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Federal Circuit Says Don’t Count Your Chickens Before They’re Lached

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The Federal Circuit (“CAFC”) today decided that in a game of “chicken,” one might actually be best served by swerving out of the way — comebacks are allowed. In John Bean Technologies Corp. and Morris & Associates Inc., the CAFC reversed a district court’s decision that plaintiff Bean’s patent infringement claims were barred by equitable estoppel and laches. The reversal was based on the fact that, although Bean had indeed slept on his rights for more than ten years, his filing of an ex parte reexamination, which resulted in new patent claims, effectively restarted the clock on the estoppel and laches issue, and the new claims were not subject to the long time delay.

Bean and Morris were perennial competitors in the specialized market for poultry (i.e., chicken) chilling refrigerators. In 2002, U.S. Patent No. 6,397,622 issued to John Bean. Morris was notified by several of its customers that John Bean’s representatives had claimed that Morris was violating John Bean’s ’622 patent. Morris then sent John Bean a strongly worded demand letter alleging Morris’s belief that John Bean’s ’622 patent was invalid.

John Bean never responded to Morris’ demand letter claiming that the ‘622 patent was invalid. However, eleven years later, in 2013, John Bean filed for ex parte reexamination of his ’622 patent. After being rejected by the Patent Office as anticipated or obvious, John Bean amended the patent’s specification and the claims. The ’622 then emerged from reexamination with new claims substantially and substantively different from its original claims. Not long thereafter, John Bean sued Morris for infringement of its ’622 patent but (importantly) sued only on the new claims. The case quickly moved to summary judgment before the Eastern District of Arkansas as to whether John Bean’s suit was barred by equitable estoppel and laches. The district court ruled for Morris, finding that John Bean’s failure to respond to Morris’s demand letter fourteen years ago in 2002 constituted misleading conduct on which Morris relied, resulting in material prejudice.

On appeal, the CAFC confirmed that Bean’s non-conduct (i.e., silence by a failure to respond) was in fact sufficient to constitute misleading conduct. However, the CAFC found the facts unusual in this case, holding that extending equitable estoppel to the reexamined claims would be contrary to the principles undergirding the issuance of reexamination claims. The CAFC held that because (i) John Bean’s suit was based on the more recently narrowed reexamination claims, (ii) John Bean was not seeking damages for Morris’s conduct prior to the issuance date of the reexamination certificate, and (iii) substantial and substantive amendments were made to the original claims, equitable estoppel did not extend to bar the suit. The CAFC also buttressed its holding on its own precedent that equitable estoppel does not apply to pending claims still in examination at the time a demand letter is sent.

What This Means for You

In light of the CAFC’s holding, patentees may have an option even if they sit on their rights for a long time. By placing their own patents into reexamination, patent owners may be able to side-step delay giving rise to estoppel and laches — as long as patentees remember to substantially amend their claims. Accused infringers, on the other hand, should not believe that a party’s failure to respond to a demand letter alleging invalidity provides them with a full-proof defense in the future. Defendants not only have to continue to monitor claims pending in prosecution at the time of a demand letter or new patents, but they should also know that if issued claims later undergo reexamination, it is as if the patentee has brand new claims that require renewed analyses of infringement and invalidity.

Visit our website to learn more about V&E’s Patent Litigation practice. For more information, please contact Vinson & Elkins lawyers Craig Tyler, Howard Lim, or any of the Intellectual Property practice contacts.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.