01
Nov
By Eric Schweibenz
On October 27, 2010, ALJ Robert K. Rogers, Jr. issued the public version of Order No. 22 (dated September 28, 2010) in Certain Notebook Computer Products and Components Thereof (Inv. No. 337-TA-705).  ALJ Rogers granted-in-part Complainant Toshiba Corporation’s (“Toshiba”) motion for summary determination regarding the Second and Third Affirmative Defenses of Respondents Wistron Corporation, Wistron InfoComm (Texas) Corporation, and Wistron InfoComm Technology (America) Corporation (collectively, “Wistron”).  ALJ Rogers granted Toshiba’s motion regarding Wistron’s defenses of unclean hands, laches, acquiescence, and waiver, while granting it in part with respect to Wistron’s equitable estoppel defense.

Unclean Hands

According to the Order, Toshiba argued that Wistron’s unclean hands was an inequitable conduct defense in disguise that failed to meet enhanced pleading standards.  The Order states that Wistron, supported by the Commission Investigative Staff (“OUII”), argued that their defense was sufficiently pleaded, and only required a showing that (1) the party seeking redress has committed an unconscionable act with (2) immediate and necessary relation to the equity that it seeks. 

With respect to U.S. Patent No. 5,430,867 (the ‘867 patent), Wistron alleged that Toshiba entered into a non-disclosure agreement (NDA) in connection with Toshiba’s attempts to take a license from Intellisoft International for its Bookmark software.  Wistron further alleged that Toshiba violated the NDA and used the Bookmark software to apply for the ‘867 patent, never disclosing the Bookmark software to the U.S. Patent Office during the prosecution of the ‘867 patent.  After stating the Federal Circuit’s holding that inequitable conduct is “no more than unclean hands doctrine applied to particular conduct before the PTO,” ALJ Rogers determined that Wistron’s unclean hands defense was actually an insufficiently pled inequitable conduct defense.  ALJ Rogers further determined that Wistron’s four paragraph pleading did not meet the enhanced pleading standard required by Exergen v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009), by not identifying the individuals involved in the misrepresentation, failing to detail how the Bookmark software was material to patentability, and failing to allege intent to deceive the PTO.  To the extent Wistron relied on the breach of the NDA to support its unclean hands defense, ALJ Rogers determined that as a third-party with no involvement in the contract, Wistron has no standing to make such an allegation.  Accordingly, ALJ Rogers granted Toshiba’s motion for summary determination on unclean hands with respect to the ’867 patent.th (2) immediate and necessary relation to the equity that it seeks.

With respect to U.S. Patent No. 7,156,693 (the ‘693 patent), Wistron asserted unclean hands in its pleadings based on Toshiba’s alleged failure to disclose touchpad products developed by Asutek Computer Inc. and Synaptics Inc.  In response to Toshiba’s motion, Wistron made no mention of the Asutek and Synaptics products, and instead alleged omissions regarding a Sharp patent, which was not mentioned in Wistron’s pleadings.  ALJ Rogers determined that the defense concerning the Sharp patent was not properly part of the investigation, because Wistron did not include this allegation in response to Toshiba’s amended complaint.  ALJ Rogers further determined that Wistron’s allegations surrounding the Asutek products constituted an assertion of inequitable conduct and failed to meet the enhanced pleading standard of Exergen for the same reasons as Wistron’s allegations concerning the ‘867 patent.  ALJ Rogers therefore granted Toshiba’s motion for summary determination on Wistron’s unclean hands defense for the ‘693 patent.

Equitable Estoppel

According to the Order, with respect to the ‘693 patent, Toshiba argued Wistron failed to adequately plead equitable estoppel, because absent a duty to speak, mere silence on Toshiba’s part cannot create an estoppel, and Wistron failed to demonstrate that Toshiba made any misleading statements that Wistron reasonably relied upon.  Wistron, supported by the OUII, opposed the motion, arguing that Wistron and Toshiba engaged in patent negotiations from October 1996 to January 2010, and that in response to numerous inquiries into which patents Toshiba would assert if negotiations failed, Toshiba never included the ‘693 patent.  Wistron alleged it was lulled into a false sense of security and relied upon Toshiba’s silence by entering several contracts with customers to provide the accused products.  Viewing the facts in the light most favorable to Wistron, ALJ Rogers determined that material facts remained in dispute regarding (1) whether Toshiba’s failure to identify the ‘693 patent during negotiations could constitute misleading conduct for purposes of equitable estoppel, (2) whether Wistron reasonably believed Toshiba did not intend to enforce its ‘693 patent, and (3) whether Wistron relied on such alleged misleading conduct.  ALJ Rogers therefore denied Toshiba’s motion with respect to equitable estoppel regarding the ‘693 patent, but granted it with respect to the ‘867 patent, since ALJ Rogers determined that Wistron abandoned its equitable estoppel defense with respect to the ‘867 patent.

Laches and Acquiescence

ALJ Rogers granted Toshiba’s motion with respect to Wistron’s laches and acquiescence defenses after determining that Wistron did not address these defenses in response to Toshiba’s motion or list these defenses in the Joint Stipulation of Contested Issues.  ALJ Rogers further determined that laches is not a viable defense in a patent-based Section 337 investigation, because “it does not, as a matter of law, curtail the type of prospective relief sought in [Section] 337 cases.”

Waiver

According to the Order, Toshiba argued that Wistron had not alleged that Toshiba intentionally relinquished or abandoned a known right.  In response, Wistron argued that Toshiba waived claim scope of the ‘867 patent by disclosing, but failing to claim subject matter, particularly the switch and power controller configuration disclosed in Figure 1 of the ‘867 patent.  ALJ Rogers determined that Wistron’s defense is really a claim construction/non-infringement argument, which it can assert within the context of a non-infringement argument, but which does not support a separate waiver argument.  ALJ Rogers accordingly granted Toshiba’s motion with respect to Wistron’s waiver defense.
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