Fresh From the Bench: Recent Patent Cases From the Federal Circuit
VirnetX –Apple successfully appeals a $368 million judgment that its Face Time feature infringes a patent of VirnetX. The panel vacates and remands, based on faulty claim construction, the improper denial of a motion for JMOL based on non-infringement under the doctrine of equivalents, and the admission of improper expert witness testimony as to damages. The panel's comments on the expert testimony could make it significantly more difficult for patentees to argue for big damage awards.
Jang – After ruling that a patent license dispute is properly before the Federal Circuit and not the regional circuit because plaintiff's right to relief depends on an issue of patent law, the panel exercises its discretion not to accept this interlocutory appeal under 28 USC. §1292(b).
STC – A 6-4 majority denies a petition for rehearing en banc based upon the absence of a necessary party. The majority disagrees with the argument that the provision of Rule 19(a) requiring joinder of a party without whom an action cannot be heard should control over the substantive provision of patent law that prevents fewer than all owners of a patent from suing for patent infringement.
SCA – The panel affirms a grant of summary judgment of laches based on more than a six-year delay in filing suit, but finds that issues of fact preclude summary judgment as to equitable estoppel.
VirnetX v Cisco Systems, Fed. Cir. Case 2013-1489 (September 16, 2014)
VirnetX accuses Apple of infringement based on its "FaceTime" system. The patents at issue claim technology that resolves domain names and facilitates establishing "secure communication links."
The panel affirms the construction of "domain name" as "a name corresponding to an IP address," rejecting Apple's argument that the proper construction is "a hierarchical sequence of words in decreasing order of specificity that corresponds to a numerical IP address." The intrinsic evidence supports the district court's construction, and such intrinsic evidence is not outweighed by the extrinsic evidence of one dictionary definition.
The district court construed "secure communication link" as "a direct communication link that provides data security." Apple argues that this term should be construed to require not only data security but also anonymity. The panel notes that the word "secure" does not have a plain and ordinary meaning in this context, and so must be defined by reference to the specification. When read in light of the entire specification, the term "secure communication link" requires anonymity. Indeed, the addition of anonymity is presented as one of the primary inventive contributions of the patent. Thus, the panel vacates and remands infringement findings that include the phrase "secure communication link.
Infringement Under the Doctrine of Equivalents
Claim 1 of the ‘151 patent requires initiating an encrypted channel—rather than a secure channel—between the client and the secure server. VirnetX conceded that Apple's VPN On Demand system does not literally practice this limitation because the private network between the server and the target is not necessarily encrypted from end to end. Rather, VirnetX asserted that Apple infringes under the DOE because the difference between secure communication via encryption and secure communication in general is insubstantial.
After considering the record as a whole, the panel concludes that the evidence does not support the jury's finding of infringement under the doctrine of equivalents. VirnetX's expert testified that VPN On Demand (a) performs substantially the same function because it secures the communication between the client and the secure server, (b) does so in substantially the same way by protecting data through encryption on insecure paths that are vulnerable to eavesdroppers, and (c) achieves substantially the same result of successfully protecting the entire communication path from potential eavesdroppers.
Notably, in explaining the "way" that VPN On Demand secures communications, the expert did not testify that VPN On Demand provides encryption on the allegedly secure pathway between the VPN server and the private network, but only on the insecure portion of the pathway. Thus, the panel concludes that his testimony effectively equates the "security" of the private network with the "encryption" provided by the VPN server. But the patent consistently differentiates between "security" and "encryption." In light of these distinctions in the patent itself, the jury's implicit finding that VPN On Demand achieves the result of protecting communications from eavesdropping in "substantially the same way" as contemplated by the "encrypted channel" claim limitation was not supported by VirnetX's expert's testimony. According to the panel, the district court's denial of JMOL as to that claim must therefore be reversed.
Exclusion of Evidence
At trial, to prove induced infringement, VirnetX attempted to show that Apple knew or was willfully blind to the fact that its customers' use of its products would infringe valid patent claims. In defense, Apple sought to inform the jury that, after learning of VirnetX's allegations, Apple initiated reexaminations against the asserted patents, which resulted in initial rejections of the asserted claims at the PTO. Apple offered these rejections as evidence of Apple's reasonably held belief that the patents were invalid. The district court, however, excluded this proffer, concluding that such non-final actions in pending reexaminations would be "highly prejudicial evidence that risks misleading the jury." The panel concludes that, regardless of the evidence's relevance to a fact at issue at trial, the district court would still not have abused its discretion in finding that the probative value was substantially outweighed by the risk of unfair prejudice to the patentee, confusion with invalidity (on the merits), or misleading the jury, thereby justifying exclusion under Federal Rule of Evidence 403.
Even though the case had to be remanded due to faulty claim construction, the panel takes the opportunity to address the expert witness testimony VirnetX presented, which the jury apparently accepted, to get to the $368 million award.
Weinstein's First Approach: Royalty Base
Apple argues that the testimony of VirnetX's expert Roy Weinstein on the proper royalty base should have been excluded because it relied on the entire market value of Apple's products without demonstrating that the patented features drove the demand for those products. Under Weinstein's first damages theory, his calculations were based on the entire cost of the devices, ranging in value from $199 for the iPod Touch to $649 for the iPhone 4S. Weinstein used the base price at which each product was sold, excluding only charges for additional memory sold separately. He called this the smallest salable unit. However, when asked whether this "removed features that aren't accused in this case," Weinstein answered:
To the extent that the products that we're talking about here contain additional features, like additional memory, for instance, that Apple was charging for, by using the lowest saleable unit, I'm doing as much as I can to remove payments for those features . . . .
The panel concludes that this testimony confirms that Weinstein did not even attempt to subtract any other unpatented elements from the base, which therefore included various features indisputably not claimed by VirnetX, e.g., touchscreen, camera, processor, speaker, and microphone, to name but a few.
Weinstein's Testimony as to Comparable Licenses
One of Weinstein's theories relied on a 1 to 2 percent royalty on the price of the device based on comparable licenses. Apple contended those licenses were not comparable but the panel disagreed, noting that some of those licenses were related to the patents in suit, and the differences between those licenses and the present dispute had been explained to the jury. Given the issues the panel had with the rest of the damages testimony, the evidence of comparable licenses is likely to play an important part in the remand if VirnetX prevails on infringement.
Weinstein's Second and Third Approaches: Nash Bargaining Solution
In addition to arguing reasonable royalty, Weinstein offered two other estimates of damages attributable to the FaceTime feature. Both of these estimates relied on the Nash Bargaining Solution. Weinstein began by determining "incremental or additional profits that are associated with the use of the patented technology," using two different methods to estimate the incremental profits associated with the FaceTime feature. First, he used the front-facing camera as a proxy for the FaceTime feature, and calculated the profits that he believed were attributable to the addition of the front-facing camera to certain Apple products. Second, he relied on customer surveys to assert that 18% of iOS device sales would not have occurred but for the inclusion of FaceTime, and determined the profits attributable to those sales.
Having thus purported to determine those profits, Weinstein then testified about how the parties would split those incremental profits. To do this, he began with the assumption that each party would take 50% of the incremental profits, invoking the Nash Bargaining Solution, and then adjusted that split based on "the relative bargaining power of the two entities."
According to the panel, the Nash theorem arrives at a result that follows from a certain set of premises. It asserts nothing about what situations in the real world fit those premises. Anyone seeking to invoke the theorem must establish that fit, because the 50/50 profit-split result is proven by the theorem only on those premises. Weinstein did not do so. The reliability of this methodology is not saved by Weinstein's attempts to account for the unique facts of the case in deviating from the 50/50 starting point. Indeed, Weinstein's thin attempts to explain his 10% deviation from the 50/50 baseline in this case demonstrates how this methodology is subject to abuse. His only testimony on the matter was that although he "considered other splits," he ultimately determined that a 10% deviation—resulting in a 45/55 split was appropriate "to reflect the fact that Apple would have additional bargaining power over VirnetX back in . . . 2009." Such conclusory assertions cannot form the basis of a jury's verdict.
For each of the reasons described above, the panel vacates the damages award and remands the case.
Jang v. Boston Scientific Corporation, Fed. Cir. Case 2014-134 (September 16, 2014)
Dr. G. David Jang and BSC entered into an agreement whereby Jang assigned his patent rights in exchange for a promise to pay compensation if BSC sold stents covered by Jang's patents. In 2005, Jang brought suit for breach of contract, basing jurisdiction on diversity of citizenship, alleging that BSC had failed to compensate Jang for the sale of certain covered stent products. BSC subsequently filed requests for ex parte reexamination in the PTO. The PTO rejected the claims and the claims at issue were canceled.
In light of the PTO proceedings, BSC moved for summary judgment, arguing that under Lear, Inc. v. Adkins, 395 U.S. 653 (1969), the parties' agreement cannot require payment for practice of claims subsequently held to be invalid. The court denied the motion, ruling that, pursuant to Studiengesellschaft Kohle, MB.H. v. Shell Oil Co., 112 F.3d 1561 (Fed. Cir. 1997) ("Kohle"), a patentee is not precluded under Lear from recovering royalties until the date the licensee or assignee first challenges the validity of the patent.
On petitioners' motion, the district court certified an interlocutory appeal of the order denying summary judgment pursuant to 28 U.S.C. § 1292(b) as to the following questions:
1. Where an assignor is suing to recover royalties allegedly due for practicing claims now determined to be invalid, does the exception to Lear, identified in Kohle, apply?
2. If the Kohle exception does apply, what is the standard for its application where the assignee has consistently maintained that royalties are not due because the claims do not cover the products at issue?
The Circuit directed the parties to address the jurisdictional question prior to consideration of the merits of the petition.
This Appeal is properly before the Federal Circuit and not a regional circuit
Section 1292(b) vests the Court of Appeals which would have jurisdiction of an appeal of such action, to decide, in its discretion, whether or not to permit an interlocutory appeal. This court has exclusive jurisdiction to decide an appeal from a final decision of a district court in any civil action "arising under" any Act of Congress relating to patents. 28 U.S.C. §§ 1338(a), 1295(a)(1). Even though BSC does not contend that federal patent law creates the asserted causes of action, the panel notes that this case nonetheless presents a patent issue that is "(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress." Gunn et al. v. Minton , 133 S. Ct. 1059, 1065 (2013).
In ruling that the Circuit has jurisdiction over Jang's prior appeal, the panel notes that although this case arises from a contract claim, Jang's right to relief on that claim depends on an issue of federal patent law—whether the stents sold by BSC would have infringed Jang's patents. Nothing in Gunn alters that conclusion.
In Gunn, the plaintiff alleged that his attorneys committed malpractice by failing to timely raise an exception to the on-sale bar that led to his patent being held invalid. After the state trial court granted summary judgment in favor of his attorneys, plaintiff argued on appeal that the state court lacked jurisdiction because his claim arose under federal patent law. The Supreme Court disagreed, holding that the patent issue underlying the malpractice case was not substantial in the relevant sense because that inquiry looks to the importance of the issue to the federal system as a whole and not the significance to the particular parties in the immediate suit. The malpractice claim was not substantial because the questions posed were only "backward-looking" and "hypothetical," and their importance was limited to the specific facts and parties in that case. Thus, the Court held that the patent issue was insufficient to establish federal "arising under" jurisdiction.
Here, by contrast, the patent law issues are substantial and neither backward-looking nor hypothetical. The contract defines covered products as those covered by valid claims of the patent. The contract then defines valid patent claims as a claim of the licensed patents that has not expired "or been held invalid" by a final decision by a court, which is unappealed, or of an administrative agency having authority over patents. Contract claims based on underlying ongoing royalty obligations, such as the ones at issue here, raise the real-world potential for subsequently arising infringement suits affecting other parties.
Under disputes like the one at issue here in which resolution of the contract claim itself requires resolution of underlying issues of infringement, there exists the possibility that the patentee would file suits alleging infringement by others. These suits have the potential of conflicting rulings particularly as to validity. Permitting regional circuits to adjudicate questions of patent validity, for example, could result in inconsistent judgments between a regional circuit and the Federal Circuit, resulting in serious uncertainty for parties facing similar infringement charges before district courts within that regional circuit. Maintaining Federal Circuit jurisdiction over such contractual disputes to avoid such conflicting rulings is important to "the federal system as a whole" and not merely "to the particular parties in the immediate suit." Gunn, 133 S. Ct. at 1066.
Jurisdiction depends upon facts as they were at the time of filing the complaint.
Jang argues that the Federal Circuit no longer has appellate jurisdiction because the PTO's cancellation of the claims in issue means the question of patent validity as it relates to the public at large can no longer be said to be "substantial." The panel disagrees. Just as subject matter jurisdiction in diversity cases such as this one is determined on the facts as they existed at the time the claim was filed, the Federal Circuit's exclusive appellate jurisdiction is predicated on the cause of action and the basis of the facts as they existed at the time the complaint was filed. 28 U.S.C. §§ 1338(a), 1295(a)(1). Thus, the court will look to whether the four-part Gunn test is met on the basis of the cause of action pled and the facts as they existed at the time the complaint or any compulsory counterclaim is filed.
Here, the actions of the PTO in cancelling the claims at issue did not take place until long after the complaint had been filed. Because the patent law issues raised in the complaint were at that time substantial for the reasons noted above, jurisdiction of the petition is and properly remains before this court.
The Circuit exercises its discretion and decides not to take the interlocutory appeal.
BSC seeks this court's review of whether the district court correctly applied Lear and Kohle. Title 28 U.S.C. § 1292(b) authorizes a district court to certify for appeal an otherwise-unappealable order under circumstances in which it is "of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation." The panel notes that the Circuit grants interlocutory review only rarely and declines to grant such review here. It is not clear that the issues identified in the questions will be controlling, and each question depends on the resolution of factual issues not yet addressed by the district court.
STC.UNM v. Intel Corporation, Fed. Cir. Case 2013-1241 (September 17, 2014)
A petition for rehearing en banc is denied by a sharply divided Circuit based upon the determination that one patent owner cannot sue for patent infringement without all owners joining the litigation. The majority feels that Rule 19(a) presupposes that the single plaintiff has an enforceable cause of action. In that situation, according to the majority, Rule 19(a) dictates that a party without whom the action should not be heard, is to be joined. But if the original plaintiff does not have an enforceable cause of action, Rule 19(a) does not apply. According to the majority, the Circuit has consistently recognized that the substantive right to enforce the patent does not belong unilaterally to each co-owner, but requires all of the co-owners' agreement, so that each co-owner has a substantive right not to be involuntarily joined in a patent infringement suit without such agreement. See, e.g., Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1468 (Fed. Cir. 1998), cert. denied, 525 U.S. 923 (1998). Pursuant to 28 U.S.C. § 2072, a procedural rule cannot be used to abridge, enlarge, or modify any substantive right. Where, as here, there is a substantive right not to join in the assertion of the plaintiff's claim, Rule 19(a) does not apply. Applying the Rule both to compel joinder as a party and on that basis to allow assertion of the infringement claim, as STC argues, would abridge the rights of the joined party and enlarge the rights of the initial plaintiff.
Two dissenting opinions were filed, one of which is by Judge Newman, who dissented as part of the three-judge panel originally hearing the case. Judge Newman reiterated that Rule 19(a) should be used to add the reluctant co-owner in order to permit the original plaintiff to assert its patent. Her reasons are threefold. First, by this action the Circuit is applying a special exclusion from Rule 19(a); second, 35 USC 281 gives a patent owner the right to sue for infringement and by this action the Circuit is depriving the patentee of that right; and third, Rule 19 is mandatory, stating that where, in that person's absence, the court cannot accord complete relief among existing parties; the missing party "must" be joined. According to Judge Newman, the majority holds that a party who is necessary to the action cannot be joined, and therefore that the action cannot proceed. Yet our constitutional framework provides for resolution of property disputes through judicial attention. An arbitrary rule that excludes enforcement of a property right that is owned in common, cannot be reconciled with the principles of the rule of law. At a minimum, she expresses, this ruling should be reviewed by the en banc court, not tacitly confirmed.
Judge O'Malley adds in a separate dissent that it is Rule 19—not substantive judge-made laws governing joinder—that establishes the criteria for assessing joinder. See Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 118 n.13 (1968). She concludes: Rather than once again simply exempt patent law from the rules that govern all federal litigation, we should either: (1) clarify the basis for this so-called substantive right against involuntary joinder in patent infringement cases and explain why it can overcome the dictates of Rule 19; or (2) hold that Rule 19 applies, including the provisions for involuntary joinder set forth therein, and direct the lower court to consider the propriety of joinder or dismissal under that rule alone.
The earlier decision of the three-judge panel, STC.UNM v. Intel Corp., 754 F.3d 940, 947 (Fed. Cir. 2014), is discussed in my report of June 20, 2014.
Judge Newman's dissent is consistent with recent Supreme Court patent rulings instructing the Circuit that there should be no special rules for patent cases. Earlier this year in Medtronic v. Mirowski the Court ruled that the party with the substantive cause of action, that is, the patentee, should have the burden of proof even in a DJ case. In eBay Inc. v. MercExchange, the Court ruled that the same test for injunctions should apply in patent cases that applies in other cases. And, just a couple of months ago, the Court ruled in Octane Fitness, LLC v. Icon Health & Fitness, Inc. , that in deciding whether a case is "exceptional," justifying an award of attorney fees, courts should simply look to see whether they case is unusual, and that it is too high of a burden to require the moving party to have to prove bad faith.
When we look at the rights of the parties that are affected by this decision, the majority expresses the need to protect the reluctant co-owner from participating in an action in which it does not wish to appear. Compared to the rights of the party attempting to enforce its patent in accordance with its statutory right, the importance of protecting the recalcitrant co-owner would appear to pale.
Of course, this entire issue can be avoided by contractually providing, when the original co-ownership arrangement is established, that each co-owner agrees it will be joined to litigation at the request of the other party. This decision will hopefully encourage parties to agree to such provisions.
SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, Fed. Cir. Case 2013-1564 (September 17, 2014)
On October 31, 2003, SCA sent a letter to First Quality, contending that some of First Qualities' adult incontinence products infringed SCA's ‘646 patent. If First Quality disagreed, SCA asked it to provide an explanation. First Quality responded that a ‘649 patent invalidated the ‘646 patent. SCA and First Quality exchanged four more letters over the next eight months, but those letters concerned a different patent and different products.
On July 7, 2004, SCA filed an ex parte reexamination request based in part on the prior art '649 patent. About three years later, on March 27, 2007, the PTO confirmed the patentability of all of the claims of the ‘646 patent. SCA never notified First Quality about the reexamination.
Starting in 2006, First Quality began expanding its line of adult incontinence products. In 2008 First Quality acquired Covidian's Tyco Healthcare Retail Group and, along with it, some of the products at issuehere. It continued its expansion in 2009 at a cost of more than $10 million.
SCA claims that it began preparing to file suit against First Quality immediately after the reexamination was concluded. But SCA did not file suit or otherwise contact First Quality until August 2, 2010, when it filed its complaint in this case—six years and nine months after SCA first contacted First Quality regarding the '646 patent. According to SCA, it spent the ensuing three years implementing new business management structures, evaluating outside counsel, and examining other potentially infringing products.
The court granted First Quality's summary judgment as to laches and equitable estoppel, and SCA appeals.
Laches is an equitable defense to patent infringement that may arise only when an accused infringer proves by a preponderance of evidence that a patentee (1) unreasonably and inexcusably delayed filing an infringement suit (2) to the material prejudice of the accused infringer. A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc). If these prerequisite elements are present, a court must then balance the facts and equities, including the length of delay, the seriousness of prejudice, the reasonableness of excuses, and the defendant's conduct or culpability before granting relief. When found, laches bars retrospective relief for damages accrued prior to filing suit but does not bar prospective relief.
Delays exceeding six years give rise to a presumption that the delay is unreasonable, inexcusable, and prejudicial. Under this presumption, the burden of evidentiary production shifts from the accused infringer to the patentee. Both of these presumptions disappear if the patentee can identify evidence sufficient for a jury to conclude either that the delay was excusable or not unreasonable, or that it was not materially prejudicial. If the patentee meets this burden, the accused infringer must prove both elements of laches.
Equitable estoppel may only arise when an accused infringer shows by a preponderance of evidence that (1) a patentee communicated something in a misleading way, by words, conduct, or omission, to an alleged infringer, (2) on which the accused infringer relied, (3) such that he would be materially prejudiced if the patentee is allowed to assert a claim that is inconsistent with his earlier communication. But even where the three elements of equitable estoppel are established, a court must take into consideration any other evidence as to the equities in exercising its discretion and deciding whether to allow the defense. When found, equitable estoppel acts as a complete bar to a patentee's infringement claim.
Unlike laches, equitable estoppel requires that a plaintiff's inaction be combined with other facts respecting the relationship or contacts between the parties to give rise to the necessary inference that the claim against the defendant is abandoned. Moreover, equitable estoppel requires that the defendant rely, to its detriment, on the patentee's abandonment. And a court may not presume that the underlying elements of estoppel are present, regardless of how much time has passed.
Laches exists in this case.
SCA argues that the reexamination proceedings preclude application of the laches presumptions in this case because the reexamination period should be excluded from the total delay. Reasonable explanations for delay include attempts to enforce the patent, such as filing suit against another infringer or participating in post-grant PTO proceedings. The district court concluded that SCA's stated reasons for delay, principally the reexamination, were insufficient to overcome the presumption of unreasonable delay. First, the court reasoned that, under the facts of this case, notice by SCA of an intent to sue after reexamination was required. Second, the court rejected SCA's argument that it needed more than three years to bring infringement claims following the reexamination. Although the panel disagrees that SCA was required to provide notice of the reexamination proceedings to First Quality, it agrees that SCA failed to rebut the presumption of unreasonable delay.
The district court found that SCA continuously tracked First Quality's activity since 2003. Given the circumstances, SCA should have been prepared to reassert its rights against First Quality shortly after the '646 patent emerged from reexamination. But SCA remained silent for more than three years after reexamination.
The district court concluded that SCA failed to rebut the presumption that First Quality suffered economic harm, and the panel agrees. First Quality made a number of capital expenditures to expand its relevant product lines and to increase its production capacity. The evidence suggests that First Quality would have restructured its activities to minimize infringement liability if SCA had brought suit earlier.
The district court should have considered the equities before granting summary judgment as to laches .
SCA further contends that, even if it failed to rebut the laches presumptions, it was an abuse of discretion for the district court to refuse to fully consider the equities. The panel agrees. SCA points to (1) its alleged good faith in seeking reexamination of the '646 patent, (2) the PTO's public notice of the reexamination proceedings, and (3) the fact that the PTO granted new claims during reexamination. None of these factors, however, suggests that the court's summary judgment of laches constituted an abuse of discretion. The court's failure to balance the equities in its decision was therefore, according to the panel, harmless error.
Issues of fact remain as to equitable estoppel.
The first element of equitable estoppel requires SCA to have made a misleading communication, either affirmatively or by omission. The district court ruled that SCA unquestionably misled First Quality through its letter and subsequent inaction. However, the panel notes that silence alone will not create an estoppel unless there was a clear duty to speak or somehow the patentee's continued silence reenforces the defendant's inference that the defendant will be unmolested. Although the most common example of equitable estoppel is a patentee who objects to allegedly infringing activities and then remains silent, that silence must be coupled with other factors, such that the patentee's misleading conduct is essentially misleading inaction.
Compared to prior case law finding equitable estoppel, the interaction between SCA and First Quality was meager. SCA and First Quality exchanged only six terse letters over a course of eight months. Only two of those letters referenced the '646 patent or the accused products. First Quality never solicited further comment from SCA. Thus, a reasonable juror may be less likely to infer that SCA's subsequent silence misled First Quality. Nevertheless, First Quality maintains that SCA's silence was tantamount to an admission that the '646 patent was invalid. But a mere verbal charge of infringement, if made, followed by silence is not sufficient affirmative conduct to induce a belief that the patentee has abandoned an infringement claim. Here, SCA almost immediately filed for reexamination of the '646 patent to address the issues raised by First Quality—an action that could reasonably be viewed as inconsistent with SCA's alleged acquiescence. Thus, evidence supports a version of events that differs from First Quality's. A reasonable juror could conclude that First Quality raised an issue SCA had overlooked and that SCA, rather than acquiescing, took immediate action.
Issues of fact remain as to prejudice to First Quality.
Equitable estoppel also requires that material prejudice to the accused infringer be caused by its reliance on the patentee's misleading communication. The evidence demonstrates that First Quality disregarded SCA's allegations involving the '646 patent, but it does not necessarily establish that First Quality made capital investments and expanded its business based on SCA's subsequent silence. Even the most rudimentary search by First Quality would have revealed that SCA had filed the reexamination. Thus, a reasonable juror could conclude that First Quality's reliance, to the extent it can be established, was not reasonable.