Opinion ID: 810396
Heading Depth: 3
Heading Rank: 1

Heading: Unreasonable Delay and Undue Prejudice

Text: [2] When evaluating the reasonableness of a delay, the evaluation period begins when the plaintiff knew (or should 12556 EVERGREEN SAFETY COUNCIL v. RSA NETWORK have known) of the allegedly infringing conduct, and ends with the initiation of the lawsuit in which the defendant seeks to invoke the laches defense. Kling v. Hallmark Cards, Inc., 225 F.3d 1030, 1036 (9th Cir. 2000) (“any delay is to be measured from the time that the plaintiff knew or should have known about the potential claim at issue”). In determining the reasonableness of the delay, courts look to the cause of the delay. Delay has been held permissible for a variety of reasons, such as when delay is required by an exhaustion of remedies through an administrative process, when it is “used to evaluate and prepare a complicated claim,” or when its purpose is “to determine whether the scope of proposed infringement will justify the cost of litigation.” Danjaq, 263 F.3d at 954 (internal citations and quotation marks omitted). In contrast, delay is impermissible when its purpose or effect is to capitalize on the value of the alleged infringer’s labor by determining whether the infringing conduct will be profitable. Id. [3] Evergreen has demonstrated the requisite unreasonable delay. The laches evaluation period in this case began to run on the day when Sorenson received Evergreen’s draft manual and the Letter, sent by Evergreen on May 12, 1999, because that is the date on which Sorenson knew, or should have known, of the allegedly infringing content. Danjaq, 263 F.3d at 952. The fact that Sorenson had the Evergreen draft manual in his possession in 1999, regardless of whether he actually read it, demonstrates that he should have known of the infringement approximately ten years before he commenced his action in 2009. Id. The delay was unreasonable because it involved no evaluation or investigation of the claim, or other legitimate justification; RSA merely slept on its rights. Sorenson cannot rely on the fact that he allegedly did not open the Letter containing the draft manual until nearly twelve years later. See generally Restatement (Second) of Contracts § 68 cmt. a (1981) (“What amounts to receipt in all these cases is defined by the present Section, under which a written communication may be received though it is not read or though it EVERGREEN SAFETY COUNCIL v. RSA NETWORK 12557 does not even reach the hands of the person to whom it is addressed.”); see also Danjaq, 263 F.3d at 951 (“[I]t is inequitable for the owner of a copyright, with full notice of intended infringement, to stand inactive while the proposed infringer spends large sums of money in its exploitation, and to intervene only when his speculation has proved a success.”) (quoting Haas v. Leo Feist, Inc., 234 F.2d 105, 108 (S.D.N.Y. 1916)). We recognize generally two forms of prejudice in a laches context: evidentiary and expectations-based. Danjaq, 263 F.3d at 955. “Evidentiary prejudice includes such things as lost, stale, or degraded evidence, or witnesses whose memories have faded, or who have died.” Id. Expectations-based prejudice occurs when a defendant “took actions or suffered consequences that it would not have, had the plaintiff brought suit promptly.” Id. [4] The ten-year delay here caused evidentiary prejudice because Evergreen’s executive officer, who was involved in the negotiations with Sorenson, had died, and other involved employees had relocated or forgotten about components of the case (namely, important details concerning the development of the draft manual with Sorenson’s assistance in 1998 and 1999). Likewise, Sorenson conceded that his own records regarding his involvement with, and payment from, Evergreen were destroyed in 2004. Sorenson’s business records were also destroyed after his corporate bankruptcy, and he kept minimal records after his personal bankruptcy. Accordingly, Evergreen demonstrated significant evidentiary prejudice. Danjaq, 263 F.3d at 955. Moreover, RSA’s delay caused expectations-based prejudice because Evergreen likely would not have produced or revised and reproduced the infringing manual multiple times had RSA initiated its infringement action in 1999. Accordingly, we hold that the district court did not err in finding unreasonable delay and undue prejudice sufficient for laches to apply. 12558 EVERGREEN SAFETY COUNCIL v. RSA NETWORK