RAYMOND A. JACKSON, District Judge.
Before the Court is the issue of whether the equitable defense of laches should apply in this case. The Court initially styled its ruling from the bench as a response to a renewed motion for a Judgment as a Matter of Law on Laches from the Defendants. However, in reviewing the trial transcript, the Court notes that Defendants made no such Rule 50(a) motion regarding laches. The Plaintiff, however, did make a Rule 50(a) motion regarding laches and provided argument on the matter. Furthermore, Defendants responded to this motion and proffered additional evidence for the Court's consideration, which Plaintiff received and had an opportunity to respond to, but did not. Creating additional confusions is the fact that because laches is an equitable defense to be resolved as to both fact and law by the Court, a Rule 50(a) motion is inappropriate from either party. In the end, however, the Court will not place form over substance, particularly when all parties have been given a fair opportunity to litigate on the issue. Accordingly, the Court construes Plaintiffs Rule 50(a) Motion for Judgment as a Matter of Law on Laches as a Motion for Partial Findings pursuant to Rule 52(c). By making their inappropriate Rule 50(a) Motion, the Court determined that Plaintiff had placed into evidence all relevant materials regarding laches, a determination that was only questioned by Plaintiff after the Court provided its initial ruling against them on laches from the bench on October 31, 2012. Even when given an opportunity to proffer additional evidence with the benefit of consideration of the Court's ruling on the matter, the Plaintiff put forward a proffer that contains information already in the record or that is irrelevant in light of relevant case law.
Therefore, having taking evidence on laches concurrently with the jury trial on infringement, invalidity, and damages and after thoroughly reviewing the evidence, arguments (including those made on summary
The Patent Act does not provide a statute of limitations for infringement claims. However, it is well-established law that the equitable doctrine of laches may bar a patentee's recovery of pre-filing damages where (1) the patentee knew of his claim, but unreasonably delayed in filing suit and (2) that delay caused material prejudice to the alleged infringer. See Hair v. United States, 350 F.3d 1253, 1257 (Fed.Cir.2003) ("Even without a specific statutory bar to call into play, courts will impose a parallel bar — under the rubric of laches — in cases in which the plaintiff has failed to act in a reasonably prudent manner to protect and enforce rights, and when a perceived injustice to the defendant exists."). With respect to the first requirement — knowledge of infringement coupled with unreasonable delay in pursing claims against said infringement — The Federal Circuit has held that "[t]he length of time which may be deemed unreasonable has no fixed boundaries but rather depends on the circumstances." A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1032 (Fed.Cir.1992). Furthermore, "[t]he period of delay is measured from the time the plaintiff knew or reasonably should have known of the defendant's alleged infringing activities to the date of suit. However, the period does not begin prior to issuance of the patent." Id. (citations omitted). Put another way, "[t]he period of delay begins at the time the patentee has actual or constructive knowledge of the defendant's potentially infringing activities." Wanlass v. GE, 148 F.3d 1334, 1337 (Fed.Cir.1998) (emphasis added).
With respect to constructive knowledge, the Federal Circuit charges a patentee "with making the inquiry that a diligent and reasonably prudent patentee would make to determine whether another device infringes his patent." Odetics, Inc. v. Storage Tech. Corp., 919 F.Supp. 911, 917 (E.D.Va.1996) (citing 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)). Moreover, the Supreme Court holds that "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, 37 L.Ed. 480 (U.S.1893). With respect to the question of when a patentee has a duty to make inquiries as to whether its patents are being infringed, the Court finds the standard laid out in Odetics to be persuasive and applicable in this case:
It is also widely accepted law that a presumption of laches arises if there is a delay of six years or more once a party has actual or constructive notice of possible infringement of their patents:
A.C. Aukerman Co., 960 F.2d at 1035 (internal citations omitted). If the presumption of laches applies, it applies to both required elements of the doctrine — (1) that the delay was unreasonable and; (2) that the defendant must be prejudiced by the delay. Odetics, at 919 F.Supp. at 918. Once this presumption is met, the patentee bears the burden of rebutting both elements of laches (by a preponderance of the evidence) by showing that their delay was reasonable and/or by showing a lack of prejudice as a result of any unreasonable delay. Id. If the presumption does not apply, the defendant seeking protection behind the shield of laches must make a showing by the preponderance of the evidence that the delay was unreasonable and that prejudice occurred as a result.
On a variety of occasions, the Federal Circuit and other federal courts of appeals have defined the circumstances in which delay is reasonable. See 6 CHISUM ON PATENTS § 19.05[b][i]-[vii]. The Plaintiff has principally argued that their delay was either the result of strategic indecision at Lycos (the predecessor-in-interest of the patents-in-suit) or that Lycos was unable to pursue litigation against the Defendants due to on-going lawsuits and negotiations involving related patents to those in suit. As a result, the Court focuses on relevant
Odetics, Inc., 919 F.Supp. at 918-919 (internal citations omitted). The Court found no support in the case law for an excuse concerning "strategic indecision."
If a delay is considered unreasonable, a showing by the party with the burden must be made as to the existence of material prejudice. A.C. Aukerman Co., 960 F.2d at 1033 ("Material prejudice to adverse parties resulting from the plaintiffs delay is essential to the laches defense"). Evidentiary prejudice occurs when a defendant is unable "to present a full and fair defense on the merits due to the loss of records, the death of a witness, or the unreliability of memories of long past events, thereby undermining the court's ability to judge the facts." Id. (internal citations omitted). Economic prejudice arises "where a defendant and possibly others will suffer the loss of monetary investments or incur damages which likely would have been prevented by earlier suit." Id. The Federal Court, however, has been clear that "[s]uch damages or monetary losses are not merely those attributable to a finding of liability for infringement." Id. (internal citation omitted). Instead, "[t]he courts must look for a change in the economic position of the alleged infringer during the period of delay." Id.
The authority to impose laches lies within the sound discretion of the district court. See Gasser Chair Co., Inc. v. Infanti Chair Mfg. Corp., 60 F.3d 770, 773 (Fed.Cir.1995) ("Even if the elements of laches are established, however, a court need not bar a plaintiffs 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."). Finally, it is settled law in the United States "that in determining the length of delay, a transferee of the patent must accept the consequences of the dilatory conduct of immediate and remote transferors." 6 CHISUM ON PATENTS § 19.05[2][a][ii]; accord Eastman Kodak Co. v. Goodyear Tire & Rubber Co., 114 F.3d 1547, 1559 (Fed.Cir.1997), rev'd on other grounds, Cybor Corp. v. FAS Techs., 138 F.3d 1448, 1455 (Fed.Cir.1998).
Looking to the totality of evidence presented, the Court finds it appropriate to limit I/P Engine's damages based upon the principle of laches. Specifically, the Court finds that a presumption of laches is applicable in this case as Plaintiff waited in excess of six years to file its lawsuit against Defendants after having constructive knowledge of Defendants' infringement activities. In light of the presumption of laches, the burden shifts to Plaintiff to show that its delay was reasonable and/or that no evidentiary or economic prejudice resulted from said delay. The Court finds the Plaintiff fails on both counts. As such, the presumption of laches does not fall. Finally, the weight of the equities in this case supports application of the equitable doctrine of laches. Accordingly, Plaintiffs pre-filing damages are barred.
Defendants have claimed throughout the trial and through presentation of evidence that a presumption of laches applies because Plaintiffs waited more than six years to file suit. The record establishes, and the Court finds, that Lycos (and thus I/P Engine) had constructive notice that the Google Adwords system potentially infringed its patents as of July 2005 and failed to undertake any reasonable investigation to further determine if infringement was occurring.
The source of Plaintiffs constructive knowledge of Google's infringement rests on disclosures made by Google itself. On July 18, 2005, Google published a post on its "Google Inside AdWords" Blog, its official blog with respect to the AdWords system. This post was entered into the record as PX-176 (the "AdWords Post"). In a series of questions, the AdWords Post described a set of changes to the AdWords system. Of particular relevance to the question of laches are Google's statements concerning how ads are ranked and the introduction of Quality Score:
(PX-176). In I/P Engine's complaint, filed September 15, 2011, the company's core allegations are as follows:
(Complaint ¶ 37, 42). The language included in the AdWords Post quoted above is significantly similar to the language utilized by the Plaintiff in its complaint.
The Defendants argue that this similarity shows that as early as July 18, 2005, sufficient information had been made public by Google regarding the infringing technologies to put Lycos on notice that it should at the very least investigate for possible infringement or bring suit against Google because the same information eventually put I/P Engine on notice for their suit. I/P Engine refutes this point on two grounds. First, Plaintiff argues that the blog post was not a technically accurate description of the AdWords system by pointing to testimony by Jonathan Alferness, a Google employee. Second, Plaintiff argues that no one at Lycos was even aware of the AdWords Post and thus this is why they took no action to investigate. Both of these reasons lack merit. With respect to the first, the Federal Circuit does not require that perfect or exacting information being made public of a possibly infringing technology to place a patentee on notice. The Wanlass Court held that "sales, marketing, publication, or public use of a product similar to or embodying technology similar to the patented invention, or published descriptions of the defendant's potentially infringing activities, give rise to a duty to investigate whether there is infringement." Wanlass, 148 F.3d at 1338 (quoting Hall v. Aqua Queen Mfg., Inc., 93 F.3d 1548, 1553 (Fed.Cir.1996)). Given that Google described what Quality Score is in their AdWords Post and given that Quality Score is at the heart of the Plaintiffs claims against Defendants (as indicated by the substantial similarity of description of Quality Score in the complaint), the Court finds any argument that somehow Google's description of Quality Score as being too inaccurate to provide notice to Lycos in 2005 to be totally disingenuous and is rejected.
As to Plaintiff's second argument, that no one at Lycos was aware of the AdWords Post and that even if Lycos had been aware of the AdWords Post, it would not have engaged in an investigation, it also lacks merit and is contrary to established law. As the Wanlass Court also made clear, even if a patentee is not actually aware of activities that should put them on notice of infringement, like the AdWords Post, "constructive knowledge of the infringement may be imputed to the patentee ... if these activities are sufficiently prevalent in the inventor's field of endeavor." Furthermore, questions of constructive knowledge are not answered through a subjective lens but rather from the perspective of a "man of ordinary intelligence." Johnston v. Standard Mining Co., 148 U.S. 360, 370, 13 S.Ct. 585, 37 L.Ed. 480 (U.S.1893). The fact that Lycos in 2005 had no actual knowledge of the AdWords Post is meaningless if it had constructive knowledge, which the Court finds that it did. Google's publication of information concerning new advances in their search and ad serving technologies is the kind of "prevalent" activity in the field of the Lang and Kosak's inventions that Lycos should have been aware of in determining whether to enforce their patents. As the record indicates, the inventors of
Taken together, the Court concludes that I/P Engine (and Lycos as the predecessor-in-interest of the patents-in-suit) had constructive notice of possible infringement on the date Google published the AdWords Post on July 18, 2005. The Google AdWords Post contained information that serves as the heart of I/P Engine's claims against Google. If the information contained in the AdWords Post was sufficient to place I/P Engine on notice of infringement by Defendants in 2011, it was sufficient to place Lycos on notice in 2005. The record indicates that I/P Engine filed its lawsuit in the Eastern District of Virginia on September 15, 2011. Between July 18, 2005 and September 15, 2011, six years, one month, and 28 days passed. In short, more than six years passed before infringement claims were brought against Defendant. As a result, the presumption of laches applies in this case.
Because a presumption of laches arises in this case, the burden in on plaintiff to "introduce evidence sufficient to support a finding of nonexistence of the presumed facts." Wanlass v. Fedders Corp., 145 F.3d 1461, 1464 (Fed.Cir.1998) (en banc) (citing A.C. Aukerman Co. v. 960 F.2d at 1037). Specifically, the plaintiff must provide sufficient evidence to show that either their delay in filing their suit was reasonable and/or that no economic or evidentiary prejudice occurred. In this case, I/P Engine has failed on both counts.
First, I/P Engine has failed to make its required showing that its delay was reasonable. I/P Engine essentially makes two arguments on this point. One, I/P Engine argues that strategic indecision at Lycos after a series of corporation ownership transfers made it impossible for the company to consider what to do with its patents. As the Court notes, Plaintiff has not provided a single case citation to support strategic indecision as a justification for sleeping on its rights to challenge infringement of its patents, nor has the Court discovered such a justification in the case law.
Plaintiff must rebut the presumption of, in this case, evidentiary prejudice.
As indicated above, the authority to impose laches lies within the sound discretion of the district court. Courts considering the question of laches are required to weight the totality of the circumstance to determine whether laches should apply, even when the basic requirements are met. In this case, for all the reasons indicated above, the Court believes the equities favor application of the equitable doctrine of laches. Furthermore, there is also evidence on the record indicating that Lycos was a client of Google as early as 2003 and used the infringing technology during the course of their business relationship.
Finally, at trial, Plaintiff raised the question of whether the non-Google Defendants should be protected by the doctrine of laches or whether it should apply only to Google, since the Federal Circuit cites laches as a personal defense. See Israel Bio-Engineering Project v. Amgen Inc., 401 F.3d 1299, 1306 (Fed.Cir. 2005). However, as indicated by the record, Google's business relationship agreements with their co-defendants include an indemnification clause against suits for patent infringement. See e.g. Plaintiffs Trial Exhibit 242 ¶ 25.1 ("Google will defend... indemnify and hold harmless IAC... from and against any action ... arising from a claim that ... [t]he Services or any Google Brand Feature infringes any patent, copyright, trade secret or trade mark of such third party ..."). In Odettes, Inc. v. Storage Tech. Corp., Plaintiff similarly argued that the personal nature of the laches defense prevented the doctrine's application to customer co-defendants. Odetics, 919 F.Supp. at 925. In that case, the court determined that:
Id. at 925-26. (alteration in original). This Court finds the indemnification concerns articulated in Odetics to be persuasive and applicable in this case. As a result, all customer co-defendants in this case deserve the benefit of the doctrine of laches.
In sum, a presumption of laches arises in this case, which I/P Engine was unable to rebut. Therefore, I/P Engine is barred from recovering damages from any of the defendants for any infringement occurring before September 15, 2011.
The Clerk is directed to send copies of this Memorandum Opinion and Order to all counsel of record.