DECISION WITHOUT PUBLISHED OPINION
Reversed/Remanded.
al investments, including tens of millions of dollars in controller development, research and development, marketing, and sales of its power wheelchairs from 1997-2007." [Dkt. 168-1 at 29]. Specifically, PG expended considerable resources in controller development and in cooperating with the Lautzenhisers to ensure that the head control device was compatible with its controllers. Similarly, Sunrise spent time and money pursuing controller development projects and ensuring compatibility between Delphi controllers and the Magitek head control device. LT counters that Defendants's expenditures were mere garden-variety ventures in the ordinary course of business, and that no evidence suggests Defendants would have altered their conduct had LT filed suit earlier. The Court disagrees. If LT had sued earlier, Defendants likely never would have expended time and money to ensure compatibility between the controllers and the head control device. What is more, common sense suggests that Defendants would have modified their business strategies if they came under suit for infringement. On this point, the testimony of PG's Managing Director, Hal Chenhall, is telling:
[W]e continued to supply our controllers to our customers, and we continued to develop our products believing that the allegations had been dropped. If we'd had a response to [Mr. Price's] letter which gave us some clarification of where we were alleged to infringe . . . we would have done a design-round.
Finally, the key case that LT relies upon, Meyers v. Asics Corp., 974 F2d 1304 (Fed. Cir. 1992), is distinguishable because in that case, the defendants' delay was only four and one-half years, and therefore they were not entitled to the six-year presumption. Here, by contrast, the Court finds that LT failed to present evidence sufficient to create a genuine issue of material fact regarding the nonexistence of the presumed material prejudice, meaning that the presumption remains intact.
d. Differences Among Various Controllers
LT makes a final argument premised on the requirement that the Court has to examine the facts surrounding each defendant's alleged laches defense on a product-by-product basis. See Intertech Licensing Corp. v. Brown Sharpe Mfg. Co., Inc., 708 F. Supp. 1423, 1435 (D. Del. 1989). The Intertech court spelled out this argument in clear terms:
[T]he delays associated with periods of infringement by different machines do not `tack'
unless the nature of the alleged infringement remains substantially constant throughout the relevant time periods . . . If the products sold by a defendant
within 6 years preceding a lawsuit are not
functionally equivalent to products sold
more than 6 years prior to the lawsuit, then there is no reason why laches would bar a plaintiff's infringement claim as to the more recent sales (i.e. those within the last 6 years), because it is essentially a different claim of infringement.
Id. (citation omitted and underline added).
Based on this principle, LT argues, summary judgment on laches is inappropriate because of the differences among the various PG controllers and the PG and Delphi controllers. Specifically, LT notes that PG manufactured at least six controllers that may infringe the patents-in-suit: PG8, Pilot, Pilot Plus, VRS, VSI, and R-Net. LT claims that it lacks information to determine the similarity of these devices, and "believes that there are significant differences between the products." [Dkt. 182 at 19]. In attempt to highlight these differences, LT points to deposition testimony from Jolyon Crane, PG's Technical Director, which ostensibly describes meaningful differences in PG's various controllers. With respect to Delphi, LT maintains that because Delphi's controllers were unique, made "from scratch," and did not come to market until 2005, tacking is inappropriate. To bolster this claim, LT relies on deposition testimony from Sunrise's Senior Project Manager, Mark Greig.
The Court is not persuaded. First, Mr. Crane's testimony relates to discrete resistive elements and the use of a microcontroller; it has nothing to do with dynamic braking or free wheeling — the subject matter of the `899 and `906 patents. Mr. Greig's testimony is equally unrelated to the `899 and `906 patents. Thus, LT's claim that there are significant differences among the products for purposes of the `899 and `906 patents is relegated to mere attorney argument. Second, Defendants have put forth evidence indicating that, for purposes of the `899 and `906 patents, the various PG controllers and the PG and Delphi controllers are functional equivalents, meaning that tacking is appropriate for this succession of different products. See Aukerman, 960 F.2d at 1031 ("[L]aches has been viewed as a single defense to a continuing tort up to the time of suit, not a series of individual defenses which must be proved as to each act of infringement, at least with respect to infringing acts of the same nature.") (emphasis added).
With respect to the `906 patent, John testified in his deposition that both PG and Delphi controllers employ substantially similar infringing conduct:
Q: Did you conclude that Sunrise was the only manufacturer that was infringing [the `906 patent]?
A: I did not come to that conclusion, no.
Q: Okay. Which other manufacturers did you conclude were infringing?
A: All of them.
Q: So every single manufacturer — when did you make that — reach that conclusion? In 2004?
A: I — I became — in 2004 I — I was seeing the current reversal that I would say — I'll qualify that, that any manufacturer using a pulse with modulated controller that was shorting the fets [sic, FETS] between power pulses and run at that frequency, that since they were all basically the design, it would be my judgment if one was, that the others were doing the same thing.
Q: That would include the — the Delphi controller and the PG controller —
A: Yeah.
LT asserts that this testimony fails to prove functional equivalence: "Sunrise has attempted to meet its functional equivalency burden for the `906 patent by citing to John Lautzenhiser's testimony regarding what he was seeing done in 2004 with respect to current reversal, which related to a period of time before the Delphi controller was even introduced to the marketplace." [Dkt. 190 at 4]. The Court does not read this testimony that way. Rather, the testimony indicates that John became aware of an infringing feature in 2004, and that Delphi also employs this same feature — which, in the Court's view, amounts to functional equivalence.
With respect to the `899 patent, John testified that, in essence, regardless of design differences between PG and Delphi controllers, they both infringe the `899 patent because they both have a means or method to "open the circuitry" to allow "freewheeling." Finally, as LT highlights in its own brief, it is important to note that the `899 patent is a "continuation-in-part from, and therefore legally related to the `906 patent." As such, "LT agrees that the `906 and `899 patents may be considered together for purposes of the Court's preemptive determinations." [Dkt. 182 at 24, n. 8].
Ultimately, the Court is convinced that despite any differences among the various controllers, LT alleges infringing acts of the same nature with regard to both the `899 and `906 patents, whether the controller is PG's or Delphi's. Thus, tacking is appropriate, meaning the laches clock started to run in late 1997 for all PG and Delphi controllers used on Sunrise wheelchairs.
For the reasons set out above, the Court GRANTS PG and Sunrise's Motion for Summary Judgment on the laches defense as it applies to the `899 and `906 patents. By doing so, the Court effectively DENIES LT's Cross-Motion for Partial Summary Judgment on the laches defense as it applies to the `899 and `906 patents (i.e. through Sunrise wheelchairs that use Delphi controllers).
3. The `807 and `624 Patents
For these two patents, the Court must once again begin its laches analysis by inquiring when LT knew or should have known of its claims against the Defendants.
First, Defendants maintain that the laches clock started running in 1997 for the `624 and `807 because these patents were in existence in 1997, when John conducted testing on the PG controllers. Because the period of delay exceeds six years, Defendants argue, they are entitled to legal presumptions regarding unreasonableness and material prejudice. The Court is not persuaded, and cannot find that 1997 is the operative trigger date for these patents. As LT correctly notes, "Defendants fail to direct the court to anything in the record that gives the court the ability to ascertain a definite period of delay as needed to perform its analysis." [Dkt. 182 at 24].
Indeed, Defendants' timing evidence is scant. On October 15, 1997, John sent Mr. Greig at Sunrise a letter enclosing, among other materials, a copy of the `807 patent and the cover page of the `624 patent. However, there is no suggestion that John had knowledge of infringement at this time, or that this was any sort of veiled litigation threat. To the contrary, the correspondence between John and Mr. Greig suggests that the patents were sent primarily to enhance Sunrise's knowledge of the head control device. Moreover, in his late 2000 letters threatening an infringement suit, Duncan only mentioned the `899 and `906 patents — not the `807 and `624 patents. This omission is telling. If John had infringement concerns about the `807 and `624 patents at this time, presumably they would have been referenced in the letters.
Finally, Defendants argue that even if LT did not have actual knowledge of alleged infringement of the `807 and `624 patents at this time, it still had constructive knowledge via its duty of inquiry. See Advanced Cardiovascular Sys., Inc. v. Scimed Life Sys., Inc., 988 F.2d 1157, 1162 (Fed. Cir. 1993) (a patentee is charged with "such knowledge as it might have obtained upon inquiry, provided the facts already known by [it] were such as to put upon a man of ordinary intelligence the duty of inquiry."). Specifically, Defendants cite R2 Medical, 931 F. Supp. at 1410 for the sweeping proposition that an examination of accused devices constitutes constructive knowledge of infringement claims. The Court does not read R2 Medical so expansively, as such a general rule would cause unfairness. See Advanced Cardiovascular, 988 F.2d at 1162 (there can be no laches in failing to assert rights of which a party is wholly ignorant, and whose existence he had no reason to apprehend.) For instance, there is no indication that John's testing of PG controllers could have revealed infringement of the `807 and `624 patents.
The Court believes that under the circumstances, the more applicable principle is that where infringement is not open and notorious, it is difficult to prove that a patentee reasonably should have known of the infringement. Compare American Optical Corp v. Pittway Corp., 19 USPQ2d 1789, 1791 (E.D.N.Y. 1991) (hidden nature of component would make it possible for plaintiff not to have discovered that the component was in wider use) with Aqua Queen Mfg., 93 F.3d at 1553 (plaintiff should have known of infringement where it was open and notorious, and did not require dismantling and testing).
Here, there is no evidence suggesting that the infringement was open or notorious, or that LT had actual knowledge of infringement. Drawing all reasonable inferences in favor of LT, the Court simply does not have the requisite basis to pinpoint a laches trigger date for the `807 and `624 patents. See ABB Robotics, 828 F. Supp. at 1389 ("The question of when a patentee `knew or should have known' is one of fact."). Without a trigger date, it would be premature for the Court to complete a laches analysis. For instance, without knowing when LT had actual or constructive knowledge, the Court cannot determine if LT's behavior was unreasonable. See Gasser Chair Co. v. Infanti Chair Mfg. Corp., 60 F.3d 770, 774 (Fed. Cir. 1995) (citing Aukerman for the proposition that reasonableness must be judged based on plaintiff's knowledge). Therefore, PG and Sunrise's Motion for Summary Judgment is DENIED with respect to the laches defense on the `807 and `624 patents. For similar reasons to those described above (i.e. genuine questions of material fact regarding functional equivalence, regardless of whether PG or Delphi motor controllers is involved), LT's Cross-Motion for Summary Judgment (involving Sunrise wheelchairs with Delphi controllers) is DENIED as to the laches defense on the `807 and `624 patents. 4. The `600 Patent
If, by way of example, LT did not discover infringement on the `624 and `807 patents until mid-2007, Defendants obviously could not prevail on their laches defense.
The `624 patent is subject to a separate Motion for Summary Judgment on a disclaimer argument. The Court has reviewed the parties briefing and has determined, at the very least, genuine issues of material fact exist regarding whether a Delphi controller is the functional equivalent of a PG controller for infringement purposes. Similarly, Defendants also created genuine issues of fact as to the functional equivalency of PG and Delphi controllers involving the `807 and `600 patent. [Dkt. 172 at 7-9].
The earliest potential trigger for the `600 patent is July 30, 2002, the date it was issued. Defendants insist that the laches clock should commence immediately, because by 2002, the Lautzenhisers had intimate familiarity with PG and Sunrise and because the `600 patent specifically relates to the head control device. In light of this trigger, Defendants contend, PG is entitled to the laches presumption because it was not added as a Defendant until the summer of 2008. Defendants concede that Sunrise, named in the original complaint in 2007, is not entitled to this presumption. Nevertheless, Sunrise claims that it is still entitled to summary judgment because, under the circumstances, the five-year delay was unreasonable and caused material prejudice.
Once again, however, the Defendants have failed to provide the Court with evidence sufficient to pinpoint a start date for purposes of laches. Thus, the Court cannot complete its laches analysis with any reasonable certainty. As such, Defendants' Motion for Summary Judgment is DENIED with respect to the laches defense for the `600 patent. For similar reasons to those described above (i.e. genuine questions of material fact regarding functional equivalence, regardless of whether PG or Delphi motor controllers is involved) [Dkt. 172 at 8-9], LT's Cross-Motion for Summary Judgment (involving Sunrise wheelchairs with Delphi controllers) is DENIED as to the laches defense on the `600 patent.
B. Defendants' Estoppel Defense
Equitable estoppel may serve as an absolute bar to a patentee's claim of infringement. Scholle Corp. v. Blackhawk Molding Co., 133 F.3d 1469, 1471 (Fed. Cir. 1998). The equitable estoppel bar applies when:
(1) The patentee, through misleading conduct, leads the alleged infringer to reasonably infer that patentee does not intend to enforce its patent against
the alleged infringer. `Conduct' may include specific statements, action, inaction, or silence when there was an obligation to speak;
(2) The alleged infringer relies on that conduct; and
(3) Due to its reliance, the alleged infringer will be materially prejudiced if the patentee is allowed to proceed with the claim.
Aukerman, 960 F.2d at 1028. Like laches, the defense of estoppel must be analyzed with respect to each Defendant, product, and patent at issue. Also like laches, "equitable estoppel is not limited to a particular factual situation nor subject to resolution by simple or hard and fast rules."
Gossen Corp. v. Marley Mouldings, Inc., 977 F. Supp. 1346, 1353 (E.D. Wis. 1997) In contrast to laches, "equitable estoppel focuses on the reasonableness of the
Defendant's conduct."
Id. (emphasis added). And, unlike laches, "unreasonable delay" is not an element of estoppel and no presumption applies, meaning a party advancing an estoppel defense must prove each of the elements by a preponderance of the evidence.
Id.
Defendants contend, "The Lautzenhisers communicated by a decade of silence and misleading words and action, that the patents-in-suit would not be enforced against Defendants, who reasonably relied upon these communications in developing their business," thus causing economic and evidentiary prejudice. [Dkt. 168-1 at 24]. Predictably, LT disputes this, arguing that genuine issues of material fact abound. The Court agrees with LT. For the `899 and `906 patents, genuine issues of material fact exist as to whether PG and Sunrise relied on LT's misleading conduct. For the `600, `624, and `807, genuine issues of material fact exist as to whether LT engaged in misleading conduct. 1. The `899 and `906 Patent a. Misleading Conduct
For each patent, the Court stopped its analysis of the elements of equitable estoppel after determining that genuine issues of material fact exist. Thus, for the `899 and `906 patents, the Court did not address material prejudice. For the `600, `624, and `807 patents, the Court did not address reliance or material prejudice.
To prove the first element of equitable estoppel, the alleged infringer must prove that the patentee, through misleading conduct, has led the infringer to infer that it does not intend to enforce the patent. The patentee's misleading conduct may include specific statements, actions, inaction, or silence. See Gossen Corp., 977 F. Supp. at 1353-54 (citing ABB Robotics, 52 F.3d at 1063).
The Federal Circuit has explained that:
The patentee's conduct must have supported an inference that the patentee did not intend to press an infringement claim against the alleged infringer. It is clear, thus, that for equitable estoppel the alleged infringer cannot be unaware — as is possible under laches — of the patentee and/or its patent. The alleged infringer also must know or reasonably be able to infer that the patentee has known of the former's activities for some time. In the most common situation, the patentee specifically objects to the activities currently asserted as infringement in the suit and then does not follow up for years. In
Dwight Lloyd Sintering v. Greenawalt, 27 F.2d 823 (1928) Judge Learned Hand noted that estoppel was regularly based on `no further assurance [that a known competitor would not be sued than] the patentee's long inaction.'
27 F.2d at 827. There is ample subsequent precedent that equitable estoppel may arise where, coupled with other factors, a patentee's `misleading conduct' is essentially misleading inaction.
Aukerman, 960 F.2d at 1042.
On its face, the facts appear to be a textbook case of misleading conduct. In September 2000, Duncan sent Sunrise a letter raising the specter of infringement. In December 2000, Duncan wrote a more aggressive letter. In addition to reiterating the legal consequences of infringement, Duncan wrote that Sunrise was expressing "an apparent disregard for [the Lautzenhisers'] patent rights" and asked Sunrise to advise him whether it would retain counsel. Sunrise responded on January 2, 2001, seeking the specific Sunrise products of concern. On February 2, 2001, Duncan responded that "all products employing dynamic braking, including `regenerative' braking, and free wheeling [the subject matter of the `899 and `906 patents] are worthy of examination." In the meantime, PG engaged its own patent attorney, Joe Price, to investigate and respond to the letters. On February 22, 2001, Mr. Price wrote Duncan:
It has recently come to our attention that there has been an
allegation of infringement of the products of certain [PG] clients that incorporate our motor control products. We have been requested to investigate your
allegations of infringement . . . [I]t would be helpful if you could correspondingly identify the infringing features that you contend are present in the [PG] control systems for each of your patents. (emphasis added).
It seems clear that at this time, Sunrise and PG thought that LT was gearing up for patent litigation.
Nevertheless, LT failed to respond to Price. Moreover, LT dealt amicably with PG and Sunrise for years in commercial engagements involving the very same products now accused of infringement. Even drawing all reasonable inferences in its favor, LT's conduct was misleading.
b. Reliance
A party invoking equitable estoppel must also prove reliance. Reliance, while not an element of laches, is essential to equitable estoppel. Gossen Corp., 977 F. Supp. at 1354 (citing Heckler v. Community Health Services, 467 U.S. 51, 59-66, 104 S.Ct. 2218, 2223-27, 81 L.Ed.2d 42 (1984)). The Federal Circuit has explained that:
The accused infringer must show that, in fact, it substantially relied on the misleading conduct of the patentee in connection with taking some action.
Reliance is not the same as prejudice or harm, although frequently confused. An infringer can build a plant being entirely unaware of the patent. As a result of infringement, the infringer may be unable to use the facility. Although harmed, the infringer could not show reliance on the patentee's conduct. To show reliance, the infringer must have had a relationship or communication with the plaintiff which
lulls the infringer into a sense of security in going ahead with building the plant.
Aukerman, 960 F.2d at 1042-43 (emphasis added).
Defendants allege that LT's conduct lulled them into a false sense of security, thereby giving them confidence that they could engage in costly development projects for motor controllers to be used on Sunrise wheelchairs. According to Defendants, these projects never would have unfolded had LT pursued its infringement claims in a timely fashion. What is more, LT was undoubtedly aware that Defendants were engaging in these commercial activities.
While strong on its face, Defendants' argument is called into doubt by the fact that they may have been actually relying on their belief that LT's `899 and `906 patents were invalid — not their belief that LT had abandoned its infringement claims. Legally, evidence that the alleged infringer believed the patents were invalid or not infringed — whether due to advice of counsel, those within the organization, or others — is evidence that the infringer relied on something other than the patentee's conduct. See Aqua Queen Manufacturing, Inc., 93 F.3d at 1558 (reversing summary judgment on equitable estoppel defense because defendant "may have acted due to its belief that the patent was invalid rather than due to any belief that [the patentee] would not sue under the patent."); Gasser Chair, 60 F.3d at 776 (no reliance where "[defendant] ignored [patentee's] charges of infringement because [defendant] believed the patent was invalid."); Troxler Electronic Labs. v. Pine Instrument Co., 597 F. Supp. 2d 574, 582 (E.D.N.C. 2009) ("an infringer that merely relies on its own business judgment cannot successfully assert a defense of equitable estoppel.").
Genuine issues of material fact exist as to whether Sunrise and PG actually relied on LT's action (or inaction), or whether they relied on a belief that the `899 and `906 patents were invalid. An e-mail from PG's President John Camp, suggests that PG believed that these patents were invalidated by prior art: "These historical facts, we believe, demonstrate[] that the claims made in the Lautzenhiser patents had already been invented and were being marketed in the USA and Canada ahead of the patent filing by the Lautzenhisers." (emphasis added). In letters issued by PG Drives on February 16, 2001, under the signature of Stephen Nesmith, who is still with the company, to customers, including Sunrise, PG Drives stated its belief that:
The technology set forth in the Lautzenhiser patents is not only
outdated, it is also not relevant to the modern microprocessor based control systems provided in the [PG] controller products. We at [PG] believe that motor control products are
not subject to any legitimate claim based on the Lautzenhiser patents and we intend to support that belief on behalf of our products and customers. (emphasis added).
Further, regarding the Bell letter, Mr. Nesmith, in an email to John Camp copied to Hal Chenhall and forwarded to Mr. Crane, wrote:
Regarding the `Lautzenhiser Letter', Hamish stated that Dynamics had received the same panicked calls from their customers, wanting to know the merits of the alleged infringement. Their (Dynamic's/Rosstron's) review of the patents has come to the same conclusion
as our own, and they have stated so to their customers (e.g,
all aspects of the patents are subject to prior art). Hamish just wanted to know if we read it the same way. I confirmed, that at this time,
we are in agreement with their conclusion. (emphasis added).
Finally, Sunrise appears to have relied on the stated position of PG, its "black box" supplier. Mr. Greig's deposition testimony reinforces this possibility. For instance, when asked if Sunrise undertook an infringement analysis following Duncan's late 2000 letters, Mr. Greig responded, "At that time . . . we referred to the makers of those controllers, specifically [PG], for their expert opinion on how those controllers behaved since we were not knowledgeable."
Defendants characterize these statements as a mere "initial reaction of PG business people . . . including their predictable questioning of patent validity and alleged infringement." They further argue that these reactions were later supplanted by Mr. Price's legal response to Duncan's letter. [Dkt. 187 at 7]. Perhaps, but Defendants' argument is effectively an invitation for the Court to resolve a genuine issue of material fact at the summary judgment stage. Doing so would be inappropriate and premature, particularly given the fact that all reasonable inferences tilt in LT's favor.
If PG and Sunrise relied on assumptions of invalidity rather than LT's conduct, they cannot meet the reliance requirement. Thus, there is a material issue of fact as to whether LT lulled PG and Sunrise into a false sense of security, or whether PG and Sunrise were instead guided by their own legal conclusions. With respect to the equitable estoppel defense for the `899 and `906 patents, PG and Sunrise's Motion for Summary Judgment is DENIED. 2. The `600, `624, and `807 Patents
The `600, `624, and `807 patents do not require an exhaustive equitable estoppel analysis. Given that Duncan's letter never mentioned these patents — and LT never threatened litigation on these patents prior to the original complaint — genuine issues of material fact exist as to whether or not LT's conduct was misleading. After all, for this element, "Silence alone is not sufficient affirmative conduct to give rise to estoppel," and "silence [must be] sufficiently misleading to amount to bad faith." Hottel Corp. v. Seaman Corp., 833 F.2d 1570, 1573-74 (Fed. Cir. 1987), overruled on other grounds, Aukerman, 960 F.2d 1020 (citations omitted). While LT arguably did more than remain silent, drawing all reasonable inferences in favor of LT, questions of fact surround the allegedly misleading nature of LT's conduct on the `600, `624, and `807 patents. Thus, the Court DENIES PG and Sunrise's Motion for Summary Judgment with respect to their equitable estoppel defense on these patents.
As Defendants' note, "John Lautzenhiser had made Sunrise aware of the `807 and `624 patents . . . when he identified those two patents to Greig in October 1997." [Dkt. 168-1 at 25]. However, this fact alone certainly does not warrant granting summary judgment.
3. Remaining Issues Raised by LT's Cross-Motion
Two issues raised by LT's Cross-Motion for Summary Judgment remain outstanding.
a. Equitable Estoppel and Sunrise Wheelchairs with Delphi Controllers
First, LT argues that it is entitled to summary judgment on Sunrise's equitable estoppel defense to the extent it applies to Sunrise wheelchairs with Delphi controllers. The Court disagrees, finding that genuine issues of material fact exist. First, the fact that Delphi controllers did not come to market until 2005 is not dispositive on Sunrise's equitable estoppel defense: "Equitable estoppel does not require the passage of an unreasonable period of time in filing suit." Aukerman, 960 F.2d at 1028. Second, LT's conduct over the course of a ten-year relationship with Sunrise, detailed above, was arguably misleading, potentially lulling Sunrise into a false sense of security so that it could pursue a commercial relationship with Delphi involving controllers without worrying about an infringement suit. On this point, John worked with Sunrise in attempt to ensure that Delphi's controllers were compatible with the head control device. Third, genuine issues of material fact exist as to whether Sunrise relied on LT's conduct in pursuing this commercial relationship with Delphi, and whether this reliance caused material prejudice. Drawing all reasonable inferences in Sunrise's favor, the Court agrees that "the Lautzenhisers' conduct regarding Sunrise powered wheelchairs with Delphi controllers is relevant to . . . Sunrise's reliance on the Lautzenhisers' conduct with regard to the Delphi controller." [Dkt. 172 at 14]. Simply stated, LT cannot prove the nonexistence of an element of Sunrise's equitable estoppel defense. Thus, the Court DENIES LT's Cross-Motion for Summary Judgment as to Sunrise's equitable estoppel defense on all patents, to the extent it applies to Sunrise wheelchairs using Delphi controllers.
b. Equitable Estoppel Delphi
Second, LT argues that Delphi itself cannot prevail under a defense of equitable estoppel. To bolster this claim, LT highlights that Delphi did not release controllers for commercial use until 2005 and Delphi's 30(b)(6) witness testified that prior to developing the controllers, Delphi "had no knowledge of the Lautzenhiser patents during the design phase; so therefore we wouldn't have made any design changes in consideration of the Lautzenhiser patents." Effectively, Delphi admitted that it never based design decisions on LT's action or inaction as to enforcement of the patent-in-suit. This fact eviscerates the element of reliance for purposes of estoppel. Without knowing of LT, Delphi could not have conceivably relied on LT's conduct. See Troxler Electronic Labs., 597 F. Supp. 2d at 594 ("the defense of equitable estoppel requires the court to analyze the facts from the alleged infringer's perspective.") (emphasis added). Even drawing all reasonable inferences in favor of Delphi, the Court finds that there are no genuine issues of material fact as to the reliance element of the estoppel defense. LT's Motion for Summary Judgment as it applies to the availability of an estoppel defense for Delphi is therefore GRANTED.
C. Defendants' Implied License/Permissive Use Defense
The parties have brought Cross-Motions for Summary Judgment on Defendants' implied license defense. The doctrine of implied license is anchored in the idea that a patentee cannot consent to an infringer's use or sale of a product, only to later claim infringement based on such use or sale. Wang Labs v. Mitsubishi Electronics, 103 F.3d 1571, 1579-80 (Fed. Cir. 1997) ("In patent law, an implied license merely signifies a patentee's waiver of the statutory right to exclude others from making, using, or selling the patented invention."). In this context, equitable estoppel and implied license are related. However, "The primary difference between the estoppel analysis in implied license cases and the analysis in equitable estoppel cases is that implied license looks for an affirmative grant of consent or permission to make, use, or sell" while estoppel only requires "misleading conduct." Mass Engineered Design, Inc. v. Ergotron, Inc., 633 F. Supp. 2d 361, 388 (E.D. Tex. 2009) (emphasis added).
Although an affirmative grant of consent is required for implied license, a patentee need not grant a formal license. In fact, "any conduct [by the patentee] exhibited to another from which that other may properly infer that the owner consents to his use of the patent in the making or using it, or selling it, upon which the other acts, constitutes a license." Wang Labs, 103 F.3d at 1580; but see Blais v. United States, 31 Fed. Cl. 422, 426 (Fed. Cl. 1994) ("[A]n implied license cannot arise out of the unilateral expectations or even reasonable hopes of one party. One must have been led to take action by the conduct of the other party."). In determining the existence of such consent, the Federal Circuit requires:
(1) an existing relationship between the patentee and infringer; (2) within that relationship the patentee transferred a right to use the patented invention;
(3) the right was transferred for valuable consideration; (4) the patentee has now denied the existence of the right; and (5) the patentee's statements and conduct created the impression that it consented to the accused infringer making, using, or selling the patented invention.
Wang Labs, 103 F.3d at 1579;
Mass Engineered Design v. Ergotron, 633 F. Supp. 2d 361, 388 (E.D. Tex. 2009).
Defendants argue that LT actively encouraged Defendants' manufacture, sale, and use of products that it now alleges are infringing, which constitutes an implied license. The centerpiece of Defendants's argument is that Magitek's website advertised its head control device's compatibility with PG controllers. Because of this advertisement, Defendants argue, "[LT] has demonstrated its approval of the right to use products made according to the patents in conjunction with a power wheelchair (such as Sunrise) utilizing a PG controller." [Dkt. 168-1 at 34].
The head control device could not be used directly with a powered wheelchair. In order to function, the head control device needed to be plugged into a wheelchair controller like PG's.
Drawing all reasonable inferences in favor of LT, the Court is not persuaded. At this time, the Court simply cannot find that LT's behavior amounted to an affirmative grant of consent as required for an implied license defense. As LT notes, Magitek included instructions to help purchasers of its products install and set up a specialty control for use with a standard controller. In doing so, Magitek informed consumers that its products were compatible with PG controllers. Trumpeting compatibility, however, does not give Defendants carte blanche to use patents with impunity. This analysis is further complicated by John's affidavit, which states that Sunrise first contacted Magitek about making their products compatible. If indeed Defendants were the driving force behind this collaborative relationship, then it is harder for Defendants to argue that LT's behavior is the cause of Defendants' alleged infringements. See Wang Labs, 103 F.3d at 1580 (noting that Supreme Court precedent holds that under the doctrine of implied license, the conduct of the patentee must lead the alleged infringer to act).
Moreover, the key cases that Defendants rely upon are distinguishable. For instance, in Mass Engineered, the court stated that by selling Mass products "Dell . . . encouraged [infringing] sales through itself as well as to third parties." Id. at 386. Accordingly, the conduct of Dell in selling Mass products created the affirmative grant required for an implied license and related directly to the infringement. In contrast, neither LT nor Magitek ever actually sold Defendants' products; nor has any Defendant sold Magitek products. In Wang Laboratories, the court determined that plaintiff, the holder of a patent for a memory module (SIMM), granted an implied license where plaintiff provided designs, suggestions, and samples to defendant, and eventually began purchasing SIMMs from defendant, before making infringement accusations. Here, by contrast, LT was not purchasing allegedly infringing products from Defendants.
While the existence of an implied license is normally a question of law, Blais, 31 Fed. Cl. at 425, the Court cannot help but find genuine issues of material fact as to whether or not LT's behavior constituted an affirmative grant of consent. See Wang Laboratories, 103 F.3d at 1579 (noting that there is a factual component to the implied license review). LT argues, "None of the contacts by and between LT, [PG] and Sunrise was coupled with any affirmative statements or conduct on the part of LT giving Sunrise or [PG] carte blanche permission to manufacture devices which infringed one or more of the five Lautzenhiser patents at issue in this action." [Dkt. 182 at 10]. The Court believes that genuine issues of material fact exist on this very issue.
On the flip side of the coin, the Court also finds that genuine issues of material fact preclude summary judgment for LT. Drawing all reasonable inferences in favor of Defendants, the Court simply cannot find that LT has proven the nonexistence of any of the five elements articulated above. Elements (1) and (4) are clearly met, while questions of fact cloud elements (2), (3), and (5). For these reasons, the parties' Cross-Motions for Summary Judgment on the Defendants' implied license defense are DENIED.
IV. CONCLUSION
For the reasons set out above, the Court GRANTS PG and Sunrise's Motion for Summary Judgment [ Dkt. 154] as to the laches defense on the `899 and `906 patents. Thus, for these patents, LT cannot recover damages before the filing date of the suit: Sunrise was sued on June 18, 2007, and PG was named as a co-Defendant on July 11, 2008. Because of the existence of genuine issues of material fact, the Court DENIES PG and Sunrise's Motion for Summary Judgment as to the laches defense on the `807, `624, and `600 patents. The Court did not assess Delphi's laches defense because, for the reasons explained above, it is a moot point. In making these determination, the Court also DENIES LT's Cross-Motion for Partial Summary Judgment [ Dkt. 158] as to the availability of the laches defense for Sunrise wheelchairs that use Delphi controllers.
As to the equitable estoppel defense, the Court DENIES Defendants' Motion for Summary Judgment for all patents-in-suit. Moreover, because of the existence of genuine issues of material fact, the Court DENIES LT's Cross-Motion for Partial Summary Judgment as to the availability of the equitable estoppel defense for Sunrise wheelchairs with use Delphi controllers. However, the Court GRANTS LT's Cross-Motion for Partial Summary Judgment as to the availability of the equitable estoppel defense for Delphi itself. Thus, Delphi cannot prevail under a theory of equitable estoppel.
Finally, as to the implied license defense, the Court DENIES the parties' respective Motions for Summary Judgment.
SO ORDERED: