Federal Circuit Affirms Dismissal of Patent Infringement Suit on Grounds of Equitable Estoppel
By Abby Lauer – Edited by Chinh Vo
Aspex Eyewear, Inc. v. Clariti Eyewear, Inc., No. 2009-1147 (Fed. Cir. May 24, 2010)
In a recent opinion, the Federal Circuit affirmed the U.S. District Court for the Southern District of New York, which had granted defendant Clariti’s summary judgment motion to dismiss a patent infringement lawsuit brought by plaintiff Aspex.
The Federal Circuit held that Aspex’s lawsuit was properly dismissed on grounds of equitable estoppel. Because Aspex waited three years after initially accusing Clariti of patent infringement to bring a lawsuit, the court agreed with the district court that the elements of equitable estoppel had indisputably been established. In so holding, the court revived an infrequently-applied doctrine first established by the Federal Circuit’s 1992 en banc decision in A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992).
In A.C. Auckerman Co., the Federal Circuit described the elements that must be satisfied for equitable estoppel to prevent a plaintiff from bringing a patent infringement lawsuit. First, the patentee must have misled the accused infringer to reasonably believe that the patentee did not intend to enforce its patent in court. Second, the accused infringer must have detrimentally relied on the patentee’s misleading conduct. Third, it must be shown that the alleged infringer will suffer material prejudice if the patentee is permitted to proceed with its infringement claim.
Based on past communications between Aspex and Clariti, the Federal Circuit decided that each of the elements of equitable estoppel had been satisfied. In early 2003, Aspex sent several letters to Clariti, warning the company that some of its products might be covered by Aspex patents, including its ’747 Patent. When Clariti responded requesting further information about Aspex’s accusations, Aspex did not elaborate regarding the alleged infringement of the ’747 Patent. No further communication regarding this patent took place until August 2006, when Aspex sent another letter accusing Clariti of infringing the ’747 Patent. After the companies exchanged additional letters, Aspex brought suit for infringement of the ’747 Patent on March 22, 2007.
Writing for the panel majority, Judge Newman held that the letters sent by Aspex in 2003 could “fairly be understood as threats of suit for infringement.” Aspex Eyewear, Inc. at 8. Because Aspex waited three years before bringing an infringement lawsuit against Clariti, the 2003 letters constituted “misleading conduct” satisfying the first element of equitable estoppel. The second requirement of equitable estoppel was also met: Clariti detrimentally relied on Aspex’s conduct by expanding marketing and development of certain products in the belief that the ’747 Patent would not be enforced. Id. at 11. Finally, the court held that Clariti need not show a total loss of value in order to satisfy material prejudice under the third prong of equitable estoppel. Id. Clariti demonstrated adequate prejudice by showing that it changed its economic position based on actions taken or not taken by the patentee. Id.
Judge Rader dissented. He argued that the majority’s decision represents an undue expansion of the defense of equitable estoppel. Id. at 19. Rader disagreed with the majority’s claim that Aspex’s 2003 letters could be classified as a threat that the company would enforce its patent rights in court. Id. at 20. As a result, Rader did not believe that those letters constituted “misleading conduct” on which Clariti could detrimentally rely. Id. at 22. Rader also concluded that Aspex’s communications did not materially prejudice Clariti. Id. at 23.
Despite the fact that the Federal Circuit has only infrequently considered the doctrine of equitable estoppel in recent years, the court‘s decision in Aspex Eyewear, Inc. v. Clariti Eyewear. Inc. sends a clear message to patent holders: do not accuse competitors of infringing a patent unless you are prepared to enforce the patent rights in court within a reasonable amount of time. This period may be less than the six years provided by the statute of limitations for patent infringement. After the initial accusation, silence can destroy a patentee’s ability to assert its patent rights against an alleged infringer.
Abby Lauer is a second-year student at Harvard Law School. She majored in biology as an undergraduate and is considering a career in intellectual property law.