Odetics, Inc. v. Storage Technology Corp.

• Decision Date: 22 March 1996
• Docket Number: No. 1:95CV881.,1:95CV881.
• Citation: 919 F. Supp. 911
• Parties: ODETICS, INC., Plaintiff, v. STORAGE TECHNOLOGY CORPORATION, et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

919 F. Supp. 911

ODETICS, INC., Plaintiff, v. STORAGE TECHNOLOGY CORPORATION, et al., Defendants.

No. 1:95CV881.

United States District Court, E.D. Virginia.

March 22, 1996.

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Paul J. Kennedy, Washington, DC, Vincent J. Belusko, William J. Robinson, Stuart L. Merkadeau, Eric Shih, Los Angeles, CA, for plaintiff.

Laurence E. Stein, Pennie & Edmonds, Washington, DC, John R. Stark, Bernard H. Chao, Pennie & Edmonds, Menlo Park, CA, Stephen J. Harbulak, Michael J. Lyons, Pennie & Edmonds, New York City, W. Russell Wayman, Storage Technology Corporation, Louisville, CO, for defendants.

MEMORANDUM OPINION

ELLIS, District Judge.

This is a patent infringement action in which the parties filed cross-motions for summary judgment on the doctrine of laches. The accused infringers contend the undisputed record establishes that the plaintiff patentee knew or should have known of the existence of its infringement claim more than six years before suit was filed. They further contend that this delay in filing suit was inexcusable, and that they were prejudiced by it. The patentee, in response, denies these contentions, arguing instead that it had no reason to know of the existence of this cause of action until late 1993, and alternatively that any delay on its part in bringing suit was both excusable and nonprejudicial to the defendants. Thus, among the questions presented by the parties' cross-motions for summary judgment are the following:

(i) What knowledge must a patentee have about a putative infringing product or device to trigger the running of the laches clock?

(ii) Does a putative infringer's failure to obtain a detailed noninfringement opinion give rise to a negative inference sufficient to defeat the defendant's later claim of laches?

(iii) Is the defense of laches also available to "customer defendants," i.e., companies accused only of using an infringing product, as opposed to manufacturing and/or selling it?

I.

The facts pertinent to the laches analysis are essentially undisputed and easily summarized.¹ Odetics, Inc. ("Odetics") filed this action on June 29, 1995, alleging that various automated tape libraries ("ATLs")² manufactured and sold by defendant Storage Technology Corporation ("Storagetek") infringed Odetics' United States Patent No. 4,779,151 ("'151 patent").³ Crestar Bank, Visa International Service Association, Inc., and Visa USA, Inc. (collectively, "customer defendants") were also named as defendants because of their use of the accused Storagetek products, chiefly in connection with the ubiquitous automated teller machines that have revolutionized consumer banking over the past decade.

The '151 patent issued on October 18, 1988. By this time, Storagetek had already been producing and marketing its ATLs to the public for about a year. Indeed, Odetics became aware of the introduction of the ACS 4400, Storagetek's first ATL, in 1987. Thus, Timothy Crabtree, a co-inventor of the '151 patent, recalls seeing trade journal articles about the Storagetek ATL product circulated at Odetics sometime in 1987. In fact, Crabtree admitted that "the articles were circulated, because obviously this was somewhat similar technology to what we are working on, although in an entirely different industry." Specifically, Crabtree recalled thinking "Oh, someone else is doing something similar to what we are doing for a different purpose." Crabtree also knew at this time that the silos or library modules of the Storagetek ATL could be interconnected.

The trade journal articles circulated at Odetics were only part of Storagetek's marketing efforts in connection with the new ACS 4400. These efforts also included circulation of the original ACS 4400 system manual. This manual contains references to, and diagrams of, the system's pass-thru port, the '151 patent element on which Odetics' infringement claims focus. It also explicitly states that the pass-thru port rotates. Unlike the trade journal articles, however, it is unclear whether anyone at Odetics read the manual during this time period.⁴

Notwithstanding its knowledge of the Storagetek ATL, including that the ACS 4400 embodied "similar technology" to the '151 patent to accomplish a similar result, Odetics did not begin to investigate the possibility of infringement until late 1993. In November of that year, Storagetek approached Odetics regarding a potential sale of its subsidiary, Lago Systems, to Odetics. As a part of those sales discussions, Storagetek provided Odetics with documentation of Lago's ATL. Two months later, in January 1994, Odetics retained legal counsel to help assess the Storagetek products vis-a-vis the '151 patent, thereby taking the first legal steps on the road to the filing of this suit in June 1995.

II.

Laches is a seasoned, settled doctrine, firmly rooted in the foundational soils of equity and justice.⁵ It is based on the Latin maxim, "vigilantibus non dormientibus aequitas subvenit," which means "equity aids the vigilant, not those who sleep on their rights."⁶ The doctrine of laches may be applied to limit the judicial relief available to a plaintiff who waits an unreasonable amount of time before seeking such relief. Yet, the mere passage of time does not, by itself, warrant application of the doctrine. More is required, for as has been noted, "laches is a species of estoppel,"⁷ and the doctrine therefore requires both an act or omission by the plaintiff, namely failing to bring suit at an earlier date without reasonable excuse, and resulting prejudice to the defendant.⁸ Thus, in the specific context of patent infringement litigation, a defendant attempting to interpose the affirmative defense of laches must show (i) an unreasonable and inexcusable delay by the plaintiff patentee in filing the infringement suit after the plaintiff knew, or reasonably should have known, of the defendant's allegedly infringing activity; and (ii) material prejudice to the defendant resulting from the delay. A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1032 (Fed.Cir.1992) (en banc). Once these two elements are shown, a court may, in its discretion, invoke the equitable doctrine of laches to bar the patentee from recovering damages for any past infringement by that defendant.

From these basic principles, it is evident that the time from which the patentee's delay is to be measured is a crucial factor in the laches analysis. The period of delay begins when the plaintiff patentee knew or should have known of the alleged infringing activity. Id. at 1032. The "knew or should have known" standard means that a patentee need not know unequivocally that a device actually infringes before the laches clock begins to run. ABB Robotics, Inc. v. GMFanuc Robotics Corp., 828 F.Supp. 1386, 1391-92 (E.D.Wis.1993), aff'd, 52 F.3d 1062 (Fed.Cir.1995). Rather, he is charged with making the inquiry that a diligent and reasonably prudent patentee would make to determine whether another device infringes his patent. Jamesbury v. Litton Industrial Products, Inc., 839 F.2d 1544, 1552 (Fed. Cir.), cert. denied, 488 U.S. 828, 109 S.Ct. 80, 102 L.Ed.2d 57 (1988). Put another way, "the plaintiff is chargeable with such knowledge as he might have obtained upon inquiry, provided the facts already known by him were such as to put upon a man of ordinary intelligence the duty of inquiry." Johnston v. Standard Mining Co., 148 U.S. 360, 370, 13 S.Ct. 585, 589, 37 L.Ed. 480 (1893); Advanced Cardiovascular Systems, Inc. v. Scimed Life Systems, Inc., 988 F.2d 1157, 1162 (Fed.Cir.1993) (quoting Johnston).⁹

The next question, then, is what facts are sufficient to trigger the duty of inquiry. While case law on this point is meager, there are some decisions that provide a starting point for analysis of this case. For example, one court has found that knowledge of trade journal articles describing the allegedly infringing product is sufficient to satisfy the "knowledge" requirement of laches. Hamilton v. Mid-West Abrasive Co., 216 F.Supp. 411, 419 (W.D.Pa.1963). More specifically, because the patentee in Hamilton had read these articles, he was "charged with knowledge that defendant had a successful machine which accomplished the same objects covered by his patent." Id. Similarly, another court of this division has held that a patentee's duty of inquiry is triggered by the commercial release of the allegedly infringing product coupled with the patentee's examination of it. See Jackson Jordan, Inc. v. Plasser American Corp., 219 U.S.P.Q. 922, 926 (E.D.Va.1983). From these decisions, a sensible guiding principle emerges: If a patentee knows of the existence of a product or device that (i) embodies technology similar to that for which he holds a patent and (ii) uses that similar technology to accomplish a similar objective, he has a duty to examine the product or device more closely to ascertain whether it infringes his patent. If he shirks this duty, he does so on peril of triggering the laches period and perhaps ultimately losing his right to recover damages for the infringement.

Once the laches period begins to run, a delay of more than six years before the commencement of a suit gives rise to a presumption as to both elements of laches, namely (i) that the delay was unreasonable, and (ii) that the defendant was thereby prejudiced. See, e.g., Aukerman, 960 F.2d at 1034-36; see also Advanced Cardiovascular Systems, Inc. v. Scimed Life Systems, Inc., 988 F.2d 1157, 1163 (Fed.Cir.1993) (applying the six-year presumption to bar a claim challenging ownership of patent). Thus, where there is a six-year delay in asserting an infringement claim, a patentee seeking to avoid summary judgment must adduce evidence raising a genuine, material issue as to reasonableness or prejudice. Aukerman, 960 F.2d at 1037-38. If the patentee adduces such evidence, the presumption disappears, and the application of...