Equitable estoppel is a legal doctrine that prevents a party from asserting a legal claim or right under principles of fairness and equity. In the 1992 en banc decision of Aukerman v. Chides Constr., the Federal Circuit identified three elements of the equitable estoppel doctrine in the context of patent infringement. Most often, a claim of equitable estoppel arises after a lengthy period of inaction by the patent holder trying to assert its rights in an infringement situation. In the case of patent infringement, certain actions by a patentee can lead to a claim of equitable estoppel by an alleged infringer:
- Misleading Silence: the patentee, through misleading conduct (or silence), leads the alleged infringer to reasonably infer that the patentee does not intend to enforce its patent against the alleged infringer;
- Reliance: alleged infringer relies on the conduct; and
- Prejudice: the alleged infringer will be materially prejudiced if the patentee is allowed to proceed with its claim.
The equitable principle of latches involves a failure of a party to assert its legal rights for so long that the other side comes to believe its action is permissible, that the claim is waived and will not be asserted. This is a legal doctrine born out of principles of fairness and equity. For example, consider the situation where your lease prevents you from having a pet. Despite the lease language prohibiting pets, you got a pet. The landlord knew of your pet for 3 years and did not enforce the lease provision concerning pets. You, the tenant, come to believe the landlord is okay with the pet. If the landlord unexpectedly tries to assert breach and evict you for the pet, you could raise an equitable estoppels defense.
In one recent case, the court found that a 4 ½ year delay in asserting patent rights against an alleged infringer created an equitable estoppel. In this case, the alleged infringer was a successor in interest of a prior entity (after a corporate merger) that received a cease and desist letter. The successor in interest (the alleged infringer) invested considerable sums in the product over a 4 ½ year period and argued it would be unfairly harmed if the patent was asserted after such a long delay. In that case, there was a cease and desist letter by the patentee that the alleged infringer responded to with a defense of an invalid patent. There was no more communication between patentee and the alleged infringer for 4 ½ years until an infringement action was commenced against the successor company.
This particular case had an interesting wrinkle. The patentee filed a continuation application after the cease and desist letter was sent. Since the cease and desist letter never mentioned the claimed subject matter of this second patent application, the patentee was not precluded from asserting infringement claims of the newer patent against the successor company. A critical point for the court was that the successor company would have “privity” with the patent holder since the former entity was a wholly owned subsidiary of the successor with similar executive management and product lines.
The cost of patent enforcement is substantial and causes many patentees to take a “wait and see” approach. This failure to take action can risk the right to assert patent infringement claims. If you find yourself in this situation, you should conduct an infringement analysis and an invalidity search. The investment will give you a better idea of the strengths and weakness of your legal position so you can make critical business decisions about how to proceed in this situation.