Yesterday Eric Guttag wrote an article about the Federal Circuit ruling in Aspex Eyewear Inc. v Clariti Eyewear, Inc., which determined a threat of infringement followed by three years of silence barred the patent owner from being able to move forward against the alleged infringer as a result of estoppel. See Time Bomb: CAFC Says Threat + Waiting 3 Years = Estoppel. To some this may seem strange because in most areas of law the statute of limitations is 2 or 3 years, which means if you have a grievance you need to bring that grievance to the forefront within that length of time or you are barred from recovering. So why then could a patentee even have thought they could wait 3 years or more to bring a lawsuit? The easy answer is that the statute of limitations for a patent infringement action is six years.
While this patent statute of limitations is an extraordinarily long statute of limitations by legal standards, and now estoppel will be on the mind of those in the patent community thanks to the Federal Circuit, there is another very important piece to the puzzle that needs to be appreciated by those who would choose not to pursue infringers; namely the doctrine of laches, which can prevent recovery against a defendant even if infringement is conclusively proven.
While it may seem like an extreme case where a patent owner would not take action against an infringer for a period of years, such decisions are made every day, and perhaps even more common is that infringement goes unnoticed for lengthy periods of time. This frequently happens where an small to medium sized business is involved, perhaps making the conscious choice not to purse infringers based on the costs associated with such enforcement, or perhaps because there are not meaningful mechanisms in place to identify infringement in the marketplace. In either situation, the failure to take legal action against an infringer can have dire consequences. Today, thanks to the increase in contingency representation for patent owners who cannot afford to pay patent litigators by the hour, there may be hope and there may not be a need to put off pursuing infringers.
The doctrine of laches is an equitable remedy subject to a Court’s discretion and dependent upon the particular facts of each case. To prove laches a defendant needs to demonstrate that the plaintiff unreasonable and inexcusable delayed asserting an infringement claim, as well as also showing prejudice or injury to the defendant resulting from the delay. With respect to the first prong, a patent owner’s delay in filing suit is measured from the time infringement is discovered, or should have been discovered, until the time suit is filed. In determining whether a party has too long “slept on its rights” it is necessary to show that the party knew or should have known that it had a right of action, yet did not act to assert or protect its rights.
The length of time that may be deemed unreasonable has no fixed boundaries, but rather depends on the circumstances of the case, although a presumption of laches arises if the patentee delays bringing suit for more than six years after actual or constructive knowledge of the defendant’s infringing activity. Once a presumption of laches arises, the patentee may offer proof directed to rebutting the laches factors. Such evidence may be directed to showing either that the patentee’s delay was reasonable or that the defendant suffered no prejudice.
Evidentiary prejudice can occur when delay has caused the loss of key witnesses and/or the loss of documentary evidence. Economic prejudice arises when a defendant suffers the loss of monetary investments or incurs damages that likely would have been prevented by earlier suit.
Once the relevant facts are established, the court weighs the equities in order to assess whether laches should apply to bar those damages that accrued prior to suit. In the event that laches is found, recovery is barred for damages incurred before the complaint was filed. It is important to remember that a successful laches defense bars damages only for conduct occurring prior to the filing of the lawsuit.
The moral of the story is that in order to maintain the integrity of the exclusive right granted in the patent, mechanisms must be in place to discover infringement. Likewise, once infringement is discovered enforcement actions need to be taken swiftly, or else the risk of there being prejudice to the defendant rises, which could limit or preclude recovery. Moreover, even if laches does not ultimately provide a defense, inaction on the part of the patent owner chips away at the exclusionary right and allows a competitor to gain a foothold in the patent owner’s marketplace. Any way you look at delay in enforcement, it is costly.