{"id":85511,"date":"2017-07-10T09:15:57","date_gmt":"2017-07-10T13:15:57","guid":{"rendered":"https:\/\/ipwatchdog.com\/?p=85511"},"modified":"2017-07-09T12:26:47","modified_gmt":"2017-07-09T16:26:47","slug":"equitable-estoppel-after-loss-laches-sca-v-first-quality","status":"publish","type":"post","link":"https:\/\/ipwatchdog.com\/2017\/07\/10\/equitable-estoppel-after-loss-laches-sca-v-first-quality\/id=85511\/","title":{"rendered":"Equitable Estoppel After the Loss of Laches from SCA v. First Quality"},"content":{"rendered":"

\"SCOTUS\"The Supreme Court ruled this Spring that the laches defense is not available for patent infringement damages in SCA Hygiene Products Aktiebolag et al. v. First Quality Baby Products, LLC, et al.<\/a>\u00a0 While the defendant cried foul and presented a \u201cparade of horribles\u201d at the loss of this defense, the Court offered the doctrine of equitable estoppel to quell their concerns.\u00a0 But when is equitable estoppel an effective substitute for those instances where the laches defense was previously invoked to prevent a patentee from abusing their grant against a competitor?<\/p>\n

First, as a brief refresher, we should discern the key differences between laches and equitable estoppel.\u00a0 Laches requires a showing of (1) unreasonable delay in filing suit; and (2) that the delay has a material prejudice to the defendant.\u00a0 Equitable estoppel requires a showing of (1) misleading statements or conduct; (2) action in reliance; and (3) resulting prejudice.\u00a0 In view of the required elements, laches focuses on the timing of filing the infringement suit, while equitable estoppel focuses on the conduct of the parties.\u00a0 This is perhaps why, in the Court\u2019s opinion, equitable estoppel is an appropriate defense while laches is not.<\/p>\n

The Court noted in SCA v. First Quality<\/a> that laches was created by equity courts where no statute of limitations existed as a \u201cgap filling\u201d defense.\u00a0 The Court also interpreted 35 U.S. Code \u00a7 286<\/a> to act as a six-year time limitation during which a patentee may recover infringement damages.\u00a0 Therefore, while laches generally provides a shield against untimely claims, a statute of limitations serves a similar function and speaks directly to the issue of timeliness, making laches redundant.\u00a0 The Court noted that it was unprecedented for Congress to provide the dual protection of a statute of limitations and a laches defense.<\/p>\n

Both the defendant and Justice Breyer\u2019s dissent in SCA v. First Quality <\/em>argue that once a business chooses to rely on a particular technology, it can become expensive to switch to other technologies, even if it would have been relatively inexpensive to do so at an earlier time.\u00a0 This may provide a patentee with considerable incentive to delay suit until the costs of switching (and thus the settlement value of the claim) are high. \u00a0The practical consequences of such delay can be significant, and the \u00a7 286 six-year limitation on damages does not necessarily encourage a patentee to be timely.\u00a0 The statute does limit past damages to six years from the filing of an infringement action, but unlike traditional statutes of limitations, allows the patentee to bring suit any time after infringement.\u00a0 With the loss of the laches defense, defendants have lost the opportunity to argue that a delay in filing of an infringement action is unreasonable.\u00a0 As previously noted, a delayed filing may result in a higher settlement amount, and a dormant patentee is neither prevented nor discouraged from enacting this strategy by \u00a7 286, at least for a period up to six years.\u00a0 It is instances like these where a laches defense could previously have been asserted to keep dormant patentees from sitting on their rights.<\/p>\n

Equitable estoppel may be appropriate for the defendant in SCA v. First Quality <\/em>since the plaintiff was silent for years after the defendant asserted invalidity (possibly fulfilling the misleading conduct through inaction and reliance on that conduct).\u00a0 But can equitable estoppel be relied upon as a defense against a dormant plaintiff in the example illustrated above?\u00a0 Below, we consider the two elements of equitable estoppel that replace the unreasonable delay element of laches: misleading conduct and reliance.<\/p>\n

A fair test for the ability of equitable estoppel to fill the shoes of laches would be in an instance where the patentee had minimal conduct toward the defendant associated with the suit.\u00a0 This is because the first element of laches merely requires unreasonable delay in filing rather than an investigation of the patentee\u2019s conduct.\u00a0 Equitable estoppel may falter as a laches substitute when solely facing a patentee\u2019s delay in filing because although misleading silence can constitute the misleading conduct prong of the defense, mere silence alone does not<\/a>.\u00a0 For instance, a threat of aggressive<\/a> or immediate enforcement of a patent, followed by silence<\/a> or inaction, may represent one example of misleading silence.\u00a0 Equitable estoppel may thus potentially replace laches in instances where patentees send cease and desist letters but take no further action for some time before filing of an infringement action.\u00a0 Also, silence alone, even without contacting the alleged infringer, may be enough to satisfy the misleading conduct prong of the defense if the patentee had knowledge of the alleged infringing activity<\/a>, creating an obligation for them to speak out. \u00a0However, even if there is a finding of the patentee\u2019s misleading conduct, the analysis does not end there as the conduct must also be paired with the infringer\u2019s action in reliance on that conduct.<\/p>\n

For a successful equitable estoppel defense, an accused infringer must show that they relied on the misleading conduct in connection with taking some action.\u00a0 In this regard, an infringer manufacturing a product who is unaware of a patent could presumably not show reliance on any misleading conduct by the patentee, losing the option of asserting equitable estoppel.\u00a0 To show reliance, the infringer must have had a relationship or communication<\/a> with the plaintiff that lulls the infringer into a sense of security.\u00a0 Unlike laches, equitable estoppel requires a showing of particular conduct by the infringer.<\/p>\n

While both defenses must be shown by a preponderance of the evidence standard, the increased difficulty in proving the elements of equitable estoppel may be an appropriately higher bar.\u00a0 This is because equitable estoppel provides complete relief against a claim rather than just past damages as is the case with laches.\u00a0 This increased difficulty, however, limits the reach of equitable estoppel as a substitute for laches.\u00a0 Rather than constituting a mere timeliness inquiry, equitable estoppel requires particular conduct by both parties. \u00a0Accordingly, equitable estoppel may often not recover the ground lost by the laches defense for infringement damages and therefore may open the door for patentee abuse.\u00a0 One should be weary of dormant patentees whom prior to SCA<\/em> could have lost their assertion rights because of their delay, but now may safely assert their lingering claim.<\/p>\n","protected":false},"excerpt":{"rendered":"

Equitable estoppel may be appropriate for the defendant in SCA v. First Quality since the plaintiff was silent for years after the defendant asserted invalidity (possibly fulfilling the misleading conduct through inaction and reliance on that conduct). But can equitable estoppel be relied upon as a defense against a dormant plaintiff in the example illustrated above? Below, we consider the two elements of equitable estoppel that replace the unreasonable delay element of laches: misleading conduct and reliance.<\/p>\n","protected":false},"author":109584,"featured_media":79456,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":"","_links_to":"","_links_to_target":""},"categories":[7202,6998,228,3,586],"tags":[12440,10730,1769,12457,5531,1240,1491,1266,1765,9096,33,6780,107,8742,34,13258,1241,1771,248],"yst_prominent_words":[],"acf":[],"_links":{"self":[{"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/posts\/85511"}],"collection":[{"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/users\/109584"}],"replies":[{"embeddable":true,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/comments?post=85511"}],"version-history":[{"count":0,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/posts\/85511\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/media\/79456"}],"wp:attachment":[{"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/media?parent=85511"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/categories?post=85511"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/tags?post=85511"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/yst_prominent_words?post=85511"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}