Gasser Chair Co., Inc. v. Infanti Chair Mfg. Corp., 94-1282

• Decision Date: 01 June 1995
• Docket Number: No. 94-1282,94-1282
• Citation: 34 USPQ2d 1822,60 F.3d 770
• Parties: GASSER CHAIR COMPANY, INC., and George Gasser, Plaintiffs-Appellants, v. INFANTI CHAIR MANUFACTURING CORP., and Vittorio Infanti, Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

Page 770

60 F.3d 770

34 U.S.P.Q.2d 1822

GASSER CHAIR COMPANY, INC., and George Gasser, Plaintiffs-Appellants, v. INFANTI CHAIR MANUFACTURING CORP., and Vittorio Infanti Defendants-Appellees.

No. 94-1282.

United States Court of Appeals Federal Circuit.

June 1, 1995.

Anthony J. Casella, Casella & Hespos, New York City, argued for, defendants-appellees. With him on the brief was Gerald E. Hespos.

Before RICH, MAYER, and MICHEL, Circuit Judges.

MAYER, Circuit Judge.

Gasser Chair Company, Inc. and George Gasser (Gasser) appeal a final judgment of the United States District Court for the Eastern District of New York, No. 88-CV-3931 (Mar. 24, 1994), granting summary judgment to Infanti Chair Manufacturing Corp. and Vittorio Infanti (Infanti) and holding that Gasser's patent and trade dress claims were barred by laches and equitable estoppel. Because we conclude that the district court did not properly apply the tests of laches and equitable estoppel to the facts, we reverse and remand.

Background

Gasser and Infanti are furniture manufacturers located in New York. Gasser holds United States Patent No. 4,106,739 ("the '739 patent"), issued August 15, 1978, entitled "Bumper Edge Member for Chairs." The bumper edge is a hollow structure applied to the edges of the structural portions of a chair to protect and finish it and to indicate where the welt and upholstery should be attached.

On January 9, 1979, Gasser sent Infanti a letter saying that Infanti was infringing the '739 patent and that legal action would ensue if Infanti did not respond. On March 19, 1979, the parties reached an agreement under which Infanti agreed to cease manufacturing and selling its allegedly infringing chairs.

Contrary to the terms of that agreement, in 1981 Infanti once again began to sell chairs with bumper edges. On April 19, 1982, Gasser sent Infanti a letter threatening legal action if Infanti did not cease making chairs with bumper edges. The letter was returned as undeliverable. Gasser sent a second letter on May 19, 1982, which Infanti did not answer. During the same time period, Dun & Bradstreet, Inc., conducted investigations of Infanti at Gasser's request, and reported that Infanti had ceased doing business.

In 1983, Gasser saw Infanti displaying chairs with bumper edges at a trade show in New York. Gasser warned Infanti that he would pursue legal action if Infanti continued to make the chairs. In 1986 and 1987, Gasser again saw Infanti displays at trade shows, and on both occasions threatened legal action. On February 16, 1988, Gasser told Infanti that it would not sue if Infanti sold its business to Gasser. The parties entered into negotiations but were unable to agree on a price for the business, and on December 20, 1988, Gasser sued Infanti for infringement of the '739 patent, violation of Gasser's trade-dress rights in the overall appearance of the chairs, under Lanham Act section 43(a) and common law unfair competition, and breach of the 1979 agreement. Infanti moved for summary judgment, claiming laches and estoppel as defenses against the patent claim, functionality as a defense against the trade-dress claim, and the statute of limitations as a bar to the contract claim.

On August 19, 1991, the district court granted Infanti summary judgment on the grounds of laches and estoppel on the patent claim, and extended this holding to the trade-dress and contract claims sua sponte. ^* Gasser moved for reconsideration, which was denied on April 16, 1992. Infanti's counterclaims for antitrust violations and unfair competition were dismissed with prejudice. On March 24, 1994, the district court entered final judgment on the grounds indicated, and this appeal followed.

Discussion

A district court's grant of summary judgment is reviewed de novo. See Meyers v. Asics Corp., 974 F.2d 1304, 1306, 24 USPQ2d 1036, 1037 (Fed.Cir.1992). "[T]here must ... be no genuine issues of material fact, the burden of proof of an issue must be correctly allocated, and all pertinent factors must be considered." A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1039, 22 USPQ2d 1321, 1333 (Fed.Cir.1992). This court must ensure that the district court "view[ed] the evidence in a light most favorable to the nonmovant and dr[e]w all reasonable inferences in its favor, ... and ... resolve[d] all doubt over factual issues in favor of the party opposing summary judgment." SRI Int'l v. Matsushita Electric Corp., 775 F.2d 1107, 1116, 227 USPQ 577, 581 (Fed.Cir.1985) (citations omitted).

A. Laches as a Bar to the Patent Infringement Claim

Laches is a long-recognized defense to a patent infringement suit that arises when a patent holder "neglect[s] or delay[s] ... bringing suit to remedy an alleged wrong, which taken together with lapse of time and other circumstances, causes prejudice to the adverse party and operates as an equitable bar." Aukerman, 960 F.2d at 1028-29, 22 USPQ2d at 1325. Laches "focuses on the dilatory conduct of the patentee and the prejudice which the patentee's delay has caused." Id. at 1031-32, 22 USPQ2d at 1328. If successful, the laches defense bars relief only for damages accrued prior to suit. See id. at 1040-41, 22 USPQ2d at 1334-35.

To successfully invoke laches, a defendant must prove by a preponderance of the evidence (1) that the plaintiff delayed filing suit an unreasonable and inexcusable length of time after the plaintiff knew or reasonably should have known of its claim against the defendant; and (2) the delay resulted in material prejudice or injury to the defendant. See Advanced Cardiovascular Sys., Inc. v. SciMed Life Sys., Inc., 988 F.2d 1157, 1161, 26 USPQ2d 1038, 1041 (Fed.Cir.1993); Aukerman, 960 F.2d at 1028, 22 USPQ2d at 1324; Meyers v. Brooks Shoe Inc., 912 F.2d 1459, 1461, 16 USPQ2d 1055, 1057 (Fed.Cir.1990), overruled on other grounds by Aukerman, 960 F.2d at 1038-39, 22 USPQ2d at 1333. On summary judgment, Infanti also had to establish that there was no genuine issue of material fact as to either element.

Even if the elements of laches are established, however, a court need not bar a plaintiff's suit. The application of the laches defense is discretionary, and as an equitable matter, the district court is to look to all the facts and circumstances of the case and weigh the equities of the parties. See, e.g., Aukerman, 960 F.2d at 1032, 22 USPQ2d at 1328. "Laches is not established by undue delay and prejudice. Those factors merely lay the foundation for the trial court's exercise of discretion. Where there is evidence of other factors which would make it inequitable to recognize the defense despite undue delay and prejudice, the defense may be denied." Id. at 1036, 22 USPQ2d at 1331.

The first factor, the length of time that is unreasonable or inexcusable delay in filing suit, depends on the facts and circumstances of each case. See Galliher v. Cadwell, 145 U.S. 368, 373, 12 S.Ct. 873, 875, 36 L.Ed. 738 (1892); Aukerman, 960 F.2d at 1032, 22 USPQ2d at 1328; Meyers v. Brooks Shoe, 912 F.2d at 1462-63, 16 USPQ2d at 1058. The focus is on reasonableness. See Aukerman, 960 F.2d at 1034, 22 USPQ2d at 1329. A court must consider any excuse for the delay offered by the plaintiff. See id. at 1033, 22 USPQ2d at 1329 (listing examples).

The district court concluded that Gasser delayed for five years before bringing suit: from 1983, when Gasser learned of Infanti's continued infringement at a trade show, to February 16, 1988, when the parties began negotiating a possible settlement. The court observed that Gasser had seen Infanti's chairs on display at trade shows in 1983, 1986, and 1987, and that Infanti had not attempted to conceal its post-1983 chair manufacturing from Gasser. The court concluded that Gasser's sole excuse for the delay was that litigation was not his "personal style," and that the five year delay was therefore inexcusable.

We believe the district court erred in not drawing reasonable inferences in favor of Gasser that would have shortened the delay period and may have shown that the delay was reasonable. For example, Gasser testified that he believed Infanti would again abide by the 1979 agreement following their encounter at the 1983 trade show. Gasser also testified that he did not see Infanti chairs with bumper edges again after that trade show until 1986. Infanti, on the other hand, denied that the 1983 encounter even took place. Nevertheless, the district court treated the 1983 trade show encounter as the starting date for calculating Gasser's delay in filing suit. Thus, although the court credited Gasser's testimony at least to the extent that this meeting took place, it failed to draw reasonable inferences in favor of Gasser about what took place during this encounter. Given Gasser's testimony that at the conclusion of the meeting he felt that Infanti would comply with the agreement, and that he saw no evidence that Infanti was not complying with the agreement until 1986, a reasonable inference would be that Gasser had no reason to sue until at least 1986, a difference in the delay period that might well have made a difference in the final outcome. See, e.g., Vaupel Textilmaschinen KG v. Meccanica Euro Italia s.p.a., 944 F.2d 870, 878-79, 20 USPQ2d 1045, 1052 (Fed.Cir.1991) (holding, based on similar facts and a delay of three and one-half years, that "it would have been an abuse of discretion for the district court to have held that these circumstances resulted in laches"). Alternatively, based on Gasser's testimony the district court could have concluded that the portion of the delay period from 1983 to 1986 was not unreasonable. See Aukerman, 960 F.2d at 1034, 22 USPQ2d at 1329 (reasonableness must be judged based on the plaintiff's knowledge). In any case, the district court's treatment of this evidence was improper on summary judgment.

The second factor, material prejudice resulting from the plaintiff's delay, "may be either economic or evidentiary." Id. at 1033...