WhitServe LLC v. GoDaddy.com, Inc.: Laches

On July 20, 2015, the United States District Court for the District of Connecticut in WhitServe LLC v. GoDaddy.com, Inc. rejected an alleged infringer’s laches defense because the patent holder did not have constructive knowledge of the allegedly infringing activities until shortly before filing suit.¹ Perhaps more significantly, the district court addressed whether the doctrine of laches can be invoked to bar recovery of pre-suit damages in patent infringement actions after the Supreme Court’s recent decision in Petrella v. Metro-Goldwyn-Mayer, Inc. In Petrella, the Supreme Court held that laches cannot bar damages in copyright infringement cases because application of this equitable doctrine would override the Copyright Act’s statute of limitations.² The Supreme Court’s opinion also notes the tension between its decision and the Federal Circuit precedent of A.C. Aukerman Co. v. R.L. Chaides Construction Co. that laches may apply to bar pre-suit damages in patent actions.³ The question of whether patent infringement defendants may continue to assert the laches defense in view of Petrella is currently on review by the entire bench of the Federal Circuit.⁴

Judge Young concluded in Whitserve LLC that Petrella does not overrule the Aukerman decision. As a result, the District of Connecticut has become the fourth district court since Petrella to find that laches remains a defense in patent infringement actions.⁵

In June 2011, WhitServe sued GoDaddy, alleging that GoDaddy infringed two of its patents related to a system for sending automated emails.⁶ WhitServe owns NetDocket, a company that provides internet software for patent annuity payments using the technology claimed by the asserted patents. GoDaddy is the world’s largest domain name registrar, and its accused “My Renewals” service provides renewal notices to customers of GoDaddy’s domain name-related services to remind them of upcoming payment deadlines.

Among its asserted defenses and counterclaims, GoDaddy raised the defense of laches. The evidence established that WhitServe first learned of GoDaddy’s “My Renewals” service in March 2011, but that service had been publicly available as early as October 2004. GoDaddy therefore contended that laches applied to bar WhitServe from collecting pre-suit damages. Specifically, GoDaddy argued that WhitServe had constructive knowledge of and should have earlier discovered the accused “My Renewals” service, which GoDaddy had publicly launched over six years prior to the filing of WhitServe’s complaint.⁷ Further, GoDaddy argued that it had suffered material prejudice from WhitServe’s unreasonable, inexcusable delay because it had undertaken investment and business expansion related to the accused service. In response, WhitServe argued, among other things, that Petrella had eliminated the doctrine of laches as a cognizable defense under the Patent Act.

After a separate bench trial on the laches issue, the district court concluded that patent infringement defendants can still assert the laches defense. Judge Young held that the laches defense did not apply because WhitServe did not have constructive notice of GoDaddy’s accused activity until just a few months before it filed suit and hence had not delayed in filing an action for patent infringement.

In its determination that Petrella did not implicitly overrule Aukerman, the district court examined the Patent Act’s six-year limit on damages as set forth by 35 U.S.C. § 286.⁸ In Petrella, the Supreme Court had held that, in cases of copyright infringement, a defendant cannot invoke laches to bar damages brought within the Copyright Act’s statute of limitations period. The district court differentiated the Patent Act’s limit on damages from a statute of limitations, which would preclude the application of laches after Petrella.⁹ Whereas statutes of limitations bar commencement of a lawsuit by “begin[ning] to run on some date or other,” the district court reasoned that Section 286 operates retroactively, starting from the complaint’s filing date and “count[ing] backward” six years for damages calculations.¹⁰ Furthermore, Congress’s enactment of Section 286 did not affect the Patent Act’s pre-existing statutory defenses of “[n]oninfringement, absence of liability for infringement or unenforceability,” which the Federal Circuit has earlier interpreted to include laches.¹¹ The district court found that laches therefore complements Section 286’s damages limitation.¹² Accordingly, the district court concluded that Petrella left intact Aukerman and the laches defense in patent infringement actions.¹³

After concluding that defendants to patent infringement claims may assert laches, the district court found that GoDaddy’s laches defense did not preclude WhitServe from recovering pre-suit damages.¹⁴

The district court determined that WhitServe did not have constructive knowledge of GoDaddy’s accused activity before it acquired actual knowledge in March 2011. The district court first concluded that the “My Renewals” service was not sufficiently open and notorious to alert a reasonable patent holder of suspected infringement. Even though the “My Renewals” service had been available to GoDaddy’s customers since at least 2004, there was no evidence that GoDaddy had publicly published any materials that described specifically the “My Renewals” service. The district court therefore found that public information would not have led a reasonable patent holder to suspect GoDaddy of infringing the patents in-suit.

Turning to whether WhitServe had a duty to investigate internet service providers, the district court concluded that WhitServe had no obligation to suspect infringement by domain name management companies. The district court found that WhitServe’s past activities related to intellectual property management, and its pattern of patent enforcement involved companies in the same practice. Based upon WhitServe’s own business activity and its related infringement investigations, WhitServe had no duty to investigate domain name management companies. Therefore, the district court rejected GoDaddy’s laches defense.

Although the Federal Circuit’s en banc rehearing of SCA Hygiene Products does not affect the district court’s conclusion that laches do not apply in Whitserve, this decision highlights the tension between Petrella and laches’ century-old application in patent cases.

The SCA Hygiene Products rehearing has been fully briefed by the parties. Numerous amici curiae have submitted briefs, and fourteen of the nineteen amici briefs argue that Petrella should not affect the courts’ continued recognition of laches as a defense to patent infringement claims. At oral argument on June 19, 2015, the en banc court seemed particularly interested in the functional difference between the Patent Act’s six-year limitations on damages and the Copyright Act’s three-year statute of limitations. It is unclear whether the WhitServe court’s emphasis on procedural differences between the Patent Act and the Copyright Act would convince the Federal Circuit to adopt a similar conclusion.

If the Federal Circuit were to eliminate the laches defense in patent infringement actions, it may lead to significant consequences. For instance, it may instigate a dangerous pattern among patent holders to “sleep” on their rights and wait until others make substantial investment or advancements to the technology at issue to bring suit. Many high-stakes patent infringement cases involve accused technology that resulted from independent innovation or patent holders who otherwise have no involvement in the accused technology’s industry. The equitable doctrine of laches provides these accused infringers with a defense against abusive patent litigation, and its elimination may further embolden non-practicing entities to engage in practices or litigation tactics harmful to innovation.