An August Law Technology News article, Federal Circuit Affirms $500K Sanction for Litigation Misconduct, discussed the Eon-Net decision in which misconduct, such as destroying patent prosecution files, resulted in an attorneys fee award. A recent decision from the U.S. District Court for the Eastern District of New York, Metso Minerals, Inc. v. Powerscreen International Dist., Ltd, No. 06–cv–1446 (ED NY Dec. 8, 2011), addresses another unique patent law remedy for patent prosecution file destruction which could significantly limit patent infringement damages.
In Metso the defendant had been selling allegedly infringing products since early March 2000. In March 2002 the parties entered into pre-litigation settlement/licensing negotiations, which continued until March 2005. These negotiations ultimately broke down and the patentee filed its infringement suit in March 2006.
During discovery the defendant learned that the patent prosecutor destroyed his files during licensing negotiations, with the express approval of plaintiffs counsel. Faced with this information the defendant raised a laches defense which would limit plaintiff’s damages to those which accrued after the lawsuit was filed, reducing significantly plaintiff’s recovery.
To prevail on a laches defense, the party must prove: (1) that the delay in filing the lawsuit was unreasonable and inexcusable; and (2) material prejudice resulting from the delay. (See page 6 of Metso) Laches is presumed if there is a 6-year delay in filing the lawsuit.
One type of prejudice recognized by the U.S. Circuit Court for the Federal Circuit is, so-called, “evidentiary prejudice” which “may arise by reason of a defendant’s inability to present a full and fair defense on the merits due to the loss of records, the death of a witness, or the unreliability of memories of long past events.” See AC Aukerman Co. v. RL Chaides Const. Co., 960 F. 2d 1020, 1033 (Fed. Cir.1992). The Metso defendant claimed that it suffered evidentiary prejudice resulting from the destruction of the patent prosecution files and other records.
The court determined that the laches issue could not be resolved on summary judgment. Although equitable defenses are to be resolved by the court (not the jury) the court sought an advisory jury verdict. Unfortunately for the defendant, the jury (and court) found that the plaintiff rebutted the laches presumption. The court found that plaintiff’s delay in filing suit was reasonable because, among other things, it was involved in other litigation. Furthermore, the court held that that defendant did not suffer any evidentiary prejudice because the information in the patent prosecutor’s files was either publicly available in the Patent and Trademark Office records, available from other third parties, or was privileged and would not have been produced.
The jury also concluded that the plaintiff willfully infringed the patent over a ten-year period. The plaintiff has filed a notice of appeal to the Federal Circuit.
The Metso and Eon-Net decisions are both examples of where data destruction in patent cases provides unique remedies for spoliation-type claims. In Eon-Net, the destruction of the patent prosecution files resulted in an attorney’s fee award. In Metso, the plaintiff dodged a bullet (so far) but risked a substantial damages limitation because the patent prosecutor destroyed his files. Eon-Net and Metso put patent litigants on notice that failing to preserve patent prosecution files could raise serious litigation risks for the patentee.
Mark Michels is the former litigation manager and discovery counsel at Cisco Systems.
This article originally appeared in Law Technology News.