EDTX Narrows Customer-Suit Exception for Method Claims
The Eastern District of Texas held that the customer-suit exception does not shield technology users from patent litigation when infringement claims are based on how the technology is used, not just its design.
A federal court in the Eastern District of Texas ruled that the customer-suit exception does not apply to patent claims covering a method of use. In Near Field Electronics v. Enterprise Holdings, defendants sought to stay infringement suits, arguing the core dispute was already being litigated by product manufacturers in separate declaratory judgment actions. The court denied the stay, reasoning that a ruling concerning the manufacturers would not resolve whether customer-defendants independently infringed through their specific use of the technology.
This decision limits a key defense strategy for end-users sued for patent infringement. Companies can no longer assume that a supplier's litigation will automatically pause proceedings against them, especially in cases involving method claims. This forces downstream users to mount an earlier and more independent defense, potentially increasing litigation costs and complexity.
Technology customers facing similar infringement allegations, particularly in this venue, should anticipate that courts may refuse to stay their cases. The ruling underscores the need for early strategic planning and may impact indemnification and joint-defense negotiations with suppliers.