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

August 6, 2015

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

BACKGROUND

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.

THE DISTRICT COURT’S DECISION

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.

The Expected Federal Circuit En Banc Decision

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.




1 WhitServe LLC v. GoDaddy.com, Inc., No. 3:11-cv-00948, 2015 WL 4464476 (D. Conn. July 21, 2015).

2 134 S. Ct. 1962 (2014)

3 Id. at 1974 n.15 (citing A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1028 (Fed. Cir. 1992) (en banc)).

4 S.C.A. Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, No. 2013-1564, 2014 WL 746970, at *1 (Fed. Cir. Dec. 30, 2014), vacating and rehearing en banc 767 F.3d 1339 (Fed. Cir. 2014). On December 30, 2014, the Federal Circuit granted a petition for rehearing en banc in SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC.

5 WhitServe, 2015 WL 4464476, at *13; see High Point Sarl v. Sprint Nextel Corp., 67 F. Supp. 3d 1294 (D. Kan. 2014); Kowalski v. Anova Food, LLC, No. Civ. 11-00795 HG-RLP, 2014 WL 8105172 (D. Haw. Dec. 31, 2014); Reese v. Sprint Nextel Corp., No. 2:13-CV-03811-ODW, 2014 WL 3724055 (C.D. Cal. July 24, 2014).

6 These patents had been issued to WhitServe’s founder, Wesley Whitmyer, Jr., who was also a patent attorney.

7 GoDaddy claimed its allegedly infringing activities had been open and notorious because its customer assistance webpages and call center could provide detail about its “My Renewals” service. Based upon WhitServe’s pattern of diligent infringement investigation, GoDaddy asserted that its accused service fell within WhitServe’s industry, and thus, WhitServe should have discovered this accused service earlier.

8 WhitServe, 2015 WL 4464476, at *5.

9 Id. The district court relied upon Federal Circuit precedent, including Aukerman, to support its reasoning.

10 Id. at *6.

11 35 U.S.C. § 282(b); WhitServe, 2015 WL 4464476, at *6. In its 1984 decision in J.P. Stevens & Co. v. Lex Tex Ltd., Inc., the Federal Circuit noted that the statutory language of Section 282(b) encompasses equitable defenses, including laches. 747 F.2d 1553, 1561 (Fed. Cir. 1984).

12 Id.

13 Id. at *7.

14 Id. at 12-13. The Federal Circuit has previously concluded that the equitable doctrine of laches may bar recovery of damages that accrue pre-suit. Aukerman, 960 F.2d at 1041; see also Wanlass v. Gen. Elec. Co., 148 F.3d 1334, 1337 (Fed. Cir. 1998). To invoke the equitable defense of laches, the alleged infringer has the burden to prove by a preponderance of the evidence that “(1) the plaintiff delayed filing suit for an unreasonable and inexcusable length of time from the time the plaintiff knew or reasonably should have known of its claim against the defendant, and (2) the delay operated to the prejudice or injury of the defendant.” Aukerman, 960 F.2d at 1032. Upon demonstration of these two factors, the trial judge has discretion to apply laches based on the specific factual circumstances of the case and the equities involved. Id. at 1032-34. Courts may also apply a presumption of laches when the patentee delays filing suit for more than six years after the patentee knew or reasonably should have known about the allegedly infringing activity. Id. at 1034-35. This presumption shifts the burden to the patentee to demonstrate that the delay was reasonable, excusable, or did not materially prejudice the accused infringer. Id.

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