DECISION AND ORDER
RANDA, District Judge.
Before the Court is Defendant GMFanuc Robotics Corporation's ("Fanuc") Motion for Summary Judgment on the grounds of Laches and Estoppel in this patent infringement action filed by Plaintiffs ABB Robotics, Inc. ("ABB") and Cincinnati Milacron, Inc. ("CM"). For the reasons set forth more fully below, Fanuc's Motion as to both Laches and Estoppel will be granted.
ABB is the American subsidiary of ABB Sweden, which is in turn a subsidiary of ABB ASEA, a multinational corporation based in Switzerland. Robotics is one of many industries in which ABB ASEA is involved. CM is an Ohio Company that was an active participant in the robotics industry throughout the 1980s. Fanuc, a Michigan based manufacturer of robotic devices, was created in the early 1980s as a joint venture between GM and Fanuc LTD, (a Japanese company) as a result of the growing automation of the car industry. The patent at issue is No. 4,068,536 ('536) (also referred to as the "Stackhouse patent") which concerns a robotic wrist.
Chronology of Events
In early 1984, CM contacted Fanuc regarding certain robot control patents which CM believed Fanuc would be required to take a license under. Correspondence and discussions began between Counsel for CM, Richard Eby and Counsel for Fanuc, David Syrowik. In letters dated July 9, 1984, and January 21, 1985, Syrowik indicated that Fanuc did not require a license under any of the control patents. (the '536 patent had apparently not yet been discussed) (Exhs. 6 & 7, attached to Fanuc's Motion) In August of 1985, CM, through Richard Eby, raised the issue again with respect to two particular control patents. Negotiations followed which resulted in Fanuc taking a license under some of CM's patents.
In early 1984, at approximately the same time that CM and Fanuc were discussing the CM control patents, Fanuc was developing a new paint-spray robot, designated the P-150. In January of 1985, Fanuc filed an application for a patent on its hollow robot wrist design (utilized in the P-150). That patent, No. 4,708,580 ('580), ultimately issued on November 24, 1987)
Eby and Syrowik met on September 18, 1985 and discussed an agreement whereby Fanuc would take a license under CM's control patents. In addition, they discussed the possibility that the P-150 infringed the '536. At the meeting Eby indicated that CM was serious about the enforcement of its patent rights under the '536. Syrowik maintained that the P-150 did not infringe the '536. (Syrowik Aff. ¶¶ 3-5, Exh. 15 of Fanuc's Motion) That the '536 was discussed by Eby and Syrowik is supported by a letter from Eby to Syrowik on September 25, 1985. (Exh. 16, Fanuc's Motion) That letter states, "This letter is to follow up our meeting of September 18, 1985 ... We also requested that you study the P-150 painting robot relative to Milacron's Patent No. 4,068,536, and you indicated you would respond by the end of November, 1985". On January 21, 1986 Syrowik wrote Eby, "I would like to apologize for the delay in getting back to you on our evaluations of the Cincinnati three roll wrist patent (i.e., the '536) In summary, it is GMF's position that we have no need for a license under the Stackhouse patent."
It was not until July 24, 1986 that CM contacted Fanuc and requested a meeting to discuss "robot wrist designs from the perspective of Milacron's patent." (The parties do not dispute that this is a reference to the P-150 and the '536 patent.) (Exh. 19, Fanuc's Motion) In response, Fanuc sent CM a letter again disputing infringement and enclosing two pages which depicted and described the wrist assembly of the P-150. (Exh. 20, Fanuc's Motion; Exh. N., ABB/CM's Cross Motion) On September 3, 1986, CM and Fanuc met to discuss the issue further and Fanuc reiterated its position that the P-150 did not infringe. (Exh. 15, Syrowik Aff., ¶ 7) CM management held a meeting and decided not to sue Fanuc. (Exh. 2, Rehfeldt Dep., p. 13; Exh. 14, Cole Dep., p. 12) No further discussion took place.
In 1988, CM granted a license under certain CM robotics patents to ABB Sweden. In 1990, ABB entered into an asset purchase agreement with CM wherein ABB obtained CM's Industrial Robot Division and an exclusive license from CM under the '536 patent. ABB SWEDEN, through its various subsidiaries is a major competitor of Fanuc. Around this same time, Fanuc, as part of its own patent enforcement efforts, contacted a number of companies, including subsidiaries of ABB Asea, informing them of Fanuc patents, including the '580 (incorporated in the P-150). Thereafter, correspondence between ABB Asea and Fanuc began, beginning in June of 1991, wherein ABB Asea charged Fanuc with infringement of the '536 patent. (Exh. 46, Fanuc's Motion) Fanuc denied infringement and responded to ABB Asea that any enforcement action would be barred by laches and estoppel. (Exh. 48, Fanuc's Motion) On January 17, 1992, ABB and CM filed this suit against Fanuc. Further facts will be discussed in the legal analysis.
Summary Judgment Standard
Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." (emphasis added) Fed. R.Civ.P. 56(c). A fact is genuinely disputed only when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Judge Posner, in Palucki v. Sears, Roebuck & Company, 879 F.2d 1568 (7th Cir.1989), stated:
Id. at 1573-74.
Summary Judgment is equally appropriate in the context of a patent infringement case. Soot v. General Electric Company, 681 F.Supp. 157, 162 (S.D.N.Y.1987), citing Barmag Barmer Maschinenfabrik AG v. Murata Machinery, Ltd., 731 F.2d 831 (Fed.Cir. 1984); A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020, 1039 (Fed. Cir.1992) ("If the decision on laches is made on summary judgment, there must, in addition, be no genuine issues of material fact, the burden of proof of an issue must be correctly allocated, and all pertinent factors must be considered.") (citations omitted). The defenses of laches and estoppel are established by a "preponderance of the evidence". Id. at 1045-46.
To prove laches, Fanuc must show that (1) the delay in filing suit was unreasonable; and (2) that to permit ABB/CM to proceed with the suit would materially prejudice Fanuc. With respect to laches, if the delay is longer than 6 years, a presumption arises that both (1) and (2) have been proven.
A. Presumption of Laches
The question of when a patentee "knew or should have known" is one of fact. Aukerman at 1038 ("If the patentee is successful on this factual issue, no presumption arises." (citation omitted)) In the instant case, ABB/CM "vigorously contest as issues of fact" when the laches period began. (ABB/CM's Cross Motion at 2) ABB/CM argue that it was not until August 12, 1986 when CM received detailed drawings from Fanuc that it knew the "structure of the P-150 robot". (ABB/CM's Cross Motion at 7) ABB/CM argues that the laches period does not begin until that point because "one cannot tell a book by its cover or, in this case, the internal structure of an industrial robot from its shroud." (ABB/CM's Cross Motion at 9) Therefore, the period of delay is less than six years (this action was filed on January 12, 1992), the presumption of laches does not arise, and Fanuc must go forward with proof of unreasonable delay and material prejudice. Fanuc argues that CM knew perhaps as early as November of 1984 that Fanuc was developing the P-150. Support for this argument is a CM memorandum which notes, "GMF has developed and ready to announce their own 3 roll wrist."
Fanuc also argues that the laches period began at some point in the summer of 1985. In January of 1985, Fanuc filed its patent application for the hollow wrist utilized in the P-150 and P-155 robots. In June of 1985, it displayed the P-150 at a major robotics industry exhibition. Accompanying the demonstration was a brochure with drawings which describe the attributes of the P-150. (Exh. 53, attached to Fanuc's Reply) Whether these publications are detailed enough so that CM knew or should reasonably have known that the P-150 infringed its '536 patent is not clear. Nonetheless, CM had enough information to raise the issue of infringement at a September 18, 1985 meeting.
If the September 18, 1985 meeting is the first time CM raised the issue of infringement of the '536 patent with Fanuc, something must have given it cause to do so. It could have been either the fact of Fanuc's application for the '580 patent (utilized in the P-150) or the robotics show in June of 1985 where the P-150 was demonstrated. In either case, CM's in-house patent counsel, C. Richard Eby cannot recall when CM first became aware of Fanuc's allegedly infringing activities or the existence of documents which might resolve that question. (Fanuc's Motion at xv).
(ABB/CM's Cross Motion at 9)
Interestingly, ABB/CM do not clearly indicate whether they requested the drawing which was sent by Yaskawa. ABB/CM has not disputed that CM never requested drawings and the "only reasonable inference" is that "Fanuc's display of the accused device at the robot exhibition in June of 1985 provided CM with all the information it needed to determine that Fanuc was infringing the patent-in-suit." (Fanuc's Reply at 2-3)
The Court concludes that CM "knew or should have known" of the "infringing activity" some time during the summer of 1985, or at the latest, at the September 18, 1985 meeting.
Soot, 681 F.Supp. at 163.
ABB/CM take the position that until CM knew unequivocally that the P-150 infringed, the laches period did not begin. The case law does not support that conclusion. Consider the following from Coleman v. Corning Glass Works, 619 F.Supp. 950, 953 (W.D.N.Y. 1985), "Even if Dr. Coleman (patentee) did not know whether the Corvac was technically an `infringement' in July, 1975, he knew all the facts concerning the Corvac project, and that he had somehow been wronged."; See also, Naxon Telesign Corp. v. Bunker Ramo Corp., 517 F.Supp. 804, 808, n. 3 (N.D.Ill. 1981) citing Pearson v. Central Ill. Light Co., 210 F.2d 352, 356-57 (7th Cir.1954) ("Even if Naxon had been `unsure' of the infringement, it had a duty promptly to investigate and determine if infringement existed.")
Even assuming a standard of "clear evidence of infringement", the fact that CM did not request detailed drawings supports a strong inference that it had "clear" evidence prior to the September 1985 meeting. ABB/CM have not disputed that CM made its charge of infringement at the September
The Court cannot conclude that the period of laches did not commence until CM received the August 1986 letter. ABB/CM knew or should have known of the infringing activity some time during the summer of 1985. To hold otherwise would allow a patentee to delay suit indefinitely and then assert it was not "certain" of infringement because the defendant/infringer failed to provide it with the necessary information. (in this case, unsolicited drawings) In addition, the patent holder's responsibility to police its patent rights would be shifted to the putative defendant/infringer. ABB/CM knew or should have known of the alleged infringement, at the latest, by the September 18, 1985 meeting. Therefore, the presumption of laches arises and the burden of going forward with "evidence sufficient to support a finding of the nonexistence of a presumed fact" is shifted to ABB/CM. Aukerman at 1037. ABB/CM meet their burden by introducing "evidence sufficient to raise a genuine dispute as to either delay or prejudice." (emphasis added) Hemstreet v. Computer Entry Systems Corp., 972 F.2d 1290, 1293 (Fed.Cir.1992).
B. Reasonableness of the Delay
There can be no argument that ABB/CM delayed in bringing suit; the issue is whether that delay was reasonable or excusable. Because ABB/CM must shoulder the burden of production, they must put forward "evidence sufficient to support a finding of the nonexistence of the presumed fact". Aukerman at 1037. ABB/CM have not presented evidence with respect to almost all of the justifications for delay recognized by Aukerman. Those justifications include: (1) The patentee was involved in other litigation; (2) The patentee was engaged in negotiations with the accused infringer; (3) The patentee was in a state of poverty or illness; (4) Wartime conditions; (5) The infringement was de minimis at first; and (6) There was a dispute over patent ownership. Id. at 1033. Of the justifications outlined above, only one has any relevance to this case — negotiations between the patent holder and the alleged infringer.
ABB/CM did not address the "negotiations" excuse in their motion papers. Instead, in response to Fanuc's Findings of Fact, ABB/CM assert, "CM did engage in negotiations with GMFanuc with a view toward settlement or licensing. One such instance was the "wrist meeting" on September 3, 1986.... The infringement of GMFanuc could have been settled at that time." (ABB/CM's Local Rule 6.05(b)(1) Responses to Fanuc's Proposed Findings of fact, ¶ 7) This appears to contradict the testimony of CM's own patent counsel Richard Eby. (Exh. 9, Eby dep., pp. 17, 29)
Cole Dep. at p. 10, Exh. 14
Rehfeldt Dep. at p. 6, Exh. 2
This justification is not found in Aukerman and has been explicitly rejected. MCV, Inc. v. King-Seeley Thermos Co., 870 F.2d 1568, 1572 (Fed.Cir.1989) ("To the extent MCV would justify its delay because an earlier assertion might have jeopardized business dealings with Halsey Taylor, the excuse is insufficient."); See also, General Electric Co. v. Sciaky Bros., Inc., 304 F.2d 724, 727 (6th Cir.1962) ("The delay ... was unreasonable, inexcusable, and unexplained. Whether General Electric might have been influenced by the fact that Sciaky was making substantial purchases of electrical supplies from it is not material."); 4 Chissum, Patents, § 19.05[b][vi]
Finally, ABB/CM have argued that the reasonableness of the delay is "not adapted to summary determination". (ABB/CM's Reply at 10) While this argument is facially attractive, ABB/CM's failure to marshall any facts as to any of the recognized justifications supports summary judgment on this issue because the only reason for the delay is an undisputed fact based on the recollections of Cole and Rehfeldt.
ABB/CM's lack of factual support with respect to the delay issue is not fatal. Because the defendant/infringer must prove both unreasonable delay and material prejudice, the Court must consider whether Fanuc has been materially prejudiced.
C. Material Prejudice
Material Prejudice "may be either economic or evidentiary". Aukerman at 1033, citing Cornetta v. United States, 851 F.2d 1372, 1378 (Fed.Cir.1988) (en banc). As with the element of delay, material prejudice is presumed and ABB/CM bears the burden of production. ABB/CM have argued that material prejudice is "utterly missing" with respect to both laches and estoppel. (ABB/CM's Cross Motion at 3) A showing of either evidentiary or economic prejudice constitutes material prejudice. Id.
Evidentiary prejudice may arise where the "defendant's inability 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 ..." undermines the court's ability to judge facts. (citations omitted) Aukerman at 1033. Fanuc relies solely on the third — the unreliability of memories of long past events.
The Court concludes that ABB/CM have met their burden of production relative to evidentiary prejudice. The evidentiary prejudice which goes directly to the merits of the case concerns losses of memory regarding infringement of the '536 patent. ABB/CM's offering of the Invention Disclosure Statement overcomes the presumption of evidentiary prejudice. "[A] patentee ... eliminate[s] the presumption with an offer of evidence sufficient to place the matters of defense
The evidence is now examined with respect to economic prejudice. As Aukerman states, "... economic prejudice is not a simple concept but rather is likely to be a slippery issue to resolve." Id. at 1033, citing Chissum, § 19.05[c].
Because the Court finds as a matter of law that increasing sales [without additional evidence of capital investments] may constitute economic prejudice, ABB/CM's position is rejected. Support for this holding is found in the language of Aukerman. "Economic prejudice may arise where a defendant and possibly others will suffer the loss of monetary investment or incur damages which likely would have been prevented by earlier suit." Id. at 1033 (citations omitted) (emphasis added) The second half of this sentence clearly captures increasing sales within the definition of economic prejudice.
Further support for this conclusion is found in Chissum's discussion of the issue of whether "successful expansion" of the infringing activity constitutes economic prejudice. (Chissum at 19.05[c]) While the issue discussed is broader, the analysis is instructive for purposes of this case. For instance, the cases which hold that successful expansion does not constitute economic prejudice do not do so because of an absence of capital investments. Instead, the distinguishing fact in the cases where no economic prejudice is found is that the defendant/infringer would have expanded his business no matter what the patentee "did or did not do". (Chissum at 19-445-56) Compare, Meyers v.
The Federal Circuit's post Aukerman decision in Hemstreet removes any doubt as to the nature and focus of an economic prejudice analysis. In Hemstreet, despite the defendant's evidence of expenditures of $23 million on research and development, $6.3 million on direct marketing costs, and $20 million to expand or consolidate manufacturing facilities (capital investments), the Federal Circuit reversed and remanded the district court's grant of summary judgment of laches because, "... these expenditures have no explicitly proven nexus to the patentee's delay in filing suit." In addition, the Court noted, "... CES's prejudice argument is severely undercut by Hemstreet's provision of explicit notice ... and implicit suggestion that CES would soon face litigation ..." Id. at 1294. It is clear from Hemstreet that the court's inquiry is not whether there is evidence of capital investment. Rather, the key is whether there is a nexus between the delay and the infringer's decision to expand the infringing activity, not the form or number of forms the expansion takes. No economic prejudice can be established if this nexus is absent. "The Courts must look for a change in the economic position of the alleged infringer during the period of delay. (citation omitted)" Aukerman at 1033 (emphasis in original). "The change must be because of and as a result of the delay, not simply a business decision to capitalize on a market opportunity." Hemstreet, 972 F.2d at 1294. Therefore, the infringer's decision to expand his business, whether the expansion took the form of capital investments or increased sales, must consider what the patentee did or did not do.
The cases which ABB/CM cite do not stand for the proposition they ask the Court to adopt. Instead, these cases hold that, "[t]he change must be because of and as a result of the delay ...". Hemstreet at 1294. That some make reference to investments and increasing sales (Adelberg) is not enough to conclude that there is a "duality of requirements", and the plain language of Aukerman does not support such an interpretation.
Therefore, economic prejudice is shown by evidence of either loss of investment expenditures or damages (from increasing sales) which might have been prevented by an earlier suit. However, as Aukerman and Hemstreet make clear, "such damages or monetary losses" must be, "because of and as a result of" the delay. In order to be "because of and as a result of" the delay, the defendant must have had reason to believe that the patentee did not intend to file suit for infringement.
The Court now examines the sufficiency of the evidence produced by ABB/CM to overcome the presumption that the delay has caused economic prejudice to Fanuc. (Is the evidence presented by ABB/CM "sufficient to put the existence of the presumed fact into genuine dispute"? Aukerman at 1037) ABB/CM's evidence on the issue of increasing sales is sparse. Indeed, they offer only argument that, "even were increased sales evidence of economic prejudice, ... a mere doubling of sales over five years is not the type of expansion that can constitute economic detriment." (ABB/CM's Cross Motion at 15) However, an examination of Fanuc's Exhibit 19 indicates a tripling of sales during the period of delay.
Because ABB/CM have not met their burden of production and put forth evidence sufficient to raise a genuine factual issue with respect to either the reasonableness of the delay or the material prejudice to Fanuc as a result of that delay, Fanuc's Motion for Summary Judgment of Laches is granted.
Fanuc has also moved for summary judgment on the grounds of estoppel. "Where equitable estoppel is established, all relief on a claim may be barred." Aukerman at 1041. Unlike laches, which focuses on the reasonableness of the plaintiff's behavior, estoppel focuses on what the defendant has been led to reasonably believe from the plaintiff's conduct. Id. at 1034. The defendant/infringer must prove: (1) Misleading conduct by the patentee; (2) Reliance upon that conduct; and (3) Material prejudice. "Unlike laches, equitable estoppel does not require the passage of an unreasonable period of time in filing suit." Id. at 1042. Accordingly, there is no presumption in an estoppel defense and the burden of production and proof remain at all times with the defendant. Id. at 1043. A determination of estoppel is appropriate on summary judgment and bars the patentee's claim for relief in its entirety. Id.
A. MISLEADING CONDUCT OR STATEMENTS
The patentee's statements and conduct are examined first to determine if they:
Aukerman at 1042.
This case represents the "most common situation". As discussed above, CM first requested that Fanuc examine the P-150 in light of the '536 patent at the September 1985 meeting. At approximately the same time, CM and Fanuc were negotiating with respect to certain CM control patents which resulted in Fanuc taking a license thereunder. By letter dated January 1, 1986, Fanuc reiterated its position that the P-150 did not infringe the '536. (Fanuc's Motion; Exh. 17) Further correspondence took place between CM and Fanuc during the early to middle part of 1986. In September of 1986, CM and Fanuc met to discuss the issue of infringement. Fanuc again asserted its position that the P-150 did not infringe. (Fanuc's Motion; Exh. 15, Syrowik Aff., ¶ 7)
CM took no further action. In fact, following the September, 1986 meeting, no further discussion regarding the '536 patent took place between CM and Fanuc. (Fanuc's Motion;
Here, as discussed in Aukerman, CM's misleading conduct is essentially misleading inaction. CM's inaction, when "combined with the other facts respecting the relationship", supports the Court's conclusion that there are no genuine issues of material fact which preclude the Court from holding that CM's statements and conduct were misleading to the point of giving rise to the necessary inference that CM had abandoned its claim against Fanuc. As discussed below in Part II B, the "other facts" include; (1) CM's objection to the activities as infringing (at the September 1985 meeting) followed by inaction; (2) the relationship between CM and Fanuc's parent, GM
To satisfy the second element of estoppel, the defendant must show that it, "substantially relied on the misleading conduct of the patentee in connection with taking some action." Id. at 1042-43 To show reliance the infringer "must have had a relationship or communication with the plaintiff which lulls the infringer into a sense of security ...". Such was the case here. CM's completed negotiations with Fanuc with respect to the control patents, when viewed in light of the abrupt discontinuation in correspondence regarding the '536 patent, gave rise to "the necessary inference" that the claim against Fanuc had been abandoned. That inference is further strengthened because CM had indicated to Fanuc that it would not license the '536. (See n. 10) In addition, consider that Fanuc knew CM would have to chose between the enforcement of its patent rights and its business relationship with GM, it's largest single robotics customer. (See n. 26) The silence that followed the charge of infringement gave rise to the inference that CM had decided to forgo suing Fanuc in order to maintain its business relationship with Fanuc's parent, GM.
In addition, ABB/CM argue that CM's silence supports a contrary inference — an inference that CM's silence "represented a continuing threat" that CM's forbearance would last only as long as CM's relationship with GM.
The only possible inference that can be drawn from the evidence in this case is that CM would leave Fanuc unmolested. It is immaterial whether that inference is based upon Fanuc's belief that CM didn't want to sue its best customer or Fanuc's belief that CM had decided the P-150 did not infringe.
C. MATERIAL PREJUDICE
The third element of a successful estoppel defense is that the defendant must establish that he would be materially prejudiced if the patentee is now permitted to proceed. "As with laches, the prejudice may be a change of economic position or loss of evidence." Aukerman at 1043.
After Fanuc exhibited the P-150 in June of 1985, and denied CM's charge of infringement at the September 1985 meeting, its sales of the P-150 and the P-155
While the Court has concluded that Fanuc has established the three elements of estoppel, it may also, "... take into consideration any other evidence and facts respecting the equities of the parties in exercising its discretion ...". Aukerman at 1043. With that in mind, Fanuc has requested the Court to consider the circumstances under which this case was brought. It has argued that neither CM (the patent holder) nor ABB (the exclusive licensee) are the real parties in interest. Instead, Fanuc argues that ABB Asea and ABB Sweden directed ABB/CM to file suit to protect other subsidiaries which are involved in direct competition with Fanuc. The evidence does support Fanuc's argument that neither ABB nor CM instigated this litigation. (Exh. 10, Farrell Dep., pp. 7, 21-22; Exh. 30, Corwin Dep., pp. 45-46) Further support for this conclusion is that the '536 patent was never raised until after Fanuc began its own enforcement efforts in Europe against various subsidiaries of ABB Asea. As Aukerman permits, the Court may consider these facts in examining the defense of equitable estoppel. In doing so, they only lend further support to the conclusion that ABB/CM should be estopped from asserting their rights under the '536 patent against Fanuc.
The evidence presented on the issues of laches and estoppel is such that, "if the case were tried tomorrow", [ABB/CM] would [not] have a fair chance of obtaining a verdict." (Palucki, supra at 1573-74). Fanuc is entitled
1. Defendant GMFanuc Robotics' Motion for Summary Judgment of Laches and Estoppel is Granted; and
2. Case No. 92-C-58 is Dismissed with Prejudice.
35 U.S.C. § 286
Q. You don't know any of the issues [in the case]?
Q. — or what the positions are of either party?
A. No. I have a copy of the complaint and the answer and they are all on file. It started at that point.
Q. Do you get copies of all the pleadings, as you know?
A. As far as I know, I do.
Q. Do you read them?
A. * * * I can't say we've read them in any depth ...
Q. So you don't make any effort to keep pace with the case?
A. No, Sir.