Federal Circuit Reverses Equitable Estoppel Defense: Reliance Requires More Than Business Pragmatism

by Dennis Crouch

Fraunhofer-Gesellschaft zur Förderung der angewandten Forschung e.V. v. Sirius XM Radio Inc., 2023-2267 (Fed. Cir. June 9, 2025)

In this infringement case, Judge Bataillon (D.Del) sided with the accused infringer on summary judgment -- finding that Fraunhofer's infringement claim was barred by equitable estoppel. The Federal Circuit reversed on appeal - finding genuine disputes of material fact on the key estoppel issue of detrimental reliance. Although equitable estoppel remains an important defense, the case makes clear that it requires more than post-hoc rationalization of business decisions.  Instead, defendants must show they actually considered and relied upon the patentee's conduct when making key infringement decisions.

The case involves a fairly complex licensing dispute regarding multicarrier modulation technology used in satellite radio systems. Fraunhofer is a German research organization and patent holder that licensed its MCM patents to WorldSpace back in 1998. WorldSpace then sublicensed the technology to XM Satellite Radio (now SXM) for use in developing the XM DARS satellite radio system. WorldSpace filed for bankruptcy in 2008 and its trustee used the bankruptcy powers to reject reject the Fraunhofer agreement. Fraunhofer claims that rejection eliminated the sublicense to SXM.  (The legal status is disputed.) Fraunhofer waited until 2015 to notify SXM of potential infringement, and ultimately sued in 2017 over the now-expired patents.

In the past, defendants raised the equitable defense of laches in cases (like this  one) involving significant delays by patentees in asserting their rights. However, the Supreme Court's decision in SCA Hygiene v. First Quality, 580 U.S. 328 (2017), eliminated laches as a defense to damages claims for patent infringement. The Court held that Congress's enactment of a specific six-year limitations period precluded application of the judge-made laches doctrine within that statutory window. By eliminating that previously common defense, SCA Hygeine heightened the importance of the somewhat parallel defense of equitable estoppel.

But, as discussed below, equitable estoppel requires proof beyond simply unreasonable enforcement delay.