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R2 MED. SYS. v. KATECHO

July 19, 1996

R2 MEDICAL SYSTEMS, INC., Plaintiff, and CARDIOTRONICS, INC., Plaintiff,
v.
KATECHO, INC., and CARDIOVASCULAR GROUP OF OREGON, INC., and PADECO, INC., Defendants.



The opinion of the court was delivered by: GETTLEMAN

 Plaintiffs R2 Medical Systems, Inc. ("R2") and its parent corporation, Cardiotronics, Inc. *fn1" claim that defendants have infringed or caused to be infringed certain patents R2 holds on heart monitoring and resussitation devices. This memorandum opinion and order disposes of a number of summary judgment motions filed by defendants.

 Defendants Katecho, Inc. ("Katecho"), Cardiovascular Group of Oregon, Inc. ("Cardiovascular"), and Padeco, Inc. ("Padeco") have moved for summary judgment against all R2's claims for patent infringement. All defendants move for summary judgment based upon the affirmative defenses of laches and equitable estoppel. Katecho also moves for summary judgment arguing that each of the patents asserted against it are invalid because they allegedly failed to satisfy the best mode requirement under 35 U.S.C. § 112. Finally, defendants move for summary judgment of the claims under the six patents asserted by R2, arguing that there is no genuine issue of material fact that defendants' products did not infringe the patents.

 BACKGROUND

 The patents at issue involve a system to monitor and treat heart irregularities through the use of disposable physiological electrodes and non-disposable cable systems that are used with ECG monitoring, defibrillation, and electrosurgical/ablation equipment. With traditional defibrillation, electrodes are attached to a patient's chest to monitor his heart beat for irregular behavior. Once heart problems are detected, medical personnel take a separate electronic device attached to two metal paddles, smear the paddles with a conductive gel and hold the paddles to the patient's chest to defibrillate the heart with bursts of electricity. Although life-saving, this system suffers from several difficulties, including the danger of electrical shock to the administering medical personnel and periods following defibrillation when it is impossible to monitor the patient's heart activity accurately.

 The patented devices were intended to solve these difficulties by providing cheaper disposable electrodes that could perform a variety of functions and permit medical personnel to apply electric shocks from a safe distance. The first patent, U.S. patent 4,848,345 ("'345 patent"), covers a system of disposable adhesive steel electrodes and cables that replace the traditional paddles for defibrillation. This system permits medical personnel to defibrillate a patient at a safe distance through the adhesive electrodes that are attached to the patient's chest. In addition, medical personnel may switch the electrodes back and forth between the monitoring and defibrillation functions.

 U.S. patent 4,852,585 ("'585 patent") and U.S. patent 4,895,169 ("'169 patent") disclose electrodes intended to improve upon this system by better performing all three functions of monitoring, defibrillation and electrosurgical therapy for lower cost. These patents contemplate electrodes that have a surface of conductive metal, preferably tin, with a conductive medium of a saline gel located between the metal surface and the patient's skin. This medium improves the transfer of electricity between the electrode and the patient. The gel is held in a foam layer that covers the conductive metal surface. The primary distinctive feature of these electrodes is that a chloride of the conductive metal, preferably stannous (tin) chloride, be located between the electrode's surface of the conductive metal and the patient's skin. These patents reveal two alternative locations for the stannous chloride: (1) within the gel, or (2) directly "affixed" to the conductive metal surface. If it is "affixed" to the surface, the patent suggests that the stannous chloride may be sprayed onto the surface in a thin layer. The electrode patents' claims require that the stannous chloride be "affixed" to the electrode.

 The '998 patent was issued in 1983. The '552, '345 and '356 patents are collectively known as the "system patents." The '552 patent was issued on January 22, 1985. The '345 and '356 patents were issued respectively on July 18, 1989 and July 25, 1989. The '585 and '169 patents are known as the "electrode patents" and were issued respectively on August 1, 1989 and January 23, 1990.

 All three defendants are or were suppliers of hospital-related products. Katecho manufactures and sells electrodes, including the electrodes accused of infringement. Cardiovascular and Padeco are suppliers of hospital-related products, including the electrodes at issue and related products. Cardiovascular purchased and Padeco purchases all of their allegedly infringing electrodes from Katecho.

 R2 alleges that Katecho infringes three of the patents at issue. First, R2 asserts that Katecho's packaging, advertising and instructions on certain models of electrodes direct that they be used for either the monitoring, defibrillation or therapeutic function, thereby inducing and contributing to its customers' infringement of the '998 patent. Based upon discovery, R2 has determined that these models were first sold on January 1, 1989, but were not widely distributed until sometime in 1991. Second, R2 contends that Katecho sells electrodes that directly infringe the '585 and '169 patents.

 In or about 1986, Katecho began to supply the electrodes at issue to a former customer of R2, the Laerdal Corporation. Sometime in 1986 or 1987, Buddy Rampersaud, procurement manager for Laerdal, informed R2 that his company would be purchasing their electrodes from Katecho instead of R2. In deposition testimony, William J. Smirles, director of R2's department of research and development, indicated that R2 was aware that Katecho was continuing to compete in the sale of electrodes in 1988. The present record also reveals that sometime during the late 1980's, Smirles asked R2's management for additional resources in order to investigate infringement matters. At that time, R2 declined Smirles' request. It is unclear when this took place. Smirles also affirmed that, by April of 1989, he was aware that Katecho supplied Cardiovascular with its competing line of electrodes.

 Following 1987, Katecho's overall sales grew steadily, requiring Katecho to invest in additional space, equipment and personnel. However, its sales of the electrodes at issue fluctuated, doubling some years, but then falling close to previous levels in other years. Consequently, while the sales of other electrodes were 60% higher than allegedly infringing sales in 1989, in 1994 such sales were four times higher than allegedly infringing sales. Overall, the allegedly infringing electrodes accounted for approximately 23% of Katecho's sales during the period of 1988 through 1994.

 R2 alleges that Cardiovascular and, later, Padeco infringed all six of the patents at issue. First, R2 alleges that these defendants sell electrodes that directly infringe the '585 and '169 patents. Second, R2 charges these defendants with contributory infringement and inducement of infringement of the '998 patent through their packaging, advertising and instructions on certain packaged models of electrodes. R2 also alleges that these defendants manufacture and distribute switch boxes that permit their customers to selectively use the accused electrodes with any of the three devices. Third, R2 charges defendants with contributory infringement and inducement of infringement of the remaining three system patents through their sale of adapter cable systems and R2 switch control cables with multifunctional electrodes that allegedly infringe R2's electrode patents.

 Cardiovascular originally began to sell the devices at issue in 1986 under the trade name, "Padeco." In 1991, Cardiovascular ceased selling its hospital-related products, including the electrodes at issue. At that time, a newly incorporated company, Padeco, began to sell the electrodes and related products under the same trade name. Joseph M. Mertz, sole owner of Cardiovascular, is also an owner and officer of Padeco. As noted, Cardiovascular and Padeco both purchased all of their allegedly infringing electrodes from Katecho.

 By 1988, it is evident that R2 was aware that Cardiovascular was competing for R2's electrode market. In January and July of 1988, R2 or its agents asked third parties to obtain information on Cardiovascular by inquiring with them as prospective clients about their products. In July of 1988, R2 acquired samples of a Cardiovascular electrode and two adapters, at least one of which was intended for use with R2 systems. In addition, R2 has admitted that by July 1989 it was aware of at least one instance in which R2 cables had been modified to use with Cardiovascular electrodes. In February of 1988, R2 hired a consultant to instigate a Food and Drug Administration ("FDA") investigation of the effectiveness and safety of using Cardiovascular's products with R2 systems. At this time, R2 also hired legal counsel to confront Cardiovascular with respect to its safety concerns arising from Cardiovascular's alteration of the cables and connectors in R2 systems and the potential use of R2's systems for unintended functions. In this letter, R2 accused Cardiovascular of possible FDA violations and warned that it considered Cardiovascular liable for any injuries arising from the modifications and cross-use. Finally, Smirles testified that sometime prior to 1990, after looking at Padeco brand name electrodes and their labeling, he "may have rendered an opinion [to R2 management] that there is a possibility [of infringement]."

 Cardiovascular initially sold a variety of hospital-related products. From 1986 until 1991, Cardiovascular's sales of electrodes gradually accounted for a larger proportion of its total sales. Testimony by Cardiovascular's president indicates that it discontinued carrying other hospital products when the manufacturers of those other products terminated their relationships. Cardiovascular asserts that it chose not to replace manufacturers of such products because of its growing business associated with the electrodes at issue. Cardiovascular contends that it would not have concentrated on electrode sales had it been aware that its products infringed upon another's patent.

 On May 24, 1994, R2 filed the instant suit against all defendants. Defendant Katecho and defendants Cardiovascular and Padeco raise similar motions for summary judgment. Defendants argue that, (1) R2's claims for patent infringement are barred by equitable estoppel, and (2) R2's claims for damages arising prior to suit are barred under the doctrine of laches. Defendants assert that R2 unreasonably delayed in raising all of its claims even though it reasonably should have been aware of its infringement claims by at latest February, 1988. With respect to the '998 patent and the '552 patent, defendants contend that R2 unreasonably delayed for more than six years, giving rise to a presumption of laches. With respect to the remaining patents, defendants argue that circumstances required R2 to raise its claims as soon as each patent was issued. Defendants also argue that R2 should be estopped from raising its claim because its inaction from the late 1980's until 1994 constituted misleading conduct which reasonably led defendants to continue to invest in the production and sales and the challenged devices.

 In a separate motion for summary judgment, Katecho argues that the electrode patents are invalid because the inventor, Roger L. Heath ("Heath"), failed to disclose his contemplated best mode of electrodes. All defendants also move for summary judgment of R2's claims under the electrode patents arguing that R2 has failed to present an issue of material fact that the accused electrodes have stannous chloride "affixed" to their surface as required by the electrode patents. In a separate motion, all defendants move for summary judgment of R2's claims under the '998 patent, arguing that the '998 patent covers a system capable of the simultaneous connection of all three cardiac care devices to the electrodes. Finally, Cardiovascular and Padeco move for summary judgment of R2's claims under the system patents arguing that their customers' use of the accused electrodes with R2 systems is protected under the doctrine of permissible repair.

 DISCUSSION

 To succeed on a motion for summary judgment, the moving party bears the initial burden of identifying those portions of the record, pleadings, answers to interrogatories and affidavits that demonstrate an absence of a genuine issue of material fact. Celotex Corp. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2551, 91 L. Ed. 2d 265 (1986). If the moving party satisfies this burden, then the nonmoving party must provide specific facts raising a genuine issue of fact for trial. Id. at 322. In determining summary judgment, the court must view all evidence and draw all reasonable inferences in the light most favorable to the nonmoving party. Lohorn v. Michal, 913 F.2d 327, 331 (7th Cir. 1990).

 I. Laches

 Laches provides an equitable bar where a patentee's neglect or delay in filing suit for alleged infringement results in material prejudice to the adverse party. A.C. Aukerman Co. v. R.I. Chaides Constr. Co., 960 F.2d 1020, 1028-29 (Fed. Cir. 1992) (en banc). Laches may bar only the award of damages incurred prior to suit. It does not bar prospective relief. Id. at 1041. To invoke the defense of laches successfully, an alleged infringer must demonstrate at least two factors: (1) the patentee delayed filing suit for an unreasonable and inexcusable length of time from the time the patentee knew or reasonably should have known of its claim against the defendant; and (2) the delay operated to the prejudice or injury of that defendant. Id. at 1032. Laches focuses upon the reasonableness of the patentee's conduct. Id. at 1034. The period of delay is measured from when the plaintiff knew or reasonably should have known of the alleged infringing activity until the time of suit. Id. at 1032. There are no mechanical rules to determine if the length of delay was unreasonable. Rather, the reasonableness of any delay depends upon the circumstances of each case. Id. However, a delay exceeding six years creates a rebuttable presumption that the delay was unreasonable and that the defendant suffered material prejudice. In order to rebut this presumption, the patentee must produce some evidence that creates a genuine issue of fact as to at least one of the elements of laches. Id. at 1037-38.

 In addition, the defendant must demonstrate that it suffered material prejudice as a result of any alleged delay. Such prejudice may be either evidentiary or economic. In considering economic prejudice, a court should require more than mere monetary loss attributable to a finding of liability. Id. at 1033. Rather, a court must look to the "change in the economic position of the alleged infringer during the period of delay." Id. The defendant must demonstrate a causal nexus between the patentee's delay and the defendant's expenditures or investment: "It is not enough that the alleged infringer changed its position--i.e., invested in production of the allegedly infringing device. The change must be because of and as a result of the delay, not simply a business decision to capitalize on a market opportunity." Hemstreet v. Computer Entry Sys. Corp., 972 F.2d 1290, 1294 (Fed. Cir. 1992). Where more than one patent is asserted, laches must be shown separately for each such patent. Meyers v. Asics Corp., 974 F.2d 1304, 1309 (Fed. Cir. 1992).

 A. Katecho

 1. The '998 Patent

 The record also fails to demonstrate uncontested facts showing that R2 unreasonably delayed in raising its claim under the '998 patent. Although R2 was aware that Katecho manufactured and sold competitive electrodes since 1986 or 1987, the critical question is when R2 should have become aware that the challenged packaging may have infringed upon its patent. Because the record does not indicate when R2 actually became of aware of this packaging, for purposes of this motion the period of delay begins when R2 reasonably should have become aware of the packaging. Id.

 As a practical matter, R2 could not have discovered the allegedly infringing activity until it came into some contact with the packaging at issue. The present record indicates that neither Katecho nor the other defendants began to distribute this packaging widely until 1991, approximately two and half to three years before R2 filed suit. Consequently, the earliest that R2 could be expected to identify the challenged packaging was sometime in 1991, providing a maximum delay of two and a half to three years. The reasonableness of such a delay is generally not amenable to summary judgment. See Asics, 974 F.2d at 1309 (finding reasonableness of four year delay not amenable to summary judgment). Accordingly, Katecho has not proven laches with respect to R2's action for infringement under the '998 patent.

 2. The Electrode Patents

 Under the doctrine of laches, the period of delay may not begin prior the issuance of the patent. Aukerman, 960 F.2d at 1032. Where patents are closely related, it is generally reasonable for a patentee to delay filing suit under any of the patents until all have been issued. Asics, 974 F.2d at 1307; Meyers v. Brooks Shoe, Inc., 912 F.2d 1459, 1462 (Fed. Cir. 1990), overruled on other grounds, Aukerman, 960 F.2d at 1028. The '585 and '169 patents are continuation patents that arose from the '998 patent, each disclosing similar multifunctional electrodes for use in the cardiac care system. In light of the close relationship of these patents, R2 was not required to bring suit under either patent until the issuance of the patent for the second electrode on January 23, 1990, approximately four years and four months prior to the filing of suit.

 The issuance of a patent necessary to the claim, however, determines only the maximum period of delay. The actual period of delay begins when the patentee knew or reasonably should have known of the alleged infringement. Aukerman, 960 F.2d at 1034. The record does not demonstrate when R2 had actual knowledge of its claims prior to the time of suit. Therefore, for purposes of this motion, the period of delay is determined by when R2 had constructive knowledge of each of their claims as a matter of law. In determining the date of constructive knowledge, a patentee is "charged with such knowledge as [it] might have obtained upon inquiry, provided the facts already known to [it] were such as to put upon a man of ordinary intelligence the duty of inquiry." Advanced Cardiovascular Sys., Inc. v. SciMed Life Sys., Inc., 988 F.2d 1157, 1162 (Fed. Cir. 1993) (citations omitted). R2 provides no reason why information obtained prior to the issuance of a patent is irrelevant to discerning whether it had constructive knowledge once the patent was issued. In fact, such a rule would be contrary to laches' equitable character. See Jamesbury Corp. v. Litton Indus. Prod., Inc., 839 F.2d 1544, 1551 (Fed. Cir. 1988) ("Laches is an equitable defense which depends on consideration of all the facts in the particular case."), overruled on other grounds, Aukerman, 960 F.2d at 1042.

 The record provides evidence of circumstances that, by 1990, could have suggested R2's current claims for infringement of the electrode patents. Since 1986, R2 was aware that Katecho sold competing electrodes to the same clients to be used for similar purposes as their own electrodes. Further, R2 remained aware of Katecho's competitive status throughout the late 1980's.

 The fact that a competitor provides a similar product that is used as a substitute by common customers, however, does not necessarily suggest infringement. To find constructive knowledge on summary judgment, there must be evidence of the patentee's repeated contact with or actual examination of the challenged device or specifications of that device. See Haworth, Inc. v. Herman Miller, Inc., 856 F. Supp. 354, 357 (W.D.Mich. 1994) (constructive knowledge where patentee's agent saw challenged device at several trade shows, obtained and examined samples and consulted with patent counsel); Teradyne, Inc. v. Hewlett-Packard Co., 1994 U.S. Dist. LEXIS 9020, 1994 WL 327213 at *7-8 (N.D. Cal. June 24, 1994) (constructive knowledge where patentee's researcher attended conference on challenged device, composed memo, and sent memo with manuals on device to legal counsel); ABB Robotics, Inc. v. GMFanuc Robotics Corp., 828 F. Supp. 1386, 1391 (E.D. Wis. 1993) (constructive knowledge where patentee saw challenged device at exhibition and later discussed with infringer possibility of infringement), aff'd, 52 F.3d 1062 (Fed. Cir. 1993). R2's infringement claims rest upon the alleged similar structure between Katecho's and R2's electrodes and its assertion that Katecho's electrodes use stannous chloride "affixed" to their tin surface. It is not clear when R2 concluded or can be charged with the conclusion that Katecho's electrodes also used stannous chloride.

 In addition, Smirles' request from R2 management for resources for an investigation of infringement matters does not establish constructive knowledge. While Smirles' testimony in regard to this request appears to refer to Katecho, it not entirely clear whether his investigation had any particular potential infringer in mind. Assuming that the request was aimed at Katecho, it is unclear what basis Smirles offered for his request other than Katecho's competitive position. In addition, it is uncertain when Smirles presented this suggestion to R2 management. If he presented his suggestion long before the issuance of the electrode patents, R2 could not even be certain when or if they would obtain those patents to pursue a suit against Katecho.

 Although evidence that Smirles had looked at samples of Cardiovascular's electrodes, and their labeling, suggests circumstances that might impose constructive knowledge, this evidence does not establish constructive knowledge as a matter of law. In his deposition testimony, Smirles stated that he was aware that Katecho was the manufacturing source of Cardiovascular's electrodes by April of 1989. Smirles also stated that had looked at Cardiovascular's electrodes for infringement sometime prior to 1990. Even if he did not realize that Cardiovascular's electrodes were produced by Katecho when looking at them, by 1990 he should have been aware of this fact. However, Smirles' ambiguous reference to having "looked at" the electrodes does not provide the more developed record of analysis of the challenged device generally relied upon to find constructive knowledge on summary judgment. For instance, in Haworth, the patentee had not only examined samples of the challenged device and concluded that they were a "knock-off," but also discussed his findings with patent counsel. Haworth, 856 F. Supp. at 357. In Teradyne, the court found constructive knowledge because the patentee had attended a conference on the challenged device, composed a memo concluding a possibility of infringement, and distributed the memo with manuals on the device to patent counsel. Teradyne, 1994 U.S. Dist. LEXIS 9020, 1994 WL 327213 at *7-8; see also ABB Robotics, 828 F. Supp. at 1391 (constructive knowledge after patentee raised issue of device's infringement with defendant at a licensing negotiation).

 In the instant suit, the record presents only a concession that Smirles had looked at Cardiovascular's electrodes for the possibility of infringement. However, as defendants argue in a related motion for summary judgment against R2's claims under the electrode patents, there is no obvious evidence of the critical infringing element, stannous chloride, on the surface of Katecho's electrodes. R2's only evidence of stannous chloride on the electrodes is based upon a method of atomic analysis, auger electron spectroscopy. In fact, defendants argue that even this atomic analysis does not reveal the presence of stannous chloride on the electrodes. Drawing all inferences in favor of R2, a reasonable fact-finder could conclude that Smirles' unspecified examination did not suggest infringement. Further, Smirles' vague recollection that he might have told management that there was a possibility of infringement fails to establish whether he passed on information that imposed a further duty of inquiry on R2. Consequently, a question remains whether R2 should have recognized its claim under the electrode patents when the second patent issued in 1990.

 Moreover, even if R2 had constructive knowledge of Katecho's alleged infringement when the final electrode patent was issued, Katecho has not demonstrated that this constructive knowledge would render R2's subsequent delay unreasonable as a matter of law. Measuring backwards from R2's filing of this suit in May, 1994, R2 would have delayed raising its claims, at most, for four years and four months. The only precedent cited finding a similar period of time unreasonable reached this conclusion after trial. Rosemount v. Beckman Instruments, 727 F.2d 1540, 1550 (Fed. Cir. 1984). Further, the alleged infringer had notified the patentee of the challenged device to discern if the patentee intended to raise suit. Id. No similar circumstances are present here. Consequently, assuming a four year and four month delay due to constructive knowledge, the reasonableness of such a delay remains a question appropriately left to the trier of act.

 In addition, the record does not demonstrate as a matter of law that Katecho was materially prejudiced as a result of R2's alleged delay in raising its infringement suit. Although Katecho invested in increased space, equipment and personnel during the period in question, R2 has raised a genuine issue whether this expansion was a result of the alleged delay. R2 submits evidence indicating that Katecho's sales of its unchallenged electrodes increased at a notably faster rate than its sales of the electrodes at issue. Therefore, whether Katecho's expansion was a result of the R2's alleged delay remains a genuine issue of fact.

 Katecho contends that damages arising from its continuing sales of the challenged devices establish material prejudice as a matter of law. In contrast to Katecho's assertion, however, damages that would have been prevented by an earlier suit do not necessarily prove material prejudice. To demonstrate economic prejudice, it is not enough that the alleged infringer changed its economic position by investing in the production of the allegedly infringing device during the time of delay. Hemstreet, 972 F.2d at 1294. If such damages necessarily constituted prejudice, then practically every patent claim would establish material prejudice. See Aukerman, 960 F.2d at 1033. In granting summary judgment to the alleged infringer on laches, courts usually have relied upon evidence of considerable capital investment or substantially increased sales. See Adelberg Laboratories, Inc. v. Miles, Inc., 921 F.2d 1267, 1272 (Fed. Cir. 1990) (during delay, defendant made considerable capital investments in expanding business); ABB Robotics, 828 F. Supp. at 1396 (granting summary judgment where alleged infringer enjoyed three-fold increase in sales of challenged device during period of delay). As noted, Katecho has not demonstrated any dramatic increase in sales during the alleged period of delay. In fact, the only cited precedent finding material prejudice based solely on increased sales also relied upon evidence affirmatively indicating that the alleged infringer would have modified its behavior if the patentee had acted earlier. See ABB Robotics, 828 F. Supp. at 1396-97 (defendant had halted production on similar device when it found possible infringement of patent at issue and sought license from patentee); see also ABB Robotics, 52 F.3d at 1064 (affirming decision on equitable estoppel grounds based upon this same evidence). Katecho provides only its bald assertion that it would have altered its behavior had it known of R2's claims. In addition, the ABB Robotics court granted summary judgment only after finding a legal presumption of laches. 828 F. Supp. at 1396. Katecho enjoys no such presumption here. Consequently, a genuine issue of fact remains whether Katecho suffered material prejudice as a result of any delay by R2.

 Because Katecho has demonstrated neither an unreasonable delay nor material prejudice, its motion for summary judgment based on laches is denied.

 B. Cardiovascular and Padeco

 1. "Tacking "

 Padeco did not incorporate and commence its allegedly infringing activity until 1991. However, Cardiovascular's and Padeco's motion for summary judgment presumes that Padeco may rely upon any alleged delay by R2 in raising its claims against Cardiovascular in determining Padeco's period of laches. Defendants argue that Padeco may "tack on" these years of delay because Padeco is Cardiovascular's "successor-in-interest" to its line of challenged products.

 R2 responds that laches is a "personal defense" applicable only to the relationship between the plaintiff and each particular defendant. Hughes Aircraft Co. v. General Instrument Corp., 275 F. Supp. 961, 972 (D.C.R.I. 1967), rev'd in part on other grounds, 399 F.2d 373 (1st. Cir. 1968); Pierce v. American Communications Co., 111 F. Supp. 181, 190 (D.C.Mass. 1953), vacated on other grounds, 208 F.d 763 (1st Cir. 1953). To support a defense of laches with a patentee's conduct toward another party, R2 argues that a defendant at least must have merged with the prior party or have purchased the assets of that party's business. See, e.g., American Home Products Corp v. Lockwood Mfg. Co., 483 F.2d 1120, 1124 (6th Cir. 1973) (permitting alleged infringer to tack on period of delay of company from which it purchased all of its assets). Because the record does not reveal that Padeco is formally related to Cardiovascular or ever purchased any of its assets related to the challenged devices, R2 asserts that Padeco may not "tack on" any alleged delay with respect to Cardiovascular.

 Without any citation to authority, defendants propose that an alleged infringer need not have any formal identity with a prior business in order to "tack on" a period of delay for purposes of laches. Defendants assert that an alleged infringer becomes a "successor-in-interest" where it carries an identical line of products, under an identical trade name and the previous party ceases to carry that challenged line of products. In such circumstances, defendants argue that the parties are analogous to a purchaser and seller of a line of business, with all its attendant technology and goodwill.

 Although the court agrees that an alleged infringer need not acquire the assets of another company in order to "tack on" a period of delay, some formal transfer of the technology and goodwill of the accused product is required. As a general matter, the defense of laches is personal to the defendant. Aukerman, 960 F.2d at 1032. Where the plaintiff is a transferee of a patent, however, that plaintiff must bear the consequences of any delay by the transferor. See, e.g., Continental Coatings Corp. v. Metco, Inc., 464 F.2d 1375 (7th Cir. 1972). Conversely, a defendant that is the transferee of an entire business or its assets may rely upon the patentee's delay in suing the transferor. See, e.g., Autoclave Engineers, Inc. v. Duriron Co., 190 U.S.P.Q. 125 (E.D. Pa. 1976); see generally, Donald S. Chisum, Patents, § 19.05[2][a][ii] (1994). In such circumstances, the transferee effectively has assumed the transferor's identity, usually retaining the same machinery, customers and management. See Autoclave, 190 U.S.P.Q. at 132. Similarly, where the alleged infringer has purchased a business division or a line of business, it assumes the transferor's identity for purposes of a patent challenge to that line of business. See Raber v. Pittway Corp., 1994 U.S. Dist. LEXIS 9646, 1994 WL 374542 at *2-3 (N.D. Cal. July 11, 1994).

 Defendants have not presented evidence establishing that any formal transfer of the challenged product line took place. The record suggests that Padeco may have acquired Cardiovascular's goodwill in the challenged product line. Padeco sells identical devices under an identical trade name used by the transferee. In fact, Padeco incorporated under this trade name. In addition, Cardiovascular discontinued its sales of the Padeco line of products that same year. However, these circumstances do not establish that Padeco assumed Cardiovascular's identity with respect to the challenged line of business. Defendants have presented no evidence of any agreement between Cardiovascular and Padeco either transferring Cardiovascular's technology and goodwill to Padeco or restraining Cardiovascular's right to resume sales of the challenged devices. Cf. Tandy Corp. v. Malone & Hyde, Inc., 769 F.2d 362, 367 (6th Cir. 1985) (to assume laches of previous trademark owner, defendant must acquire goodwill of business associated with that trademark); Greenlon, Inc. of Cincinnati v. Greenlawn, Inc., 542 F. Supp. 890, 894-95 (S.D. Ohio 1982) (requiring transferor to give up some right to the business for transferee of trademark to assume transferor's period of laches). Consequently, Padeco has not presented adequate evidence to permit it, as a matter of law, to rely upon any delay by the R2 against Cardiovascular.

 2. The '998 Patent

 R2 accuses Cardiovascular and Padeco of contributing to infringement and inducement of infringement of the '998 patent through their packaging, advertising and instructions on certain models of electrodes. As explained with respect to Katecho, the record does not indicate that defendants used the packaging alleged to have infringed the '998 patent until 1989, at the earliest, less than six years prior to the filing of the instant suit. Consequently, defendants are not entitled to a legal presumption of laches with respect to R2's infringement claims under the '998 patent.

 Defendants respond that R2 did not originally pursue a claim for contributory infringement. In support of this argument, defendants point to R2's answer to an early interrogatory requesting R2 to characterize its specific claims for infringement of the '346, '356, '552 and '998 patents. In its answer to this interrogatory, R2 indicated that defendants' electrodes, adapters and converted cables "directly infringed" all of these patents. Defendants ask the court to prevent R2 from avoiding a potential bar of laches by narrowing its suit to activity that occurred later.

 Answers to interrogatories, however, do not bind partes as do allegations or admissions in a pleading. Donovan v. Crisostomo, 689 F.2d 869, 875 (9th Cir. 1982); Marcoin, Inc. v. Edwin K. Williams & Co., 605 F.2d 1325 (4th Cir. 1979). R2's answer reveals that the parties were still early in the discovery process and R2 had not yet determined the scope of its suit. In fact, prior to its characterization of the infringement, the answer formally objects to the interrogatory under Federal Rule of Civil Procedure 33(b). In addition, R2's answer may contemplate both a contributory claim and a claim based upon the packaging and its instructions. In each paragraph identifying alleged infringements, R2's answer indicates that the combined use of the defendants' adapters, modified R2 cables and electrodes "directly infringed" the patents at issue. Thus, R2's theory focused on the simultaneous use of Padeco components as directly infringing, an event more likely to occur with defendants' customers than with defendants, themselves. In explaining how defendants' goods "directly infringed," R2's answer also refers to Padeco's packaging, advertising and instructions on their electrodes. Assuming that R2's delay in asserting a claim for direct infringement of the '998 patent would be relevant to determining a delay of laches in the instant claim, the record does not demonstrate that a cause of action for direct infringement in fact exists. R2 does not raise such a claim. On defendants' motion for summary judgment, it would be inappropriate to infer one. Consequently, for purposes of this motion, there is no presumption that R2's claim for infringement of the '998 patent is subject to laches.

 Defendants provide no further evidence suggesting why R2 should have been aware of the alleged infringement of the '998 patent until 1991, when the record indicates that the challenged packaging was first widely distributed. As noted with respect to Katecho, such a delay is not necessarily unreasonable. Therefore, the court denies Cardiovascular's and Padeco's motion for summary judgment on the issue of laches with respect to the '998 patent.

 3. The System and Electrode Patents

 R2 argues that Cardiovascular and, later, Padeco contributed to the infringement and induced the infringement of the system patents, '552, '345 and '356, by manufacturing and selling adapters, modified R2 cables and multifunctional electrodes that infringed upon the electrode patents, '585 and '169. R2 asserts that by providing all of these components for use with its cable systems, defendants contributed to their customers' direct infringement of the patents allegedly protecting those systems. However, under the doctrine of permissible repair, a party is permitted to replace used or worn parts of a patented system without infringing any patent protecting that system. See, e.g., Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 344, 81 S. Ct. 599, 603-04, 5 L. Ed. 2d 592 (1961) ("Aro I "). To overcome this defense, R2 proposes that replacement with components that infringe upon other patents held by the owner of the system patent infringes both the component patent and the system patent, regardless of the reason for the replacement. See Warner and Swasey Co. v. Held, 256 F. Supp. 303, 311 (E.D. Wis. 1966). Based upon this theory, R2 argues that use of infringing electrodes in the R2 systems constitutes a direct infringement of the patents protecting those systems.

 As explained above, in determining laches, the period of delay cannot begin until the issuance of the underlying patent. Aukerman, 960 F.2d at 1033. Where the party had no cause of action for infringement to pursue, it could not yet have delayed. See Watkins v. Northwestern Ohio Tractor Pullers Ass'n, 630 F.2d 1155, 1161 (6th Cir. 1980). Under R2's theory of liability, defendants did not infringe upon any of the system patents until the electrode patents were issued in 1989 and 1990. Therefore, the allegedly infringing activity--the sale of patented electrodes with the other components--did not occur until 1989, at the earliest, after the first electrode patent issued.

 In response, defendants repeat their argument that R2 originally raised its claims under the system patents as direct infringement. As noted above, however, R2 is not bound by its references to Padeco's direct infringement in their answer to an early interrogatory. See Donovan, 689 F.2d at 875. Neither R2 nor defendants assert that there is a cause of action for direct infringement. At this stage in the proceedings, it would be improper to infer that such a hypothetical cause of action exists. Because R2's claim for infringement depends upon the issuance of the electrode patents, for purposes of this motion, R2's period of delay does not begin until 1989, at the earliest. In light of the related nature of the two electrode patents, at this stage in the case, the court will infer, as it did with respect to Katecho, that R2 reasonably delayed until at least the issuance of the second electrode patent on January 23, 1990. With respect to Padeco, the period of delay could not begin until it commenced its own allegedly infringing activity in 1991.

 Like Katecho, Cardiovascular and Padeco argue that R2 had constructive knowledge of their claims under these remaining claims immediately upon issuance of each of the patents. Consequently, they assert that R2's subsequent delay of four years and four months is unreasonable as a matter of law. Defendants rely upon much of the same evidence as Katecho: R2's ongoing awareness that Cardiovascular provided competing electrodes for cardiac care; R2's acquisition of samples of Cardiovascular's electrodes and adapters; and Smirles' examination of the electrodes. In addition, defendants point to R2's awareness of the use of Cardiovascular's devices in conjunction with R2 systems and its attempt to instigate an FDA investigation in February, 1988.

 Further, even if the court were to conclude that R2 should have recognized its claims under the electrode and system patents in 1990, the record does not indicate that the subsequent four year and four month delay is unreasonable as a matter of law. The evidence does not demonstrate R2's actual knowledge of its claims. Cf. Rosemount, 727 F.2d at 1550 (finding three year delay unreasonable where defendant notified patentee of challenged device). Rather, the record indicates that R2 had significant difficulty in discerning whether Cardiovascular's electrodes used stannous chloride, a critical element to a claim under either of the electrode patents. In these circumstances, the reasonableness of a four year and four month delay is more appropriately determined at trial.

 The record also does not clearly demonstrate that either Cardiovascular or Padeco suffered material prejudice as a result of R2's alleged delay. Because "economic prejudice is not a simple concept but rather is likely to be a slippery issue to resolve," Aukerman, 960 F.2d at 1033, it usually is not amenable to summary judgment. The fact that Cardiovascular's sales of the challenged devices increased during this time period or that it gradually relied more fully upon them does not establish the required causal nexus as matter of law. For purposes of this motion, the longest possible period of delay extends from January 1990 until May 1994. Based upon defendants' vague assertions of increased sales from 1986 until 1991, the extent of the growth in sales during these final two years remains unclear. Cf. ABB Robotics, 828 F. Supp. at 1396 (finding material prejudice from three-fold increase in sales during period of delay).

 More importantly, deposition testimony by the sole owner of Cardiovascular, Joseph M. Mertz, indicates that the company exited the market for other hospital-related goods as its suppliers severed their relationships. While Cardiovascular asserts that it did not replace these suppliers because of a conscious decision to focus on the electrodes at issue, this testimony reveals a remaining genuine issue of fact as to the reason for Cardiovascular's increasing focus of the electrodes. Consequently, an issue of fact remains whether their increasing sales were caused by R2's delay.

 Because Cardiovascular and Padeco have not established either that R2 unreasonably delayed raising any of its claims or that they suffered material prejudice as a result of the alleged delay, their motion for summary judgment with respect to laches is denied.

 II. Equitable Estoppel

 Although silence or inaction may constitute misleading conduct, it must be combined with "other facts respecting the relationship or communication between the parties to give rise to a necessary inference" that the plaintiff would not enforce its patent rights. Id. at 1042. These facts surrounding the inaction must have imposed upon the patentee a clear duty to speak. Id. at 1043. While a patentee's awareness of the defendant's challenged activities may be a necessary factor, see id. at 1042, it is not sufficient to render its inaction misleading. Instead, courts have required communication between the parties either somehow encouraging the challenged activity, or indicating an intent to enforce the patent rights followed by inaction. See, e.g., ABB Robotics, 52 F.3d at 1064 (patentee objection to challenged device as infringing rendered subsequent six years of inaction misleading); Adelberg, 921 F.2d at 1271 (eleven years of inaction after patentee threatened infringement suit misleading); Olympia Werke Aktiengesellschaft v. General Elec. Co., 712 F.2d 74, 78 (4th Cir. 1983) (estoppel for years of inaction where defendant alerted patentee of product and patentee entered into negotiations to license from defendant).

 In contrast to laches, the defendant not only must demonstrate that it would suffer material prejudice as a result of the patentee's misleading conduct, but also must prove that it suffered this prejudice because it in fact relied upon this conduct. Reliance requires more than a showing of economic harm. The evidence must show that the defendant had a relationship or communication with the patentee which would have reasonably lulled the infringer into a sense of security in investing in the infringing product. Aukerman, 960 F.2d at 1042-43.

 A. Katecho

 Katecho argues that it relied to its detriment upon R2's failure to raise suit from 1986, when Katecho first believed that R2 was aware of its competing electrodes, until 1994, when R2 filed suit. For misleading conduct, Katecho relies solely upon R2's inaction during this period. Katecho raises no evidence of any relationship between the parties other than their competitive posture and telephone conversations with a former customer of R2, Laerdal, in which Laerdal's procurement officer reported R2's frustration over the loss of its customer.

 Because equitable estoppel imposes more drastic consequences than laches, it requires proof of more pernicious conduct by the patentee than mere delay. See Naxon Telesign Corp. v. Bunker Ramo Corp., 686 F.2d 1258, 1264 (7th Cir. 1982). An alleged infringer must demonstrate that the plaintiff's conduct was so misleading as to reasonably lead the alleged infringer to conclude that the plaintiff would never raise a patent challenge. Aukerman, 960 F.2d at 1041-42. Where a patentee sleeps on its rights, laches redresses any injustice by barring retrospective relief. But to bar a patentee's entire suit because of silence or inaction, the patentee must have had some duty, distinct merely from its obligation under laches, to inform the defendant of its intent to enforce its patent rights. Otherwise, the distinction between laches and estoppel is blurred despite their different consequences for the patentee.

 B. Cardiovascular and Padeco

 Like Katecho, Cardiovascular and Padeco argue that they relied upon R2's years of inaction in continuing to invest in expanding sales of the challenged devices. However, in addition to the parties' competitive posture, these defendants contend that R2's direct confrontation with Cardiovascular in 1988 over alleged safety issues provided the necessary communication between the parties to render R2's subsequent years of inaction misleading conduct for purposes of equitable estoppel. As defendants concede, in contrast to precedent finding inaction misleading, R2's inaction was not preceded by a threat or any communication at all with regard to R2's patent rights. Instead, R2 accused Cardiovascular of potentially violating FDA regulations and warned that it would hold Cardiovascular liable for injuries arising from the conjoined use of their products or the unintended use of R2 products. Defendants contend that it was this conspicuous absence of any reference to patent rights in the context of a legal confrontation over the challenged activity that reasonably led them to presume that R2 did not hold a patent claim that covered their challenged activity.

 It is difficult to see how defendants could rely upon this communication to reach such a conclusion. In light of equitable estoppel's dramatic bar of relief, misleading inaction must have "encouraged the belief that the infringer's business would be unmolested." Continental Coatings, 464 F.2d 1375, 1380. The alleged infringer may not rely upon its "unilateral expectations or even reasonable hopes" in concluding that no possible patent challenge exists. See Stickle v. Heublein, Inc., 716 F.2d 1550, 1559 (Fed. Cir. 1983). To create a reasonable inference that a party does not intend to assert a patent claim, courts have required that the patentee had notified the defendant that a potential patent claim exists. See Aukerman, 960 F.2d at 1042 (defendant must know of patent or patentee to render silence misleading conduct); see also, e.g., ABB Robotics, 52 F.3d at (prior to years of inaction, parties negotiated over license and defendant asserted no infringement).

 If an alleged infringer is completely ignorant of any patent rights, the patentee's previous silence may be misleading where there is a clear duty for it to have spoken. Aukerman, 960 F.2d at 1043. For instance, such a duty may arise from a legal relationship between the parties or where the patentee's conduct encourages the subsequently challenged activity. See Wang Lab., Inc. v. Mitsubishi Electronics America, Inc., 860 F. Supp. 1448, 30 U.S.P.Q.2D (BNA) 1241, 1249-52 (C.D. Cal. 1993) (potential misleading conduct where plaintiff strenuously lobbied defendant and others to adopt its technology as industry standard without disclosing pending patent); Potter Instrument Co. v. Storage Technology Corp., 207 U.S.P.Q. 763 (E.D. Va. 1980) (misleading conduct where patentee who sat on industry standardization committee failed to raise patent rights despite official policy to contrary).

 R2's accusations against Cardiovascular of negligent modification of its products and suggestions of potential future liability, however, did not encourage defendants to continue their activities. Defendants present no legal authority implying a duty to raise a potential claim in the context of raising other legal concerns with respect to the ultimately challenged activity. There is no evidence that R2 actually pursued any legal action against Cardiovascular. At the most, the record reflects an effort move a federal agency to conduct an investigation. In fact, R2's correspondence with Cardiovascular did not suggest imminent legal action. Even where a patentee had brought its patent to the alleged infringer's attention, mere suggestions of possible infringement do not create an adequately adversarial stance to render subsequent inaction misleading. See Hemstreet, 972 F.2d at 1295; Teradyne, 1994 U.S. Dist. LEXIS 9020, 1994 WL 327213 at *5; cf. International Harvester Co. v. Deere & Co., 623 F.2d 1207, 1213 (7th Cir. 1980) (patentee's request for samples of defendant's product to test for infringement did not raise reasonable apprehension of patent suit to warrant an action for declaratory judgment).

 Accordingly, R2's oblique references to possible lawsuits unrelated to infringement, lawsuits that would not necessarily be raised by R2, itself, were not sufficiently misleading, as a matter of law, for Cardiovascular to reasonably conclude that R2 did not have a patent claim. Defendants could not presume that R2 would have recognized any potential patent claims. Even if defendants could rely upon such a presumption, they could not be certain whether R2 refrained from raising its patent claims because of a possible excuse under laches. See Aukerman, 960 F.2d at 1033 (providing nonexclusive list of potential excuses for delay).

 Finally, defendants could not be certain that R2 harbored potential claims under patents that had not yet issued. In fact, in the instant case, four of the six patents in question had not issued at the time of this correspondence. The court is unaware of a legal obligation, in a case such as this, to alert potential future infringers of currently pending patents. See Bell Sports, Inc. v. Graber Products, Inc., 1993 U.S. Dist. LEXIS 20335, 29 U.S.P.Q.2d (BNA) 1211, 1215-16 (W.D. Wis. 1993) (finding no duty to disclose pending patent in connection with dispute over another patent). Consequently, for purposes of summary judgment, the court cannot conclude that defendants' "only ...


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