In PhatRat Technology, LLC v. Riddell, PhatRat, the purported exclusive licensee of U.S. Patent Nos. 7,386,401 and 7,693,668 relating to helmet impact reporting technology (“the PhatRat patents”), sued sporting goods manufacturer Riddell in the Northern District of Illinois for infringement of the PhatRat patents. The PhatRat patents issued in June 2008 and April 2010, respectively.
The complaint states that Riddell has been aware of patents owned by PhatRat since July 2006, based on a license offer sent to Riddell. That offer allegedly asked Riddell to consider two other patents, which PhatRat describes in the complaint as “related” to each of the PhatRat patents. Ostensibly, PhatRat included this knowledge element in the complaint in order to substantiate its willful infringement assertions against Riddell.
IP practitioners will appreciate that a number of considerations come into play for Riddell. Foremost, given the date of the ascribed knowledge of the PhatRat patents, the equitable defense of laches may apply. Laches requires proof that the patentee “unreasonably and inexcusably delayed filing suit,” and this delay “caused material prejudice” to the defendant. E.g., Integrated Cards, L.L.C. v. McKillip Indus., Inc., No. 06-2071, 2009 U.S. Dist. LEXIS 108780, at *15 (N.D. Ill. 2009). A presumption of laches applies when the patentee knew or should have known, including constructive knowledge, about the infringing activity for more than six years. Id. at *15-16.
In Integrated Cards, following a bench trial, the Court found the laches presumption applied, and inferred unreasonable delay and prejudice because a former owner’s knowledge of the infringing activity in 1996 (10 years prior to the suit being filed in 2006) was imputed to the present owner/plaintiff. Id. at *18. The Integrated Cards court also discussed that economic prejudice was inflicted to the defendant because it made “extensive investments” in products. Id. at *18-19. Ultimately, the laches defense prevented any damages arising prior to that suit commencing. Id. at *20. The Court did not, however, find equitable estoppel which, unlike laches, is a complete bar to damages. Id. at *23.
Here, PhatRat’s complaint states that Riddell has had knowledge of PhatRat’s patents for over six years, based upon the license offer sent to Riddell in 2006. This is well within the time period discussed by the Integrated Cards court for the laches presumption to apply.
A further area for defensive diligence by Riddell pertains to PhatRat’s narrative that the three inventors of the PhatRat patents have over 100 patents and that they developed their idea “over time through a series of patent applications, beginning as early as 1994.” This assertion may provide Riddell fertile grounds for invalidity searching, notwithstanding the statutory presumption that the PhatRat patents are valid. Likewise, the nature of the purported “exclusive” license and transfer of “all substantial rights” from the inventors to PhatRat will be a threshold area of scrutiny. Given Integrated Cards holding, discovery from the PhatRat patents’ assignors on what they knew and when about the accused infringer’s products, can be expected to develop the laches and potentially equitable estoppel defenses.
Ralph A. Dengler is a Director in the Gibbons Intellectual Property Department. Andrew P. MacArthur, an Associate in the Gibbons Intellectual Property Department, and Uzoamaka N. Okoye, an Associate in the Gibbons Business & Commercial Litigation Department, co-authored this post.