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Integrated Cards, L.L.C. v. McKillip Industries

August 8, 2008


The opinion of the court was delivered by: Judge Virginia M. Kendall


Plaintiff/Counter-defendant Integrated Cards, L.L.C. ("Integrated") filed suit against Defendant/Counter-Plaintiff, McKillip Industries, Inc. d/b/a/ USA/DOCUFINISH ("USA"), alleging patent infringement on U.S. Patent No. 5,462,488 ("the '488 patent") entitled "Integrated card and business form assembly and method for fabricating same on label formation equipment." USA moved for summary judgment on Integrated's claims on the basis of laches and equitable estoppel. For the reasons set forth below, USA's Motion for Summary Judgment is denied and the matter will proceed to a bench trial on the issues of laches and equitable estoppel.


Much like the Capulets and the Montagues, the McKillip brothers have been embroiled in a bitter family dispute for decades. Two brothers, both alike in trade and ambition, and their two Illinois-based integrated card companies, have now brought their battle to the federal courthouse where the Court assumes there will be a healthier outcome for both parties.

In 1994, John J. McKillip ("John") invented a product entitled "Integrated card and business form assembly and method for fabricating same on label formation equipment" and the '488 patent on the product was issued on October 31, 1995. Pltf. Resp. 56.1 ¶ 2.*fn1 An integrated card consists of a base document, like a letter, with an attached card which can be pulled away from the document. Pltf. Resp. 56.1 ¶ 9.*fn2 Later that year, John assigned one half of his interest in the '488 patent to Stanley Stack, Jr. ("Stack"). Pltf. Resp. 56.1 ¶ 3. John and Stack remained joint owners of the '488 patent until September 29, 2005 when John assigned his interest to Malessa Partners, LLC ("Malessa"). Pltf. Resp. 56.1 ¶ 3. Stack and Malessa remained joint owners of patent until October, 2005 when Stack assigned his interest to Stack, LLC. Pltf. Resp. 56.1 ¶ 4. Malessa and Stack LLC later assigned their interests in the '488 patent to Integrated. Pltf. Resp. 56.1 ¶¶ 3-4.

Steven McKillip ("Steven"), John's brother, was the principal of United Stencil & Affixing Co., Inc.*fn3 which changed its name in 1998 or 1999 to USA/Docufinish, the defendant in this action. Pltf. Resp. 56.1 ¶ 6. USA has been operating for over twenty years and is in the business of providing products for segments of the printing industry, including integrated cards. Pltf. Resp. 56.1 ¶ 6. On April 12, 2006, Integrated filed suit against USA alleging that one of its integrated card products infringes upon the '488 patent. Pltf. Resp. 56.1 ¶ 8. It is undisputed that USA has sold the accused product continuously since at least 1995. Pltf. Resp. 56.1 ¶ 8. USA moves for summary judgment on the issue of laches and equitable estoppel.


Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In determining whether a genuine issue of fact exists, the Court must view the evidence and draw all reasonable inferences in favor of the party opposing the motion. Bennington v. Caterpillar Inc., 275 F.3d 654, 658 (7th Cir. 2001); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). However, the Court will "limit its analysis of the facts on summary judgment to evidence that is properly identified and supported in the parties' [Local Rule 56.1] statement." Bordelon v. Chicago Sch. Reform Bd. of Trustees, 233 F.3d 524, 529 (7th Cir. 2000). Where a proposed statement of fact is supported by the record and not adequately rebutted, the court will accept that statement as true for purposes of summary judgment. An adequate rebuttal requires a citation to specific support in the record; an unsubstantiated denial is not adequate. See Albiero v. City of Kankakee, 246 F.3d 927, 933 (7th Cir. 2001); Drake v. Minnesota Mining & Mfg. Co., 134 F.3d 878, 887 (7th Cir. 1998) ("Rule 56 demands something more specific than the bald assertion of the general truth of a particular matter[;] rather it requires affidavits that cite specific concrete facts establishing the existence of the truth of the matter asserted.").


I. The Laches Defense

Under 35 U.S.C. § 282, laches is an equitable defense that bars recovery by the plaintiff for any damages incurred before the initiation of the infringement suit. A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1028 (Fed. Cir. 1992) (en banc). Laches requires proof that the patentee unreasonably and inexcusably delayed filing suit and that the delay resulted in material prejudice to the defendant. Wanlass v. GE, 148 F.3d 1334, 1337 (Fed. Cir. 1998). A presumption of laches arises when more than six years has elapsed between the time the plaintiff knew or should have known of the alleged infringing activity and the time of filing suit. Aukerman, 960 F.2d at 1028. When the presumption is in effect, the court infers unreasonable delay and prejudice from the length of the delay, and the burden going forward with the evidence shifts to the plaintiff. Id. When the presumption does not arise, the party claiming laches bears the burden of proving that the delay was unreasonable and inexcusable, and that it materially prejudiced the party claiming laches. Id. The period of delay begins at the time the patentee had actual or constructive knowledge of the defendant's potentially infringing activities. General Electric, 148 F.3d at 1337.

The issue of laches is committed to the sound discretion of the court. Aukerman, 960 F.2d at 1032. Because the nature of the laches defense is fact-intensive, summary judgment often will be inappropriate, but may be granted under some circumstances. Rockwell International Corp. v. SDL, Inc., 103 F. Supp. 2d 1192, 1196 (N.D. Ca. 2000) (denying summary judgment on laches defense); see also Wanlass v. Fedders Corp., 145 F.3d 1461, 1464 (Fed. Cir. 1998).

Plaintiff filed the instant action April 12, 2006. Thus, to trigger the presumption, defendant must show the absence of genuine disputes as to whether plaintiff knew or should have known of the alleged infringement on or before April 12, 2000. Rockwell, 103 F. Supp. 2d at 1196. The parties do not suggest a hard and fast rule regarding the level of knowledge requisite to trigger laches, nor does the equitable nature of laches generally warrant such mechanical rules. Id. at 1197; see also Aukerman, 960 F.2d at 1034. Integrated "must have had more than a mere suspicion but less than absolute assurance of defendant's alleged infringement in order to activate the laches clock." Id.

USA argues that Stack and John, co-owners of the '488 patent, have had actual knowledge of the accused product since March 1999 and 1996, respectively, and that Stack's knowledge should be attributed to John, and thus, Integrated. If USA is correct that Integrated knew or should have known of its alleged infringement more than six years before it filed the instant lawsuit, a presumption of laches arises. Integrated, of course, asserts that neither Stack nor John knew that the USA product infringed on the '488 patent until shortly before filing this lawsuit. For the reasons discussed below, Integrated has raised triable issues of material fact ...

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