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So, your client has secured financing, secretly developed a new technology, and then retained your firm to file an application for patent protection. The company has followed your advice to the letter and kept everything confidential until the product was ready for launch. It has even managed to deftly persuade competitors to adopt this technology as the new industry-wide standard. Now, just when your client thought that it would be rolling in royalty payments, you have to tell them that it might now be impossible to enforce any resulting patent. More importantly, you know that it is only a matter of time before the company’s new attorney explains why it should have ignored your advice and disclosed the fact that it had filed for patent protection. How could this have happened, you ask? EQUITABLE ESTOPPEL IN PATENT DISPUTES The doctrine of equitable estoppel, or “unclean hands,” can be used to prevent the enforcement of patent rights in this type of situation, where the patent owner makes a misleading communication that it will not enforce its patent, and an infringer reasonably relies upon that communication to continue or expand its business. The communication itself can take almost any form, including conduct or silence, as long as it supports a reasonable inference that the patent will not be enforced. However, in order to show reliance, the infringer must have been lulled into a false sense of security with regard to continuing or expanding its operations. Consequently, silence alone is generally not enough to create an estoppel, unless the patent owner also has some other duty to disclose its patent position. This duty of disclosure most often comes into play during a company’s participation in a standards-setting process. For example, consider the Internet Society’s Internet Engineering Task Force (“IETF”) that has taken responsibility for setting the various technical standards that control the World Wide Web. [FOOTNOTE 1]Proposed standards are submitted by participants, published as Requests for Comments (“RFCs”), and then debated in various forums before they are formally adopted. Like many other standards-setting bodies, the IETF has a written policy requiring participants to disclose intellectual property rights that cover their contributions to the standards-setting process. [FOOTNOTE 2] Nonetheless, even without such a formal written policy requiring disclosure, the company should understand that there may still be a duty to disclose relevant intellectual property rights to a standards-setting organization in which the company participates. THE MISFORTUNES OF LEON STAMBLER Your client’s circumstances may be similar to those of Leon Stambler, who learned about equitable estoppel the hard way. In 1988, he had already settled claims against at least three other infringers when he tried to enforce his patent against Diebold, Inc. for a system of using Personal Identification Numbers to activate automatic bank teller machines. [FOOTNOTE 3]Ten years before he filed his suit, Stambler had been on the American National Standards Institute’s committee that was considering proposed standards in this area. Around that time, Stambler had also realized that the proposed standards infringed his patent, but he left the committee without notifying its members of the alleged infringement. In deciding this case, Judge Platt determined that Stambler had a duty to speak out, and that his silence could be reasonably interpreted as an indication that he had abandoned his patent claims. More specifically, he “could not remain silent while an entire industry implemented the proposed standard and then, when the standards were adopted, assert that his patent covered what manufactures believed to be an open and available standard.” [FOOTNOTE 4]Stambler’s claim was therefore barred by the doctrine of equitable estoppel. AVOIDING THE PITFALLS OF EQUITABLE ESTOPPEL The avoidance of equitable estoppel in patent cases boils down to two very simple issues — What to disclose, and when to disclose it? For previously-published patent documents, the answers to these questions are simple. If a standards-setting organization in which the company participates has a patent disclosure policy, then your client should follow it. If it doesn’t have a policy, or if the policy is unclear, then your client should disclose as much as possible about the company’s portfolio of issued patents. For example, your client should consider sending everyone on the relevant committee a copy of its relevant patents. It can’t hurt, and it may even help the committee to appreciate the advantages of a particular technology. When it comes to patent applications, however, things get a little more tricky. Patent applications are generally maintained in confidence for at least 18 months, or until they are granted. [FOOTNOTE 5]Furthermore, any informal publication of the application before that time allows third parties to initiate protest proceedings that can delay, or even prevent, the issuance of the patent. [FOOTNOTE 6] On the other hand, recent changes to the patent laws now provide incentives for patent owners to publish their applications. [FOOTNOTE 7]Under certain circumstances, it is now possible to collect royalties for infringement starting from the time that the application is formally published by the U.S. Patent Office. In fact, patent applicants can even request early official publication of their applications at the time they are filed. However, there is one important catch to obtaining these so-called provisional remedies. That is, the infringer must receive actual notice of the published application before any royalties will start to accumulate. So, what does all of this mean for patent applicants who may be involved in a standards-setting organization? First of all, if a standards-setting process in which your client participates is not open and transparent, then you should immediately advise the company of the consequences of conspiring to thwart competition in the marketplace. Second, your client should keep in mind that it is still quite risky to provide anyone with a copy of a patent application before it has been granted. Third, if the rules of the standards-setting organization require disclosure of both patents and applications, then your client may want to consider asking the Patent Office for expedited publication of the application before participating. The additional provisional remedies might be worth the risk of defending a protest proceeding. And finally, even if the standards-setting organization does not require notification of members’ pending patent applications, consider doing it anyway, but only after formal publication by the Patent Office. This is one situation where your client’s unclean hands can cost a lot more than just a bad first impression. Bill Heinze is a patent attorney with the law firm of Thomas, Kayden, Horstemeyer & Risley in Atlanta, Georgia, (and at www.tkhr.com) specializing in intellectual property matters. He can be reached via e-mail at [email protected] ::::FOOTNOTES:::: FN1 Seehttp://www.ietf.org/ FN2 Id. at http://www.ietf.org/rfc/rfc2026.txt?number=2026. FN3 Stambler v. Diebold Inc., 11 U.S.P.Q. 2d 1709 (E.D.N.Y. 1988). FN4Id at 1715. FN535 U.S.C. � 122(b)(1)(A). FN637 C.F.R. � 1291. FN735 U.S.C. 154(d) (implemented Nov. 29, 2000).

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