After Finding of Direct Infringement on Summary Judgment, Court Concludes that Defendant's Infringement Was Not Willful But Denies Defenses of Laches and Equitable Estoppel

March 23, 2012

On summary judgment, the district court determined that the defendants directly infringed all patents at issue in the lawsuit. The district court subsequently conduct a bench trial on issues of willfulness and on defendants' equitable defenses, particularly whether the defenses of laches and equitable estoppel provided a defense to the finding of direct infringement.

The district court first focused on the issue of willful infringement and stated the two-prong test for willfulness. "To establish willful infringement, a patentee must satisfy a two-pronged test. In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). First, the patentee must "show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." Id. In analyzing this prong, "[t]he state of mind of the accused infringer is not relevant." Id. Second, and only after "[the objective prong] is satisfied, the patentee must demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer." Id."

The district court then found that the plaintiff failed to satisfy the objective prong of the test because even plaintiff's expert admitted that there was disagreement among experts as to the validity of the patents. "Plaintiff's expert witness, Dr. John D. Pratt, had a different perspective. He testified that, in his opinion, the Patents-in-Suit were not obvious based on prior art. In fact, contrary to the Defendants' expert witness, he argued that a combination of the Durkos '789 [Patent] and the Beavers guide would not be operable. However, when Defendants' counsel asked Dr. Pratt about his opinion regarding the USPTO's decision invalidating some claims of the Patents-in-Suit, Dr. Pratt conceded that there was disagreement between experts as to whether the disputed claims were obvious based on prior art. In light of this evidence, the Court cannot hold as a matter of law that Defendants' reliance on obviousness was objectively reckless."

Accordingly, the district court found that defendant's infringement was not willful.

With respect to the issue of laches, defendants argued that plaintiff's claim for damages incurred prior to filing the lawsuit was barred. As the district court stated, "[t]o establish laches, a defendant must prove that: (1) the patentee's delay in bringing suit was unreasonable and inexcusable, and (2) the infringer suffered material prejudice attributable to the delay. A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1028 (Fed. Cir. 1992). "A presumption of laches arises where a patentee delays bringing suit for more than six years after the date the patentee knew or should have known of the alleged infringer's activity." Id."

The district court found that there was no unreasonable delay because plaintiff presented evidence that it only had sufficient information of infringement in 2010 and there was no presumption of laches because the suit was brought within six years of plaintiff's learning of defendant's infringing activity.

Turning to the issue of equitable estoppel, the district court stated: "To invoke equitable estoppel, a defendant must establish that: (1) the patentee, through misleading conduct, led the alleged infringer to reasonably infer that the patentee does not intend to enforce its patent against the alleged infringer; (2) the alleged infringer relied on that conduct; and (3) due to its reliance, the alleged infringer will be materially prejudiced if the patentee is allowed to proceed with its claim. A.C. Aukerman Co., 960 F.2d at 1028."

The defendants based this defense on plaintiff's offer to license letters and plaintiff's silence. "Defendants argue that Plaintiff's offer-to-license letters were misleading because they did not threaten defendants with a lawsuit. Additionally, Defendants argue that they relied on Plaintiff's silence and expanded their business relationship after Defendants communicated to Plaintiff that they did not believe they needed a license for Plaintiff's technology."

The district court, after reviewing the letters, found that they were not misleading. "After a careful review of Plaintiff's offer-to-license letters, the Court finds that these letters were not misleading as they explicitly illustrated Plaintiff's intention to fully protect and enforce its patents. Plaintiff's failure to respond to Simmons's request for additional information was also not misleading, as Plaintiff did not have an affirmative obligation to respond to such requests. Moreover, Plaintiff's failure to respond does not make it reasonable for Defendants to infer that Plaintiff would not enforce its patents."

Imaginal Systematic, LLA v. Leggett & Platt, Inc., et al., Case No. CV 10-7416 RGK (SSx) (C.D. Cal. March 1, 2012)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.