Patent Owner Can't Sue Sprint Because Previous Owners Didn't

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By Peter Leung

April 5 — The owner of four wireless patents can't sue Sprint Nextel Corp. for infringement because the patents' earlier owners didn't take action, an appeals court ruled.

Sprint had reasonably relied on the conduct of previous owners suggesting that the patents wouldn't be enforce against it, the U.S. Court of Appeals for the Federal Circuit ruled April 5 (High Point SARL v. Sprint Nextel Corp., 2016 BL 106412, Fed. Cir., 2015-1298, 4/5/16).

The court affirmed the trial court's ruling that High Point SARL's lawsuit was blocked by the doctrine of equitable estoppel, which prevents a party from asserting a legal claim inconsistent with prior actions.

The case highlights the importance of due diligence when acquiring patents, of not only the validity and coverage of the patents, but also of the enforcement actions taken or not taken by previous owners. This may be especially true for non-practicing entities that acquire patents mainly to get licensing fees.

The patents involved in Sprint's case are U.S. Patent Nos. 5,305,308, 5,195,090, 5,184,347 and 5,195,091 all relating to wireless communications.

Sprint had licenses from the previous owners to use the patents. In 2001, Sprint started using unlicensed equipment to expand its wireless network, and the patent owner at the time was aware of this, the trial court said. That earlier owner did not sue Sprint and, in fact, bid unsuccessfully on one of the expansion projects. The trial court also found that the previous patent owners knew about Sprint's infringement for years and never raised the issue.

In 2008, High Point purchased the patents. A few days later, it sued Sprint.

The trial court granted summary judgment in Sprint's favor, finding that the previous owners' inaction caused Sprint to reasonably believe that it would not be sued, and to rely on this belief.

On appeal, the Federal Circuit rejected High Point's arguments about why equitable estoppel should not apply. The court found that there is evidence of misleading conduct, stemming from the patent owners' silent and active actions indicating that they would not enforce the patents against Sprint.

The Federal Circuit also pointed out that contrary to High Point's claims, Sprint is not required prove bad faith on the patent owners' part to make its case.

To contact the reporter on this story: Peter Leung in Washington at pleung@bna.com

To contact the editor responsible for this story: Mike Wilczek in Washington at mwilczek@bna.com

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