Opinion ID: 699661
Heading Depth: 2
Heading Rank: 1

Heading: Laches as a Bar to the Patent Infringement Claim

Text: 9 Laches is a long-recognized defense to a patent infringement suit that arises when a patent holder neglect[s] or delay[s] ... bringing suit to remedy an alleged wrong, which taken together with lapse of time and other circumstances, causes prejudice to the adverse party and operates as an equitable bar. Aukerman, 960 F.2d at 1028-29, 22 USPQ2d at 1325. Laches focuses on the dilatory conduct of the patentee and the prejudice which the patentee's delay has caused. Id. at 1031-32, 22 USPQ2d at 1328. If successful, the laches defense bars relief only for damages accrued prior to suit. See id. at 1040-41, 22 USPQ2d at 1334-35. 10 To successfully invoke laches, a defendant must prove by a preponderance of the evidence (1) that the plaintiff delayed filing suit an unreasonable and inexcusable length of time after the plaintiff knew or reasonably should have known of its claim against the defendant; and (2) the delay resulted in material prejudice or injury to the defendant. See Advanced Cardiovascular Sys., Inc. v. SciMed Life Sys., Inc., 988 F.2d 1157, 1161, 26 USPQ2d 1038, 1041 (Fed.Cir.1993); Aukerman, 960 F.2d at 1028, 22 USPQ2d at 1324; Meyers v. Brooks Shoe Inc., 912 F.2d 1459, 1461, 16 USPQ2d 1055, 1057 (Fed.Cir.1990), overruled on other grounds by Aukerman, 960 F.2d at 1038-39, 22 USPQ2d at 1333. On summary judgment, Infanti also had to establish that there was no genuine issue of material fact as to either element. 11 Even if the elements of laches are established, however, a court need not bar a plaintiff's suit. The application of the laches defense is discretionary, and as an equitable matter, the district court is to look to all the facts and circumstances of the case and weigh the equities of the parties. See, e.g., Aukerman, 960 F.2d at 1032, 22 USPQ2d at 1328. Laches is not established by undue delay and prejudice. Those factors merely lay the foundation for the trial court's exercise of discretion. Where there is evidence of other factors which would make it inequitable to recognize the defense despite undue delay and prejudice, the defense may be denied. Id. at 1036, 22 USPQ2d at 1331. 12 The first factor, the length of time that is unreasonable or inexcusable delay in filing suit, depends on the facts and circumstances of each case. See Galliher v. Cadwell, 145 U.S. 368, 373, 12 S.Ct. 873, 875, 36 L.Ed. 738 (1892); Aukerman, 960 F.2d at 1032, 22 USPQ2d at 1328; Meyers v. Brooks Shoe, 912 F.2d at 1462-63, 16 USPQ2d at 1058. The focus is on reasonableness. See Aukerman, 960 F.2d at 1034, 22 USPQ2d at 1329. A court must consider any excuse for the delay offered by the plaintiff. See id. at 1033, 22 USPQ2d at 1329 (listing examples). 13 The district court concluded that Gasser delayed for five years before bringing suit: from 1983, when Gasser learned of Infanti's continued infringement at a trade show, to February 16, 1988, when the parties began negotiating a possible settlement. The court observed that Gasser had seen Infanti's chairs on display at trade shows in 1983, 1986, and 1987, and that Infanti had not attempted to conceal its post-1983 chair manufacturing from Gasser. The court concluded that Gasser's sole excuse for the delay was that litigation was not his personal style, and that the five year delay was therefore inexcusable. 14 We believe the district court erred in not drawing reasonable inferences in favor of Gasser that would have shortened the delay period and may have shown that the delay was reasonable. For example, Gasser testified that he believed Infanti would again abide by the 1979 agreement following their encounter at the 1983 trade show. Gasser also testified that he did not see Infanti chairs with bumper edges again after that trade show until 1986. Infanti, on the other hand, denied that the 1983 encounter even took place. Nevertheless, the district court treated the 1983 trade show encounter as the starting date for calculating Gasser's delay in filing suit. Thus, although the court credited Gasser's testimony at least to the extent that this meeting took place, it failed to draw reasonable inferences in favor of Gasser about what took place during this encounter. Given Gasser's testimony that at the conclusion of the meeting he felt that Infanti would comply with the agreement, and that he saw no evidence that Infanti was not complying with the agreement until 1986, a reasonable inference would be that Gasser had no reason to sue until at least 1986, a difference in the delay period that might well have made a difference in the final outcome. See, e.g., Vaupel Textilmaschinen KG v. Meccanica Euro Italia s.p.a., 944 F.2d 870, 878-79, 20 USPQ2d 1045, 1052 (Fed.Cir.1991) (holding, based on similar facts and a delay of three and one-half years, that it would have been an abuse of discretion for the district court to have held that these circumstances resulted in laches). Alternatively, based on Gasser's testimony the district court could have concluded that the portion of the delay period from 1983 to 1986 was not unreasonable. See Aukerman, 960 F.2d at 1034, 22 USPQ2d at 1329 (reasonableness must be judged based on the plaintiff's knowledge). In any case, the district court's treatment of this evidence was improper on summary judgment. 15 The second factor, material prejudice resulting from the plaintiff's delay, may be either economic or evidentiary. Id. at 1033, 22 USPQ2d at 1328 (citing Cornetta v. United States, 851 F.2d 1372, 1378 (Fed.Cir.1988)). Economic prejudice, which was credited by the district court in this case, arises if a defendant will suffer the loss of monetary investments or incur damages which likely would have been prevented by earlier suit. Id., 960 F.2d at 1033, 22 USPQ2d at 1329. 16 Hemstreet v. Computer Entry Sys. Corp., 972 F.2d 1290, 23 USPQ2d 1860 (Fed.Cir.1992), explains the showing required to support a finding of prejudice. There, the record reflected that Computer Entry Systems Corp. (CES) spent over $23 million on research and development, $6.5 million on direct marketing costs, and $20 million to expand or consolidate manufacturing facilities. Id. at 1294, 23 USPQ2d at 1863. Nevertheless, this court held that CES had not proved the prejudice necessary to support a finding of laches because the expenditures had no explicitly proven nexus to the patentee's delay in filing suit, as Aukerman requires for a finding of prejudice. Id. at 1294, 23 USPQ2d at 1863. It is not enough that the alleged infringer changed his position--i.e., invested in production of the allegedly infringing device. The change must be because of and as a result of the delay, not simply a business decision to capitalize on a market opportunity. Id. at 1294, 23 USPQ2d at 1863. This court reversed the district court's grant of summary judgment of laches and equitable estoppel. See id., at 1294-95, 23 USPQ2d at 1864. 17 Here, there was evidence that Infanti's business significantly expanded during the delay period. However, the district court did not require proof of a nexus between the investment and the delay. Instead, it concluded that [i]n light of Infanti's significant investments, there can be no genuine issue that Infanti was actually prejudiced by Gasser's delay. Mem. and Order at 10. This approach was improper. 18 Infanti attempts to avoid Hemstreet by arguing that, unlike in Hemstreet, the district court in this case did not actually shift the burden of proof to Gasser. Indeed, the court correctly noted that prejudice must result from the plaintiff's delay and not from a business decision or gamble that the patent owner would not sue. Nevertheless, it implicitly put the burden on Gasser to prove that Infanti's damage was not caused by the delay by suggesting that Gasser could have submitted affidavits or business records indicating that Infanti had planned to expand its business long before it formed a belief that Gasser would not pursue its infringement claim. Mem. and Order at 11. Such a showing was not required of Gasser on summary judgment. Moreover, the evidence of record showed that Infanti was indifferent to whether Gasser would sue because of his personal belief that the patent was invalid. Even a considerable investment during a delay period is not a result of the delay if it was a deliberate business decision to ignore [a] warning, and to proceed as if nothing had occurred. Hemstreet, 972 F.2d at 1294, 23 USPQ2d at 1864; see also Meyers v. Brooks Shoe, 912 F.2d at 1463, 16 USPQ2d at 1058 (Brooks has not shown any connection between its activities during the laches period and Meyers' silence. From all that appears, Brooks would have followed the same course regardless of what Meyers did or did not do.). 19 We reiterate that a change in the economic position of the infringer during the period of delay must be as a result of the delay; the infringer must prove that the change in economic position would not have occurred had the patentee sued earlier. See, e.g., Aukerman, 960 F.2d at 1033, 22 USPQ2d at 1328 (Material prejudice to adverse parties resulting from the plaintiff's delay is essential to the laches defense. (emphasis added)); Meyers v. Asics, 974 F.2d at 1307-08, 24 USPQ2d at 1038-39 (rejecting the defendants' claim of economic prejudice because the evidence shows that none of the defendants was concerned that its products might infringe Meyers' patents, and does not show that any of the defendants would have acted differently had Meyers sued earlier). 20 Finally, the district court erred in not considering that Infanti's copying of Gasser's chairs could be egregious conduct. On a motion for summary judgment of laches a court must consider all pertinent factors. Aukerman, 960 F.2d at 1039, 22 USPQ2d at 1333. One such factor is whether the infringer has engaged in particularly egregious conduct which would change the equities significantly in plaintiff's favor. Id. at 1033, 22 USPQ2d at 1329 (citing Bott v. Four Star Corp., 807 F.2d 1567, 1576, 1 USPQ2d 1210, 1216-17 (Fed.Cir.1986), overruled on other grounds by Aukerman, 960 F.2d at 1038-39, 22 USPQ2d at 1333). Intentional copying of the plaintiff's product may so qualify. See id. at 1044, 22 USPQ2d at 1338 ([F]or purposes of summary judgment, Chaides' copying should have been deemed misconduct to be weighed into the court's decision, but it was not.); Bott, 807 F.2d at 1576, 1 USPQ2d at 1217 (conscious copying of the plaintiff's product and accelerating infringing sales after an adverse decision on liability constituted egregious conduct defeating the laches defense). 21 Here, there was undisputed evidence that Infanti intentionally copied Gasser's designs when custom designing chairs for customers, which Infanti admitted amounts to approximately 99% of his business, and yet the district court did not weigh this evidence against Infanti. Moreover, until 1988 Infanti never consulted an attorney to get an opinion of whether the patent was invalid. Infanti revealed in his deposition his personal view that it was invalid because there are a million different extruders in this world and because he had been unable to obtain such a patent in South America. On summary judgment, the district court should not have ignored this evidence at Gasser's expense. Cf. CPG Prods. Corp. v. Pegasus Luggage, Inc., 776 F.2d 1007, 1014-15, 227 USPQ 497, 502 (Fed.Cir.1985) (finding willful infringement where the defendant's president, without advice of counsel, decided that a patent was invalid); Ryco, Inc. v. Ag-Bag Corp., 857 F.2d 1418, 1428-29, 8 USPQ2d 1323, 1331-32 (Fed.Cir.1988) (Although the failure to obtain legal advice is not determinative, it is one of the factors supporting a finding of willfulness.). 22 Infanti contends that it did not willfully infringe Gasser's patent because it had been selling bumper edge chairs since 1976. However, undisputed evidence showed that Infanti was aware of Gasser's patent since approximately January 1979. Mem. and Order at 1. Whether Infanti was justified in producing the chairs prior to the issuance of Gasser's patent is irrelevant to whether it was justified in doing so after being made aware of it. It also bears noting that [t]hroughout the history of the determination of patent rights, oral testimony by an alleged inventor asserting priority over a patentee's rights is regarded with skepticism, ... and as a result, such inventor testimony must be supported by some type of corroborating evidence. Price v. Symsek, 988 F.2d 1187, 1194, 26 USPQ2d 1031, 1036 (Fed.Cir.1993) (citations omitted). 23