Recent U.S. Decisions Affecting Licensing
Tuesday, March 28, 2017
No Laches Defense of “Unreasonable Delay” for Patent Infringement Suits Brought within Six-Year Limitation Period
By John Paul, Brian Kacedon, and Kevin Rodkey
In SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, the U.S. Supreme Court found that a laches defense for unreasonable delay in suing for patent infringement may not be used in cases filed within the six-year statute of limitations period for recovering damages. The Court considered its prior decision in Petrella, which limited the laches defense in copyright cases; the general principle that laches did not apply when Congress set forth a statute of limitations for a claim; and whether the federal courts had established a consensus that a different rule applies for patent cases.
In 2003, SCA accused First Quality of patent infringement. First Quality responded that SCA’s patent was invalid based on one of First Quality’s own patents. When SCA did not respond further, First Quality proceeded to develop and market its products.
In 2004, without notifying First Quality, SCA filed a reexamination of its patent based on First Quality’s patent, and the Patent Office confirmed SCA’s claims as patentable in 2007.
In 2010, SCA sued First Quality for patent infringement. First Quality moved for summary judgment on laches and equitable estoppel, which the district court granted.
When SCA appealed the decision, the Federal Circuit heard the case en banc, affirmed the laches finding, and vacated the equitable estoppel finding.
SCA then asked the Supreme Court to review the laches holding.
The SCA Hygiene Decision
The Supreme Court reversed, holding that laches cannot be asserted as a defense against patent damages claims where the infringement occurred within the six-year statute of limitations period prescribed by U.S. law.
In reaching this conclusion, the Court compared the Patent Act’s statute of limitations to the Copyright Act’s statute of limitations that it previously discussed in its earlier decision in Patrella on the laches defense in a copyright case.
The Court explained that statutes of limitations are enactments by Congress that “speak directly to the issue of timeliness” and that overriding those timeliness determinations by applying laches is “beyond the Judiciary’s power.” The Court further explained that laches serves as an equitable “gap-filling” doctrine, but “where there is a statute of limitations, there is no gap to fill” and laches cannot be invoked. The Court determined that, while not identical, the Patent Act’s statute of limitations was sufficiently similar to the Copyright Act’s that the reasoning of Patrella applies.
Next, the Court considered First Quality’s attempts to distinguish Patrella. It rejected First Quality’s argument that the Patent Act did not have a “true statute of limitations” because § 286 set a backward-looking period for recovering damages, rather than a forward-looking time bar from when the claim was discovered. The Court found this argument unpersuasive, noting that the Copyright Act’s statute of limitations was “a three-year look-back limitations period” similar to the Patent Act. It also explained that, although some statutes of limitations include the “discovery rule” advocated by First Quality, “that is not a universal feature of statutes of limitations.” Moreover, the Court explained that Patrella did not determine whether the Copyright Act includes a discovery rule and, therefore, Patrella could not be distinguished on that basis.
The Court addressed the position that the Patent Act codified the prior precedent of applying laches to damages claims by stating the general principle that laches cannot be invoked to bar a damages claim within the statute of limitations and then proceeding to determine whether there was a prior patent-specific rule to the contrary that would have been codified.
The Court then examined the historical case law to determine whether there was a judicial consensus that created a patent-specific rule, but found no such consensus. Looking to three different time periods, the Court determined that many of the cases relied on by the Federal Circuit and First Quality did not directly address the issue of laches in the damages context, but rather dealt with them for other equitable remedies.
For the cases that did hold laches was a viable defense to damages claims within the limitations period, the Court found there were “too few to establish a settled national consensus” to override the general rule. And, after the Patent Act was established, the handful of court of appeals cases finding laches was a viable defense “does not constitute a settled, uniform practice of applying laches to damages claims.” As a result, the Court was not persuaded that Congress intended the Patent Act to incorporate a rule different from the general rule that laches does not apply to damages suffered within a statute of limitations period.
Finally, although the Court held that laches could not be applied, it observed that other doctrines, such as equitable estoppel, protect against patent owners who induce potential infringers to invest in infringing products prior to bringing suit.
Justice Breyer’s Dissent
Justice Breyer would have held that laches could be applied within the damages period because laches is a gap-filling doctrine and “there remains a ‘gap’ to fill” in the Patent Act. He noted that the Patent Act does not set forth a period during which a patent owner can file its suit. Instead, according to Justice Breyer, a patent owner can sue any number of years after discovering the infringement, but can only recover for the previous six years of damages.
Justice Breyer determined that this creates a “gap” because a patent owner might know of potential infringement but can wait more than a decade while the accused infringer invests and becomes “locked-in” to the potentially-infringing technology. At that point, the patent owner could sue, recovering damages for the previous six years of infringement and then continue recovering until the patent expires. Justice Breyer found that this was the kind of “gap” and prejudicial delay that laches was intended to prevent.
Turning to the case law, Justice Breyer would have determined that there was a patent-specific rule that laches could bar damages claims within the statute of limitations period. He disagreed with the majority that the historical equity cases did not apply because most patent cases were brought in courts of equity before they were merged with law courts, and during that time there was a statute of limitations for damages that could be precluded by laches.
Moreover, he noted that “dozens” of cases from “every federal appeals court” determined that laches could be a defense against damages claims within the statute of limitations, which constituted a settled consensus that was incorporated into the Patent Act. Last, he found the majority’s explanation that there were “too few” cases to establish a settled consensus unpersuasive, because the majority looked at isolated time periods rather than the body of case law as a whole. Justice Breyer likened the majority’s ruling to being a “close” 9-0 loss in baseball because each inning was lost by only one run.
In summary, Justice Breyer dissented because he believed that the prior case law established a settled rule in patent cases.
Strategy and Conclusion
Patent owners will now not be pressed to file lawsuits for patent infringement based on a concern that they may be accused of unreasonably delay in asserting their claims. Whether this results in more settlements of claims without litigation or other consequences will remain to be seen.
The SCA Hygiene opinion can be found here.
Editors and authors
The editors and authors are attorneys at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.
John Paul - firstname.lastname@example.org
Brian Kacedon - email@example.com
Robert Wells - firstname.lastname@example.org
Kevin Rodkey - email@example.com
This article is for informational purposes and does not constitute legal advice.
The views expressed do not necessarily reflect the views of LES or Finnegan.