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The value of promises and estoppel defences

(Redirected from Laches)

This page collects info about the legal situation when a patent holder makes a "promise" or acts in a way that implies they will not use their patents against a product developer.

In summary, in the US, a promise may have the same value as a licence, and "estoppel" could be invoked as a plan B in some situations. For other countries, we're still looking for info.

US courts on promises

According to the ruling in In re Spansion by US Third Circuit on 21 December 2012, a promise is a licence; and they back this up with a reference to a ruling from the CAFC and a ruling from the US Supreme Court. Here's an excerpt from that ruling:[1]

"[A] license ... [is] a mere waiver of the right to sue by the patentee." De Forest Radio Tel. & Tel. Co. v. United States, 273 U.S. 236, 242 (1927). A license need not be a formal grant, but is instead a "consent[ ] to [the] use of the patent in making or using it, or selling it ... and a defense to an action for a tort." Id. The Court of Appeals for the Federal Circuit explained that the inquiry focuses on what the agreement authorizes, not whether the language is couched in terms of a license or a covenant not to sue; effectively the two are equivalent. TransCore, LP v. Elec. Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009).[2]

(But, for a layperson, it's not explicit in the ruling if this still applies when someone else buys the patents. Can someone else take a look or check for more details in the court rulings that this ruling reference?)

Estoppel

Some say that "estoppel", in US law, would make patent promises valid even after sale of the patent to another company.

This question is often asked about Microsoft's patents on .Net and C#. Microsoft gives a promise not to sue, but the promise says: "This is a personal promise directly from Microsoft to you".

The following is a quote from the SFLC audio show. The two lawyers were talking about copyright and the public domain, not patents, so the context might be different for patents. With that said:

Aaron Williamson: ...estoppel is an equitable defence which basically says it would not be fair to assert or to find infringement in this case. ...or to, essentially, find damages or whatever. So it's not... estoppel is typically up to the court to, sort of, weigh the fairness of the situation, and it's not... it, sort of, changes case by case.
Karen Sandler: Yeh, it's not necessarily that... It's just a defence, is the thing. So you don't necessarily want to wind up relying on estoppel, but it is an effective thing to talk about, and we do talk about it a lot, and rely on it somewhat, but it's just a matter of... In part it's just, you can think about it sort of as like a fairness argument...[3]

Long inaction implies safety: Laches and equitable estoppel

Another related equitable defence which exists in some countries is "laches", also called "equitable estoppel". In the USA, the CAFC have used concept when rejecting litigation in 1992, and confirmed their ruling in 2013.

If an alleged infringer can show that the patent holder has harmed the alleged infringer by waiting to assert a patent, the patent holder's claims for back damages are estopped by laches, and the alleged infringer is not liable. But unfortunately, this may not be easy to show in court, and the patent holder can still seek an injunction.

In the 1992 case A.C. Aukerman Co. v. R.L. Chaides Construction Co., heard by the CAFC en banc, the court ruled:[4]

1. Laches is cognizable under 35 U.S.C. 282 (1988) as an equitable defense to a claim for patent infringement.

2. Where the defense of laches is established, the patentee's claim for damages prior to suit may be barred.

3. Two elements underlie the defense of laches: (a) the patentee's delay in bringing suit was unreasonable and inexcusable, and (b) the alleged infringer suffered material prejudice attributable to the delay. The district court should consider these factors and all of the evidence and other circumstances to determine whether equity should intercede to bar pre-filing damages.

4. 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.

In March 2013, the CAFC confirmed this when they ruled that by waiting 4 ½ years, a patent holder lost his right to sue the product developer because of equitable estoppel.[5] The criteria (based on Patently-O's summary) are:

  1. Misleading silence
  2. Reliance - of the product developer on the silence
  3. Prejudice - the product developer will be harmed (is this not self-evident when one is the target of litigation?)

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References