Delay in Patent Reissue Undermines Equitable Defense35 U.S.C. 252 presents two flavors of intervening rights in the reexamination/reissue context: absolute intervening rights, and equitable intervening rights. The more common of the two, absolute intervening rights, precludes infringement liability prior to issuance of new/amended claims if such claims are not substantially identical in scope to the claims of the original patent.Equitable intervening rights are available as a means to balance the public interest in the patent system and the remedial purpose of the reissue statute with the private interest of an infringer who innocently and in good faith has undertaken substantial activities that become infringing with the issuance of a reissue patent. For example, if prior to the issuance of a new/amended claim, a defendant invests in a new manufacturing line to develop products that infringe the new/amended claims, negotiates contracts to deliver infringing goods, and otherwise proceeds in conducting such business in good faith, the court may permit such infringement to continue under terms the court deems as equitable to both parties.In Bendix Commercial Vehicle Systems LLC, et al v. Haldex Brake Products Corp., (NDOH) having lost all previous battles (inequitable conduct in patent reissue here) (recapture in patent reissue here), defendant Haldex argued that they should be allowed to infringe based upon the doctrine of equitable intervening rights.In denying the defense of equitable intervening rights to Haldex, the court explained (decision here):To determine whether the grant of equitable intervening rights is appropriate, courts consider various factors, including: (1) whether substantial preparation was made before the reissue; (2) whether there are existing orders or contracts; (3) whether non-infringing goods can be manufactured from the inventory used to manufacture the infringing product and the cost of conversion; and, (4) whether the infringer has made profits sufficient to cover its investment. Seattle Box Co., Inc. V. Indus. Crating & Packing, Inc., 756 F.2d 1574, 1579-80. As this is an equitable determination, the court may also consider the relative degrees of good faith or bad faith exercised by the parties in connection with their product and patent development.The court reviewed the facts of the case in the context of the above factors. The court did not find the Haldex investments to be substantially more than their profits. Likewise, the court pointed out that trial testimony indicated that their investment was not made in reliance upon the availability of the U.S. market, and that infringement was well known at the time of most of the investment.In responding to Haldex’s argument that Bendix’s delay in filing suit on the reissue patent was in bad faith, the court reasoned:Further, because of the “delay” in filing for reissue, Haldex had more time than it otherwise would have had to recoup some of the losses from its investment. The delay in filing led to a delay in the issuance of the second patent, which gave Haldex more opportunity for sales that were protected by the absolute intervening rights provided by the statute. (footnote 4)Interesting.This case was brought to my attention by the great Docket Navigator.

35 U.S.C. 252 presents two flavors of intervening rights in the reexamination/reissue context: absolute intervening rights, and equitable intervening rights. The more common of the two, absolute intervening rights, precludes infringement liability prior to issuance of new/amended claims if such claims are not substantially identical in scope to the claims of the original patent.

Equitable intervening rights are available as a means to balance the public interest in the patent system and the remedial purpose of the reissue statute with the private interest of an infringer who innocently and in good faith has undertaken substantial activities that become infringing with the issuance of a reissue patent. For example, if prior to the issuance of a new/amended claim, a defendant invests in a new manufacturing line to develop products that infringe the new/amended claims, negotiates contracts to deliver infringing goods, and otherwise proceeds in conducting such business in good faith, the court may permit such infringement to continue under terms the court deems as equitable to both parties.

In Bendix Commercial Vehicle Systems LLC, et al v. Haldex Brake Products Corp., (NDOH) having lost all previous battles (inequitable conduct in patent reissue here) (recapture in patent reissue here), defendant Haldex argued that they should be allowed to infringe based upon the doctrine of equitable intervening rights.

In denying the defense of equitable intervening rights to Haldex, the court explained (decision here):

To determine whether the grant of equitable intervening rights is appropriate, courts consider various factors, including: (1) whether substantial preparation was made before the reissue; (2) whether there are existing orders or contracts; (3) whether non-infringing goods can be manufactured from the inventory used to manufacture the infringing product and the cost of conversion; and, (4) whether the infringer has made profits sufficient to cover its investment. Seattle Box Co., Inc. V. Indus. Crating & Packing, Inc., 756 F.2d 1574, 1579-80. As this is an equitable determination, the court may also consider the relative degrees of good faith or bad faith exercised by the parties in connection with their product and patent development.

The court reviewed the facts of the case in the context of the above factors. The court did not find the Haldex investments to be substantially more than their profits. Likewise, the court pointed out that trial testimony indicated that their investment was not made in reliance upon the availability of the U.S. market, and that infringement was well known at the time of most of the investment.

In responding to Haldex’s argument that Bendix’s delay in filing suit on the reissue patent was in bad faith, the court reasoned:

Further, because of the “delay” in filing for reissue, Haldex had more time than it otherwise would have had to recoup some of the losses from its investment. The delay in filing led to a delay in the issuance of the second patent, which gave Haldex more opportunity for sales that were protected by the absolute intervening rights provided by the statute. (footnote 4)

Interesting.

This case was brought to my attention by the great Docket Navigator.