Defending Patent Infringement Actions

As stated previously, a grant of a patent allows an inventor to exclude others from making, using, selling, offering for sale, or importing the patented invention into the United States without the inventor’s permission for a limited period of time. Patent rights are granted by federal law, which also provides that an inventor whose patent is infringed may seek a remedy in federal court. There are several defenses to patent infringement that may be asserted by one who is sued for patent infringement. One defense that not only will negate infringement liability but will also destroy the validity of a patent is inequitable conduct on the part of the inventor in procuring the patent. Another defense is Laches and estoppel and a third defense is the shop rights doctrine.

Shop Rights Defense

If the one enters into an employment relationship, as an employee, the ownership of any intellectual property created by that employee may be governed by well-established rules including the “shop rights” doctrine. A “shop right” refers to the right of an employer to use an employee’s invention in the employer’s business without the payment of a royalty to the employee. In essence, the employer is not required to pay the employee twice for his work for the employer. Typically, this doctrine may be applied as a defense to an infringement action, which is usually initiated by a former employee against the former employer for infringement of a patent listing as an inventor, the former employee. The rationale for the rule is that when an employee creates an invention during his employment with the employer and when the employee uses the employer’s resources to conceive, develop or perfect the invention, the employee was paid for creating the invention and the employer has an equitable right to practice the invention. According to this rule, the employee-inventor must in equity allow his or her employer to continue to practice the invention under a non-exclusive, non-transferable right.

Laches

To be able to obtain monetary compensation for patent infringement, there are certain requirements that are placed upon the patent owner. One requirement is that a patent owner must not be guilty of “laches.” Laches is a doctrine or judge-made law that requires one who has a cause of action to prosecute that cause of action without a delay that might prejudice the party against whom the lawsuit is brought. “Prejudice” is a general term that refers to harm experienced by a party. In the patent context, a party can be found to be prejudiced by a patent owner’s failure to act because such failure could be taken as an indication that no patent right exists or that the patent owner is not interested in enforcing the patent right. Another party might rely on that apparent lack of patent right for a particular product and expend much time and money in making or using that product and would be prejudiced if it was ordered to cease its operation.

If more than six years passes after a patent owner discovers infringing conduct before a lawsuit is filed, the law presumes that the patent owner is guilty of laches and will not be able to recover any monetary damages between the beginning of the infringing conduct and the time the lawsuit was commenced. However, that presumption can be rebutted by the patent owner by showing that there was a reasonable cause for the delay or that the alleged infringer was not prejudiced by the delay. In either case, the presumption is destroyed and a monetary recovery is available. Because laches is an “equitable” defense, a determination of whether laches will prevent a monetary recovery will depend upon whether the parties–both the patent owner and the alleged infringer–conducted themselves in good faith. If an alleged infringer does not have a good faith belief that no valid patent protection exists but rather simply gambles that a patent lawsuit will not be brought, a court may conclude that any prejudice suffered by the alleged infringer was caused by its own actions than the delay by the patent owner in bringing a lawsuit.

Equitable estoppel

Another doctrine of judge-made law that is closely related to laches is equitable estoppel. Estoppel means that a party’s own conduct prevents the party from asserting rights that might have been asserted had the party not behaved as it did. In the patent context, equitable estoppel arises when a patent owner takes actions that would lead a reasonable person to believe that he or she was not infringing the patent. Another factor necessary for a finding of estoppel is that the alleged infringer relied upon the patent owner’s conduct. Finally, it must be found that, because of the patent owner’s conduct and the alleged infringer’s reliance upon that conduct, that the alleged infringer would be prejudiced if a patent infringement lawsuit was allowed.

A simple example of equitable estoppel would be if a manufacturer was interested in making a particular item but was concerned that making the item would amount to the infringement of a patent. The manufacturer might submit details of its proposed item to the patent owner and voice its concerns about possible infringement. If the patent owner expresses to the manufacturer that its proposed item does not infringe upon the patent owner’s patent, the manufacturer might invest substantial time and money into setting up manufacturing operations for the item. In this example, all the necessary elements for a finding of equitable estoppel are present: the patent owner’s own conduct gave the manufacturer a reason to believe that it would not infringe upon the patent by making the item; the manufacturer relied upon that conduct in going ahead with its manufacturing operation; and the manufacturer would be prejudiced if a patent infringement action was allowed to proceed because it would have to abandon the time and money it invested in its manufacturing operation. Even though the patent owner might have a valid patent, and even though the manufacturer was in fact infringing upon that patent, equitable estoppel would prevent the patent infringement lawsuit from proceeding.

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