Subject: Day 12 Self Study Course:  

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summarized by Tatsuo Yabe

 

Chapter 12:

Text Pages 639 to 672  

Proving Unenforceability

(continued)

 

Unenforceability is different from a holding of invalidity although the result may be the same (the patentee cannot enforce his patent).  However, whether permanently unenforceable or for a period of time, or unenforceable against all infringers or against only the defendant depends upon the patenteefs action.

 

D.  Laches and Equitable Estoppel

 

A.C. Aukerman Co. v. R.L. Chaides Construction Co. (Fed Cir. 1992)

 

Facts:

 

Assignee of USP3793133 and USP4014633: Aukerman

Method and device for forming concrete highway barriers that separate highway surface of different elevations.

 

Licensee: Gomaco Corporation

(Required to notify Aukerman of the purchasers who purchased Gamacofs adjustable slip-forms.)

 

Purchaser of Gomaco: Chaides

 

Upon notification from Gomaco, on Feb. 13, 1979 , Aukermanfs counsel sent a letter to Chaides, advising that use of the devise would constitute an infringement of Aukermanfs patents and offered Chaides a license.  In the letter dated April 24, 1997, Aukermanfs counsel mentioned that Aukerman was seeking to enforce its patents even against a small contractor like Chaides and further mentioned that Aukerman would waive liability for past infringement if Chaides took a license by June 01, 1979. 

 

Chaides responded in late April with a handwritten note on the Aukermanfs June 01, 1979 letter, saying if Aukerman wants to do so gfor $200 to $300 per year", go ahead.

 

8 years have passed without any communications between Aukerman and Chaides.  During the time period, Chaides increased its business of forming asymmetrical highway barrier walls and made a second adjustable mold for pouring step wall (Aukermanfs alleged infringing product).

 

Because of another licensee Baumgartnerfs notice in 1987 that Chaides was a substantial competitor in California , Aukermanfs new counsel sent a letter to Chaides on October 22, 1987 threatened litigation if not executing the licenses previously sent within 2 weeks.  On August 2, 1988 , Aukermanfs counsel again wrote Chaides explaining more fully Aukermanfs licensing proposal.

 

No reply was received from Chaides, on October 26, 1988 , Aukerman filed suit against Chaides for infringement of USPf133 and USPf633.

 

The district court ruled in favor of Chaides by granting SJ motion, saying that Aukermanfs delay of more than 6 years in suing Chaides shifted the burden to Aukerman to prove that its delay was reasonable and was not prejudicial to Chaides.@@Regarding equitable estoppel, the court put the burden on Chaides to establish this defense, and then held that Aukermanfs silence for nearly 10 years after making an initial protest was sufficiently misleading to constitute bad faith. The court went on to say that Chaides had detrimentally relied on Aukermanfs silence in deciding to forgo bankruptcy and to bid low on highway contracts.

 

Summary

Fed Cir took this case in banc to clarify and apply principles of laches and E.E (equitable estoppel). 

 

Regarding laches and E.E., Fed Cir hold:

 

 

Laches

E.E. (equitable estoppel)

1. Statute providing basis for the defense

Cognizable under 35USC282 as an equitable defense to a claim for patent infringement.

 

The Supreme Court invoked the maxim: gCourts of equity, it has often been said, will not assist one who slept upon his rights, and shows excuse for his laches in asserting themh.  Lane & Bodley   As a defense to a claim of patent infringement, laches was well established at the time of re-codification of the patent laws in 1952 (Section 286).

 

The section 286 should be interpreted to bar the defense of laches and provide, in effect, a guarantee of 6 years damages regardless of equitable considerations arising from delay in assertion of onefs rights.

 

Cognizable under 35USC282 as an equitable defense to a claim for patent infringement.

 

 

2. Consequences of successfully establishing the defense

the patenteefs claim for damages prior to suit may be gone;

 

the patenteefs claim may be entirely barred.

3. Elements for establishing the defense

(a) the patenteefs delay in bringing suit was unreasonable and inexcusable; and

 

* no fixed length of time, but rather depends upon the circumstance.

 

(b) the alleged infringer suffered material prejudice because of the delay.  The district court should consider these factors and all other circumstances to determine whether equity should intercede to bar pre-filing damages.

 

** Material prejudices to adverse parties include (b1) economic and (b2) evidentiary.

 

Where economic prejudice may be established by the loss of monetary investments (not just due to the litigation) and/or the change in the economic position of the alleged infringer during the period of delay.

 

Where evidentiary prejudice may be proved by Deffs inability to present a full & fair defense due to the loss of records, the death of Ws, or the unreliability of memories of long past events, resulting undermining the courtfs ability to judge the facts.

 

A court must also consider and weigh any justification offered by P for its delay.  Pfs recognizable excuse include (not exhaustive): other litigation; negotiations with the accused infringer; possibly poverty and illness under limited circumstances; wartime conditions; extent of infringement and dispute over ownership.

 

Moreover, a court also takes into consideration conducts and culpability (i.e., intentional copying) of Def, which would change the equities significantly in Pfs favor.

 

(a)     the patentee, through misleading conduct, leads the alleged infringer to reasonably infer that the patentee does not intend to enforce its patent against the alleged infringer.  gConducth may include specific statements, action, inactions, or silence where there was an obligation to speak.

(b)     The alleged infringer relies on that gconducth.

(c)     Due to its reliance, the alleged infringer will be materially prejudiced if the patentee is allowed to proceed with its claim.

 

In other authorities, elements (b) and (c) are oftentimes combined into a single gdetrimental relianceh requirement.

 

Regarding an element (a), Pfs conduct must have supported an inference that P did not intend to press an infringement claim against D.  Thus, it is clear that for EE, D must be aware of the P and/or Pfs patent.  Additionally, D must know or reasonably be able to infer that P has known of the Dfs activities for some time.

 

Regarding an element (b), it is not a requirement of laches, but is essential to EE.  D must show that it substantially relied on the misleading conduct of P in connection with taking some action. Reliance is not the same as prejudice (eharm or injuriesf) because D can build a plant (eeconomic prejudicef) without knowledge of the patent or without reliance on Pfs act.

 

Regarding an element (c), D must establish that it would be materially prejudiced if P is now allowed to proceed.  As with laches, the prejudice may be a change of economic position or loss of evidence.

 

4.Presumption

arises where a patentee delays bringing suit for more than 6 years after the date the patentee knew (*a) or should have known (*b) of the alleged infringerfs activity.

 

à see (a) & (b) Note 7 below.

 

In Panduit Corp. v. All States Plastic Mfg (Fed Cir 1984), Fed Cir explains that presumption arises out of considerations of fairness, public policy, and probability.  Borrowed the 6 Yr damage limitation period set forth in the section 286 for the time period for giving rise to a Rebuttable presumption of laches.

 

The 6 Yrs damages limitation under 286 counts backward from the date of suit. Whereas, the 6 Yr for laches begins with a Pfs knowledge of infringement and counts forward.

 

Note that the establishment of the factors of undue delay and prejudice does not mandate recognition of a laches defense in every case but those established factors are taken into consideration by the trial judge to exercise sound discretion.

No presumption.

 

Because the laches factors (unreasonable and inexcusable delay and prejudice) are not elements of EE.  Also, because the relief granted in estoppel is broader than in laches, meaning that the whole suit may be barred so that D should carry a burden to establish the EE defense based on proof, not a presumption.

 

Even where all 3 elements of EE are established, the court exercise its discretion to determine whether to allow the defense of EE to bar the suit taking into consideration any other evidence and facts regarding the equities of the parties.

5. Effects of Presumption

A presumption has the effect of shifting the burden of going forward with evidence, not the burden of persuasion.

 

After much scholarly debate, Rule 301 embodies what is known as the gbursting bubbleh theory of presumptions.  Under this theory, a presumption is not merely Rebuttable but completely vanishes upon the introduction of evidence sufficient to support a finding of nonexistence of the presumed fact.

 

Once a presumption of laches arises, P may offer proof directed to rebutting the laches factors. Such evidence may include showing either Pfs delay was reasonable and/or that Dfs suffered no prejudice.

 

P needs to present an evidence that raises a genuine issue regarding the reasonableness of the delay to overcome the presumption

 

P may eliminate the presumption by offering evidence showing that no additional prejudice occurred in the 6 year time period (Dfs defenses remains substantially available as before and Dfs economic prejudice has not occurred).

 

Elimination of the presumption does not necessarily mean that P precludes the possibility of a laches defense; however, it does mean that the presumption plays no role in the ultimate decision. 

 

Even if unable to overcome the presumption, P may be able to preclude application of the laches defense with proof that the D was itself guilty of misdeeds towards P (gthe maxim, gHe who seeks equity must do equity.h) 

 

At all times, D bears the ultimate burden of persuasion of the affirmative defense of laches.

No presumption.

 

 

6. STD of review by district court

By sound discretion of the trial judge

 

7. Review STD by Fed Cir.

The District judgefs decision is to be reviewed by Fed Cir under the gabuse of discretion STDh.

 

 

 

 

Application of Doctrine/Theory to the Facts of this Case

Because the district court shifted the ultimate burden of persuasion to the patentee (Aukerman) to negate the prima facie defense of laches, the district courtfs grant of SJ on the laches defense must be reversed.

 

Ø       The district court placed the gburdenh on the patentee gof showing that the delay was not unreasonable and inexcusable.h  This was a greater burden than overcoming the presumption by the patentee.  The patentee bears the burden only to come forward with sufficient evidence to raise a genuine factual issue regarding the reasonableness of its conduct after Dfs showing of delay in excess of 6 years.

 

Ø       The district court erred in resolving the issue of whether Dfs infringing activities changed sufficiently to disrupt the laches period.  This fact could not be inferred against P in such a manner that P should have known these changed circumstances.

 

Ø       [Other comments]

 

 

-          There are peculiar and special reasons why patent holder should not be barred from enforcing his right under the patent because of his delay commencement of infringement suit.

-          Frequently, the patenteefs financial situation prevents the institution of suits.

-          Patentee cannot be fully cognizant of all infringements occurring in the United States because his information may be largely hearsay.

-          The validity issue of patent may be in dispute so that in a doubtful case the commercial success of the patented goods is determinative of the validity issue.

-          Thus, there is justification in patent suits for withholding damages for infringements committed prior to the commencement of the suit when a laches defense is established.

-          gInjunctive reliefh is still available even a laches defense is established.

 

The elements supporting EE were in genuine dispute so that the district courtfs granting SJ motion was not correct.

 

Ø       Whether Pfs conduct was misleading to D in that Chaides reasonably inferred from Aukermanfs conduct that it would not be sued in using Aukermanfs invention.

-          Silence alone will not create an estoppel unless there was a clear duty to speak or Pfs continued silence reinforces Dfs inference of non-enforcement of patents by P.

-          The longer the delay, the stronger the inference becomes.

-          A party must generally notify an accused infringer about other litigation for it to impact the defense of EE.  Because knowing other litigation, enforcement of Pfs rights, to D would work against the inference of non-enforcement of patent rights by P.

 

Ø       Regarding culpable conduct by Chaides having built a gcopyh of the mold, Aukerman produced no evidence demonstrating ghow the copy infringed the patentsh. However, in this phase of litigation, Aukerman does not owe the burden of proving that the copy infringed because the phase was the motion for SJ of EE.  Under this assignment of burdens, Chaidesf testimony regarding the gcopyh of the infringing device, if construed in the light favorable to Aukerman, could amount to an admission of infringement, which at least raises an issue of fact.

-          For purpose of SJ, Chaidesf copying should have been deemed misconduct to be weighed into the courtfs decision, but it was not.

 

Ø       Fed Cir concludes that SJ, holding that Aukerman was equitably estopped from assertion of infringement against Chaides, was improperly granted and is reversed.  Thus, the issue is remanded for trial.

 

 

 

 

 

Quantum of Proof

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In civil litigations, a STD for prove is by preponderous evidence.

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However, where a particular claim is disfavored on policy grounds (e.g., fraud or undue influence, the terms of a lost will, reformation or modification of a written contact), a STD for prove is by clear and convincing evidence.  

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For the specific statutory provision (i.e., a patent is presumed valid), a STD for prove is typically by clear and convincing evidence.

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However, for establishing the facts relating to laches issue, a STD for prove is by preponderous evidence.

The same is true for E.E. (equitable estoppel).

 

Notes: Pgs 655 - 656

 

1.  Why did Aukerman delay 10 Yrs before suing Chaides?

-- Obviously, Chaides back in late 1970 was still such a small infringer, thus it did not make sense paying attorneys fee and commencing the litigation against Chaides.  However, as time goes by, when Baumgartner (another licensee of Aukerman) informed that Chaides was substantial competitor in 1987, Aukerman realized that it is feasible to sue Chaides.

2. Laches Factors

@i) P's delay in bringing suit was unreasonable; and ii) D suffered material prejudice because of the delay.

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3. Presumption of laches  

   A presumption of laches arises if P waits more than 6 Yrs after he knew or should have known about the infringement by D before bringing suit.

  

 - Possible justification for delay by P include:

    1. P was involved in another litigation;

    2. negotiations with the accused;

    3. poverty or illness;

    4. wartime conditions;

    5. extent of infringement;

    6. there is a dispute over ownership.

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    - Evidence of D's copying P's invention would support the P (patentee).  TWM Mfg. Co. v. Dura Corp. (6th Cir. 1979)

  

4. Equitable Estoppel Factors  

    An accused infringer succeeds on his claim of equitable estoppel if he proves:

    1. misleading conduct or communication by P which leads the infringer (D) to reasonably infer that it will not enforce the patent against the infringer.

    2. the infringer relies on the patentee's conduct; and

    3. the infringer would be materially prejudiced.

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    If successful on D's claim of equitable defense, P (patentee) can never bring suit against this infringer.  The suit s barred.  Unlike unenforceability for inequitable conduct, with E.E. (equitable estoppel), the P (patentee) is only estopped from suing this particular infringer.  The P (patentee) can still bring an infringement suit against other infringers.

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5. Material prejudice – economy or evidentiary

 D can prove material prejudice in two ways.  

    - Evidentially prejudice can be proven by showing a loss of records, death of witnesses, or faded memory.

    - Economic prejudice can be proven by demonstrating loss of investments such as D built a plant.

    

    --> This factor is treated the same for laches and E.E.

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6. Difference between laches and E.Estoppel

 

    - When laches is established, damages prior to the suit are barred whereas E.E. is established P's entire claim is barred.

    - For E.E., there is no presumption after 6 years to suit from knowing the infringing act by D.

    - For E.E., there is no requirement for passage of unreasonably long period of time before bringing suit;

   

7. Actual knowledge v. Constructive knowledge:  

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Wanlass v. GE (Fed Cir 1998)  - Wanlass I

Wanlass owned a patent for a single-phase run capacitor electrical motor and offered GE a license.  GE declined the license offer.  Wanlass tested a few GE products between 1977 and 1982 but found no infringement.  Wanlass did not test another GE product after 1982 until 1992.

 

The court says that constructive knowledge of the infringement may be imputed to the patentee even where he has no actual knowledge of the infringement if the activities of Def are sufficiently prevalent in the inventorfs field of endeavor.  The Fed Cir (majority opinion authored by Chief Judge Mayer and joined by Judge Michel) held that Wanlassfs claim was barred by laches since it was unreasonable for him to have conducted no investigations over a 10-year period to identify alleged infringers.

 

Judge Rader dissented the majority opinion, arguing that the majority opinion created a duty for the patent holder to police the market.  In 1986, GE changed to an allegedly infringing motor design and Wanlass did not discover it until 1992 and he filed a lawsuit against GE in 1995. The court found that Wanlass unreasonably delayed bringing suit although to the extent he had no way detect GE had changed to the infringing design (to discover a change would require Wanlass to disassemble appliances to access the motor and dismantle the motor to discover the internal changes).  Nonetheless, this court imposes on Wanlass (a small businessman and inventor) the costly and unreasonable burden of periodically checking and re-checking every product in this crowded market to detect infringement.

 

In Hall v. Aqua Queen Mfg (Fed Cir 1996), the accused devices were widely advertised in trade journals and at trade shows and Hall (patentee) himself was the head of a trade organization; he attended many of these shows and spoke with the management of the accused infringers.  In contrast, Wanlass had no indications of widespread infringement to raise his suspicions.  Because the majority opinion announces new legal rules and offers so little guidance, patentees can only look to the fact of this case.  c  For inventions like Wanlassfs, that have broad application, this new requirement is a significant burden.

 

Interestingly, only 10 days later, the Fed Cir had another occasion to address Mr. Wanlassfs failure to promptly sue a different Def.  In this case, Wanlass v. Fedders Corp (Fed Cir 1998) - Wanlass II, with virtually identical facts, the same panel of judges found that Wanlass did not have a duty to test the Fedders products.  Judge Michel wrote the majority opinion, joined by Judge Rader and Chief Judge Mayer dissented.  Chief Judge Mayer dissented arguing that it was unreasonable for the patentee not to investigate or test any potentially infringing products for a 10 year period.

 

How can you reconcile these two conflicting opinions?  The only difference seems to be that the communication between Wanlass and GE was not present in the Fedders case. Thus, it could be said that in Wanlass I, Wanlass was on notice that GE was a potential infringer and therefore he had a continuing duty to test GE products.  

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8. Skip it.

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9. How long a delay is too long?

    No specific number of days, months of delay to trigger laches.  

    Instead, only requirement is that the delay is "unreasonable".

        - holding that 3 Yrs delay was unreasonable because the delay was inexcusable and D suffered prejudice from the delay.  

            Odetics v. Storage Tech (E.D.Va. 1996)

        - holding that a 58 month delay to find an attorney willing to handle the matter on contingent fee basis, even though the company could have afforded the most expensive trial attorney in Chicago created an unjustified delay.

Naxon Telesign v. Bunker Ramo USPQ 920 (N.D. Ill. 1981)                           

      

E.     Prosecution Laches

Ø       For the application filed prior to June 08, 1995 , the patent term was 17 years from the date of issue.

Ø       For the application filed on or after June 08, 1995 , the patent term became 20 years from the earliest U.S. Patent filing date.

Ø       Most applications are now published 18 months after the earliest priority date sought by the patentee, excluding provisional patent application.

Ø       A patentee can avoid an 18 month publication by a petition of non-publication under the condition that no counterpart foreign application is to be filed.

Ø       However, if the applicant changes his/her mind to decide to file a foreign application, then the applicant must notify USPTO within 45 days of filing the foreign application.

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Symbol Tech. Inc. v. Lemelson Med. Educ. & Research Found., LP (Fed Cir 2005)

 

Lemelson is the assignee of the patents in questions, generally relating to a machine vision and a bar code technology.

 

In December 1954, Lemelson filed a first patent application.  And in 1956, he filed a second application, which matured to USP3081379 in 1963.  Before the issuance of USPf379, he filed a first CIP in 1963 from the 1954 and 1956 applications, adding Dwgs and texts and combining both 1954 & 1956 applications.  In 1972, he filed a second CIP (called ea common specificationf) that basically became the basis for additional 16 patent applications filed between 1977 and 1993.

 

Symbolfs customers began receiving letters from Lemelson notifying the possible infringement.  Symbol therefore had to indemnify these customers if the patents were valid and infringed.  Thus, Symbol filed a DJ action against Lemelson, seeking a judgment that c the patents were unenforceable for prosecution laches.

 

The district court concluded that there was a sufficient case or controversy, but it dismissed Symbolfs prosecution laches claim.

 

Symbol filed an interlocutory appeal to Fed Cir under 28 U.S.C. 1292(b).  Then, Fed Cir reversed the district courtfs judgment, holding that Symbolfs defense of prosecution laches was legally viable to determine the relevant fact. 

 

Upon remand, the district court issued a decision in Jan 2004, holding that Lemelsonfs patents were unenforceable due to prosecution laches among other things.  The district court also applied to the Doctrine of Prosecution Laches because Symbol had presented gstrong evidenceh c of intervening private and public rights.

 

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Fed Cir agrees with Symbol that the laches standard does not require gintentionalh delay but only that which is gunreasonable and unexplainedh.  The Fed Cir did not set forth any firm guidelines for application of doctrine of laches.  However, in 1923, the Supreme Court, in Woodbridge v. United States 1923, applied the doctrine of prosecution laches to render patents unenforceable (a 9.5 Year delay and an 8 Year delay, respectively).  However, there is no strict time limitations for determination of prosecution laches.  Instead, the matter is to be decided as a matter of equity, subject to the discretion of a district court.

 

Although there are legitimate reasons for re-filing a patent application, such as divisional applications on various aspects of the invention described in the original specification or continuation applications including rejected claims in order to present the unexpected advantages of the invention when obtaining such evidence takes a substantial period of time, re-filing an application solely containing previously-allowed claims for the business purpose of delaying their issuance can be considered an abuse of the patent system.

 

Here in this case, the Lemelsonfs patents in question, an 18 to 39 year-time period had elapsed between the filing and issuance.  In this exceptional case, the public suffers in a great deal because the public including Symbol have invested in the technology described in the delayed patents for unreasonably long period of time.  Fed Cir held that all of the claims of patents in question are unenforceable under the doctrine of prosecution laches.

 

 

Notes:

1. No presumption (rebuttable presumption) for the application of prosecution laches like the litigation laches.  

The average prosecution time was 2.47 years in a period from 1976 to 2000.  Only 1.38% of more than

two million patents tool 8 years or longer in prosecution.

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2. Only 0.72% during the period from 1982 to 2000 are based on the filing of 4 ore more CAs.

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3. The new package rule directed by a former PTO director, Mr. Dudas, was rescinded by a new PTO director Me. Kappos.

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Problems (Text Pgs 670  to 671)

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1. 

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2.

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3.

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I encourage you to work on these problems, especially Problems 1 and 3, and discuss these Problems with your study buddy.

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