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Court Finds Nine Year Delay Too Long to Sustain Trademark Infringement Suit

Plaintiff ExperExchange, Inc., licenses its optical character recognition (OCR) software to manufacturers and software developers. Defendant DocuLex, Inc., is a software development company that sells document management software. In May 1999, DocuLex entered into a license agreement with ExperExchange.

In August 2008, ExperExchange filed suit in the Northern District of California, alleging that DocuLex breached the parties’ license agreement by using ExperExchange’s technology and trademarks in more than the one product the agreement authorized.

DocuLex defended on the ground of laches. It argued that because ExperExchange waited nine years to assert the License Agreement covered only a single product, DocuLex expended considerable resources developing products incorporating ExperExchange’s technology and trademarks, even though it could have switched to another OCR provider that could have provided it with substantially similar software at a similar price.

The court agreed.

“Here, both requirements for laches are met. First, Plaintiff unreasonably delayed in initiating this action. As discussed above, the undisputed fact that Plaintiff received royalty reports indicating that DocuLex was incorporating Plaintiff’s software into products other than PDF.Capture is enough to have given Plaintiff constructive notice of this conduct. Plaintiff’s assertion that it was unaware of certain features of PDF.Capture when it entered into the License Agreement, and therefore did not understand that Defendants’ conduct infringed its copyrights until recently, is unpersuasive. In particular, there is no evidence in the record from which a trier of fact could reasonably infer that Plaintiff could not have obtained this information had it acted with reasonable diligence when it learned that DocuLex was incorporating Plaintiff’s software into products other than PDF.Capture.

“Second, Defendants have demonstrated that they will suffer prejudice as a result of the delay. In particular, it is undisputed that DocuLex continued to incorporate Plaintiff’s [OCR] software into its products, many of which Plaintiff now alleges are infringing. Thus, the delay has prejudiced DocuLex by increasing the potential liability it faces with respect to these products. At the same time, DocuLex has continued to expend resources developing this products, in reliance on its presumed right to use the [OCR] software in them. Nor has Plaintiff presented any evidence to counter Defendants’ assertion that it could and would have used OCR scanner technology from another source had it realized that it would be faced with potential liability based on use of Plaintiff’s products.

“Accordingly, the Court concludes that Plaintiff’s claims for copyright and trademark infringement are barred under the doctrine of laches.”

The case cite is ExperExchange, Inc. v. DocuLex, Inc., 2009 WL 3837275, No. 08-3875 (N.D. Calif.) (Nov. 16, 2009).

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