A.C. Aukerman Co. v. R.L. Chaides Const. Co., No. 90-1137

CourtUnited States Courts of Appeals. United States Court of Appeals for the Federal Circuit
Writing for the CourtBefore NIES, Chief Judge, RICH, NEWMAN, ARCHER, MAYER, MICHEL, PLAGER, LOURIE, CLEVENGER, and RADER; NIES; PLAGER
Citation960 F.2d 1020,22 USPQ2d 1321
Parties, 22 U.S.P.Q.2d 1321, 35 Fed. R. Evid. Serv. 505 A.C. AUKERMAN COMPANY, Plaintiff-Appellant, v. R.L. CHAIDES CONSTRUCTION CO., Defendant-Appellee.
Docket NumberNo. 90-1137
Decision Date31 March 1992

Page 1020

960 F.2d 1020
60 USLW 2642, 22 U.S.P.Q.2d 1321, 35
Fed. R. Evid. Serv. 505
A.C. AUKERMAN COMPANY, Plaintiff-Appellant,
v.
R.L. CHAIDES CONSTRUCTION CO., Defendant-Appellee.
No. 90-1137.
United States Court of Appeals,
Federal Circuit.
March 31, 1992.
Rehearing Denied May 19, 1992.

Page 1025

Gerald P. Dodson, Townsend & Townsend, San Francisco, Cal., argued for plaintiff-appellant (Roger L. Cook and David L. Bilsker, on brief).

Thomas E. Schatzel, Law Offices of Thomas E. Schatzel, Santa Clara, Cal., argued for defendant-appellee.

Lawrence A. Hymo, Cushman, Darby & Cushman, Washington, D.C., argued for amicus curiae, Federal Circuit Bar Ass'n (William T. Bullinger, James D. Berquist, Lynn E. Eccleston, Kendrew H. Colton and Michael R. Dzwonczyk, Ronald Kananen, Marks, Murase & White, Evangeline W. Swift, President, Federal Circuit Bar Ass'n and George E. Hutchinson, Executive Director, Federal Circuit Bar Ass'n, on brief).

Jerry R. Selinger and Martha E. Waters, Vinson & Elkins, Dallas, Tex., were on the brief for amicus curiae, Datapoint Corp.

James F. McKeown, Evenson, Wands, Edwards, Lenahan & McKeown, Chair, Bar Ass'n of the District of Columbia, Washington, D.C., argued for amicus curiae, Bar Ass'n of the District of Columbia (Anthony W. Shaw and Teresa Stanek Rea, Burns, Doane, Swecker & Mathis, Arlington, Va., on the brief; and Herbert I. Cantor, Wegner, Cantor, Mueller & Player, Washington, D.C., of counsel, on brief).

Page 1026

Gaynell C. Methvin, Thomas L. Crisman and James D. Petruzzi, Johnson & Gibbs, P.C., Dallas, Tex., were on the brief for amicus curiae, Computer Entry Systems Corp. and Banctec, Inc.

Charles W. Bradley and Peter H. Priest, Davis, Hoxie, Faithful & Hapgood, New York City, were on the brief for amicus curiae, Lundy Electronics & Systems, Inc.

Maurice H. Klitzman and John J. Kelly, Washington, D.C., were on the brief for amicus curiae, Electronic Industries Ass'n.

Before NIES, Chief Judge, RICH, NEWMAN, ARCHER, MAYER, MICHEL, PLAGER, LOURIE, CLEVENGER, and RADER, Circuit Judges.

NIES, Chief Judge.

This court reheard Appeal No. 90-1137 in banc to reconsider the principles of laches and equitable estoppel applicable in a patent infringement suit. 1 A.C. Aukerman Co. sued R.L. Chaides Construction Co. in the United States District Court for the Northern District of California for infringement of Aukerman's patents, U.S. Patent Nos. 3,793,133 ('133) and 4,014,633 ('633). A.C. Aukerman Co. v. R.L. Chaides Constr. Co., No. C-88-2074-SW (N.D.Cal. Sept. 1, 1989). The district court held on summary judgment that Aukerman was barred under principles of laches and equitable estoppel from maintaining the suit and Aukerman appeals. We conclude that the correct standards, which we have clarified herein, were not applied in the district court's grant of summary judgment. Moreover, upon application of the correct law, genuine issues of material fact arise with respect to the issues of laches and equitable estoppel. Accordingly, we reverse the court's ruling on the motion for summary judgment and remand for proceedings consistent with this opinion.

I.

BACKGROUND

The following facts are not disputed. Aukerman is the assignee of the '133 and '633 patents, relating to, respectively, a method and device for forming concrete highway barriers capable of separating highway surfaces of different elevations. The device allows a contractor to slip-form an asymmetrical barrier as the mold is moved down the highway, i.e., to pour the barriers directly onto the highway without having to construct a mold. In settlement of litigation with Gomaco Corporation, a manufacturer of slip-forms which may be used to form regular or variable height barriers, Aukerman entered into an agreement in 1977 which made Gomaco a licensee under the patents and required Gomaco to notify Aukerman of all those who purchased Gomaco's adjustable slip-forms.

Upon notification that Chaides had purchased a slip-form from Gomaco, counsel for Aukerman advised Chaides by letter dated February 13, 1979, that use of the device raised "a question of infringement with respect to one or more of [Aukerman's patents-in-suit 2," and offered Chaides a license. Follow-on letters were sent by Aukerman's counsel to Chaides on March 16 and April 12, 1979. Chaides replied by telephone on April 17, 1979 but was unable to speak with counsel for Aukerman. By letter of April 24, 1979, Aukerman's counsel advised Chaides that Aukerman was seeking to enforce its patents against all infringers and that, even though Chaides might be among the smaller contractors, it had the same need for a license as larger firms. He advised further that Aukerman would waive liability for past infringement and infringement under existing contracts if Chaides took a license by June 1, 1979. Chaides responded in late April with a note handwritten on Aukerman's last letter stating that he felt any responsibility was Gomaco's and that, if

Page 1027

Aukerman wished to sue Chaides "for $200-$300 a year," Aukerman should do so. There was no further correspondence or contact between the parties for more than eight years. In the interim, Chaides increased its business of forming asymmetrical highway barrier walls. 3 Sometime in the mid-80's, Chaides made a second adjustable mold for pouring step wall which Aukerman alleges is an infringement.

Apparently in 1987, one of Aukerman's licensees, Baumgartner, Inc., advised Aukerman that Chaides was a substantial competitor for pouring asymmetrical wall in California. 4 This advice prompted Aukerman's new counsel to send a letter to Chaides on October 22, 1987, referencing the earlier correspondence, advising that litigation against another company had been resolved, and threatening litigation unless Chaides executed the licenses previously sent within two weeks. Another period of silence followed. On August 2, 1988, Aukerman's counsel again wrote Chaides explaining more fully Aukerman's licensing proposal. When no reply was received, on October 26, 1988, Aukerman filed suit charging Chaides with infringing its '133 and '633 patents.

The district court granted summary judgment in favor of Chaides, holding that the doctrines of laches and estoppel barred Aukerman's claims for relief. The court, citing Jamesbury Corp. v. Litton Indus. Prods., 839 F.2d 1544, 5 USPQ2d 1779 (Fed.Cir.), cert. denied, 488 U.S. 828, 109 S.Ct. 80, 102 L.Ed.2d 57 (1988), ruled that Aukerman's delay of more than six years in suing Chaides shifted the burden to Aukerman to prove that its delay was reasonable and was not prejudicial to Chaides. The court rejected Aukerman's proffered excuse that it was engaged in other litigation because such litigation did not cover the period from February 22, 1979, to July 31, 1980, after it first contacted Chaides, and in any event, Aukerman gave no notice to Chaides of any litigation during the period of delay up to October 1987. The court rejected Aukerman's further argument that the delay in suit was attributable to Chaides' representation of de minimis infringement. The court held that the evidence showed prejudice to Chaides in that (1) Chaides would have to pay a license fee on projects it had bid on without having allowed for this normal cost and (2) Chaides might have gone into bankruptcy had it known of its liability for past infringement. The court also held that Chaides' ability to defend itself would be prejudiced because necessary witnesses for Chaides' defense, including the inventor named in the subject patents, were unavailable and that memories of other witnesses, such as Mr. Aukerman's, had faded.

Respecting equitable estoppel, the court placed the burden on Chaides to establish this defense. The court then held that Aukerman's silence for nearly ten years after making an initial protest was sufficiently misleading to constitute bad faith and that Aukerman should have notified Chaides of the effect of the otherwise ambiguous June 1, 1979 deadline. The court went on to determine that Chaides had detrimentally relied on Aukerman's silence in deciding to forego bankruptcy and to bid low on highway contracts.

The court also found the defenses of laches and equitable estoppel were not defeated by reason of Chaides' "unclean hands." In particular, Aukerman had pointed to Chaides having made a copy of the Gomaco slip-form. The court stated Aukerman presented no evidence on "how the copy infringed the patent." Finally, it held that by the mid-80s, when this device was in use, Aukerman had already affirmatively misled Chaides.

For these reasons, the district court entered judgment for Chaides.

Page 1028

II.

SUMMARY

The court has taken this case in banc to clarify and apply principles of laches and equitable estoppel which have been raised as defenses in this patent infringement suit. 5 In summary, for reasons to be more fully discussed, we hold with respect to laches:

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.

5. A presumption has the effect of shifting the burden of going forward with evidence, not the burden of persuasion.

With respect to equitable estoppel against a patent infringement claim, we hold that:

1. Equitable estoppel is cognizable under ...

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