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Under an insurance policy covering a policyholder’s cost in defending against abuse of process cases, the defense of a patent invalidity suit is not included, a common pleas judge has ruled in a case in the Philadelphia commerce program. Judge Albert W. Sheppard Jr. reasoned that a patent invalidity claim is not akin to an abuse of process claim. Therefore, a policyholder could not tap into its coverage against allegations of abuse of process. Sheppard last week dismissed High Concrete Structures Inc. v. National Union Fire Insurance Co., a suit in the Commerce Case Management Program, determining that because patent invalidity claims involve conduct before the U.S. Patent and Trademark Office, they cannot be “recast” as abuse of process claims. High Concrete Structures, based in Denver, is a corporation with a patented “fixture” for reducing the width of wide cargo onto flatbed trucks by loading the cargo in a tilted position, according to the opinion. In an action underlying the case, High Concrete sued some of its competitors for alleged patent infringement in federal district court in Philadelphia. The competitors counterclaimed that High Concrete’s fixture patent was invalid because it misrepresented the product to get the patent, according to the opinion. The dispute in High Concrete was between the corporation and its Pittsburgh-based insurance company, National Union Fire Insurance. High Concrete brought a duty to defend claim against National Union last fall, arguing that under the insurance company’s general commercial liability insurance policy, National Union is required to pay the defense costs in any suit seeking damages from High Concrete for “malicious prosecution,” according to the opinion. Considering the factual allegations stipulated in the patent invalidity claim it faced, High Concrete contended that the claim was kindred to an abuse of process claim, according to the opinion. An abuse of process claim alleges that a lawsuit has been brought for an improper purpose. Because abuse of process claims are included under its insurer’s coverage for malicious prosecution, High Concrete argued that its defense expenses in the patent invalidity claim should be covered, according to the opinion. In November, the insurance company filed preliminary objections to the duty to defend complaint, and Sheppard sustained the objections and dismissed the case Feb. 3. Sheppard rejected High Concrete’s argument, determining that a patent invalidity claim was not akin to an abuse of process claim and pointing to the doctrine of federal pre-emption that requires patent and trademark claims to be brought in the federal court designated to hear them. “In the underlying action [the] claim for patent invalidity is based on [High Concrete's] allegedly improper conduct before the Patent and Trademark Office, so that claim cannot be recast as an abuse of process claim,” Sheppard wrote. “Therefore, even if the term ‘malicious prosecution’ in the policy encompasses a claim for abuse of process [the] patent invalidity claim may not be deemed an abuse of process claim.” So while an abuse of process claim may be brought against a patent holder to counter its claim of patent infringement, an abuse of process claim may not be brought against a patent holder that allegedly obtained a patent by improper means, Sheppard explained. A patent holder that allegedly obtained a patent improperly would be charged with patent invalidity in federal court. Sheppard quoted the U.S. Court of Appeals for the Federal Circuit’s 1992 decision in Abbott Laboratories v. Brennan: “The federal administrative process of examining and issuing patents, including proceedings before the PTO’s boards, is not subject to collateral review in terms of the common law tort of abuse of process. … An additional state action would be an inappropriate collateral intrusion on the regulatory procedures of the PTO … and is contrary to Congress’ preemptive regulation in the area of patent law.” Eric R. Brown at Marshall Dennehey Warner Coleman & Goggin represented the insurance company. Charles Bloom at Stevens & Lee in King of Prussia represented High Concrete. As for the underlying patent case, last April a U.S. Eastern District judge granted the defendant corporations’ motion for summary judgment in the patent infringement case and entered judgment for their claim of patent invalidity, according to court documents. A month later, the judge rejected High Concrete’s request for the court to set aside the summary judgment. High Concrete has appealed the ruling.

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