By the Collar: The Perils of Estoppel in Patent Litigation

Photo Credit Paul Bailey

By Aaron Orheim

On Wednesday March 6 the Court of Appeals for the Federal Circuit issued an opinion in Radio Systems Corp. v. Lalor. This decision is a valuable reminder that the doctrine of equitable estoppel can be a powerful force in patent litigation.The case involves high-tech dog collars. Bumper Boy Inc. holds two patents on electronic collars that sense and distribute tension evenly around a dog’s neck. Bumper Boy received the first patent in 2004. In 2005 Bumper Boy sent a rival collar manufacturer – Innotek, Inc. – a demand letter, claiming that Innotek’s “UltraSmart” collar infringed on its 2004 patent. After Innotek responded that its collar was “prior art [that] invalidates the claims of the…patent,” Bumper Boy remained silent for over four years.

In 2007 Bumper Boy received another patent on its design after it added a stretchable insert to the collar. Then, in 2009, Bumper Boy sent a demand letter to Radio Systems Corp.—a company that had acquired Innotek—claiming that the UltraSmart collar violated both the 2004 and the 2007 patents. The parties litigated and both moved for summary judgment. The United States District Court for the Western District of Washington held, in part, that equitable estoppel barred Bumper Boy from arguing that the UltraSmart design infringed on either patent.

The Federal Circuit affirmed the District Court’s application of estoppel for the 2004 patent. Equitable estoppel applies in the patent context when:

(1) the patentee, through misleading conduct (or silence), leads the alleged infringer to reasonably infer that the patentee does not intend to enforce its patent against the alleged infringer;
(2) the alleged infringer relies on that conduct; and
(3) the alleged infringer will be materially prejudiced if the patentee is allowed to proceed with its claim.

Estoppel claims pass to successor’s in interest—e.g. new parent companies—when privity exists.

The court found that Bumper Boy stayed silent and misled Radio Systems into believing that it did not intend to enforce the 2004 patent. Radio Systems relied on that silence by acquiring Innotek and expanding its line of dog collars. Radio Systems was prejudiced, and the estoppel claim survived the transfer of the company.

But the court reversed the application of equitable estoppel in regard to the 2007 patent. Bumper Boy could not have asserted any claims on the 2007 patent until the patent was issued. It acted to enforce the new patent in 2009, and therefore Radio Systems could not have justifiably relied on any continued silence. Judge Newman dissented, writing that the 2007 patent added nothing new to the dispute—just a small piece of stretchable material—and that the District Court did not abuse its discretion by applying equitable estoppel.

This case highlights the importance of vigilant patent monitoring. Bumper Boy failed to act on the 2004 patent and lost its claim for infringement as a result. Radio Systems overlooked the 2007 patent when it moved for estoppel on all claims and now faces further litigation. Every patent litigant could use a good watchdog.