The Federal Circuit affirmed the district court’s grant of summary judgment that equitable estoppel precludes prosecution of High Point’s lawsuit against Sprint. The patents-in-suit were originally assigned to AT&T Bell Labs, who assigned them to Lucent, who assigned them to Avaya, who sold them to High Point in March 2008. In 1995 Sprint decided to build a CDMA network. In so doing, Sprint entered into supply agreements with AT&T and later Lucent for some of the equipment used in the network, which contained limited licenses for several patents. In 1998 Sprint entered into an agreement with its vendors, including Lucent, regarding interoperability, which granted no rights under any patents. In 2001, Samsung won a competitive bidding process over Lucent and other prior suppliers, which resulted in the installation of unlicensed infrastructure in Puerto Rico. High Point sued Sprint in December, 2008. In 2014, the district court entered summary judgment on the issues of equitable estoppel and laches, on the grounds that while Sprint had actively engaged in the establishment of its CDMA network, Lucent and Avaya waited while not asserting its patent rights, thereby placing Sprint in detrimental reliance.
On appeal, High Point argued that a patentee is not obligated to investigate the technical details of its competitor’s equipment and commercial realities dictate that equitable estoppel should not apply when business transactions are complex and varied. It further argued that Sprint should have been required to demonstrate bad faith through the patentee’s course of conduct. The court, however, affirmed, stating that Lucent’s misleading course of conduct caused Sprint to reasonably infer that they would not assert the patents-in-suit while Sprint purchased unlicensed infrastructure to build its network. If the record indicates silence alone, then there must be shown some other factor which indicates that the silence was sufficiently misleading as to amount to bad faith.
Here, the evidence shows both silence and active conduct. High Point’s predecessors were on notice that Sprint was using unlicensed equipment in building its network yet they failed to challenge Sprint. Further, they were actively involved in licensing arrangements involving the patents and discussing interoperability with other infringing vendors. As to intent, the court stated that it has never held that bad faith is the sine qua non of intent, and especially in this case where the predecessor companies were actively engaged in building Sprint’s CDMA network. As to detrimental reliance, Sprint’s witnesses testified that they had many options when building the network and they would have acted differently were they aware of a threat of infringement.
High Point SARL v. Sprint Nextel Corporation, Case No. 2015-1298 (April 5, 2016); Opinion by: Reyna, joined by Mayer and Chen; Appealed From: United States District Court for the District of Kansas, Murguia, J. Read the full opinion here.