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The Supremes Have Spoken: The Defense of Laches Does Not Apply to Patent Infringement Suits...



...but can only collect damages for six years prior to filing suit.

In a stunning upset of years of jurisprudence (Federal Circuit Court of Appeals, prior patent act), the U.S. Supreme Court determined that laches (an equitable remedy) cannot be applied within the "statute of limitations" period of six years (a legal remedy for damages). Laches is an equitable doctrine that is designed to deter rights owners from "sitting on their rights." So if someone takes no action for a long time, the doctrine of laches can stop that someone from bringing an action many years later because they simply waited too long. This decision pretty much obliterates laches as a defense against a claim for patent infringement.

The case at issue is SCA Hygeine Products Akteibolag v. First Quality Baby Products, decided March 21, 2017. SCA makes adult incontinence products (adult diapers). It has U.S. Patent 6,375,646. In 2003, SCA notified First Quality that it was infringing the SCA patent. First Quality had its own earlier patent (U.S. Patent 5,415,649). First Quality replied by stating that its patent invalidated the SCA patent and, therefore, there was no infringement. SCA did not further respond and First Quality continued to develop and market its products.

In 2004, SCA requested (ex parte) reexamination of its patent in view of the First Quality patent. SCA did not inform First Quality of this action. In 2007 the USPTO confirmed validity of the SCA patent in view of the First Quality patent. And in 2010—nearly seven years after the demand letter—SCA brought suit against First Quality. First Quality moved for summary judgment based on laches and equitable estoppel, and the District Court granted the motion on both grounds.

SCA appealed to the Federal Circuit Court of Appeals. But before the Federal Circuit rendered a decision, the Supreme Court decided a laches case in a copyright litigation matter (Petrella v. Metro-Goldwyn-Mayer). This copyright case held that laches could not be applied where Congress mandated a statute of limitations in the Copyright Act and a suit for infringement was filed within the statute of limitations. Despite this, the Federal Circuit decided in favor of First Quality on the issue of laches based on the Federal Circuit's 1992 en banc case of Aukerman v. Chaides (affirming the equitable defense of laches in patent infringement suits). SCA appealed to the full Federal Circuit court, and First Quality again prevailed on its laches defense via a narrow 6-5 victory.  SCA then appealed to the Supreme Court.

In a 7-1 decision authored by Justice Alito, the Supreme Court reversed the Federal Circuit's decision applying the same principle as it did in Petrella, namely, that Congress had mandated a statute of limitations (Section 286 of the Patent Act) and so laches could not be claimed as long as the statute of limitations applied. The Supreme Court reversed the Federal Circuit and remanded.

Justice Breyer was the lone dissenter. And, in my opinion, Justice Breyer’s dissent is textually persuasive, but couldn’t overcome his colleagues’ certainty that their prior opinion on copyright law determined the issue. Indeed, Section 286 limits to six years from the date of filing a lawsuit the amount of damages a successful patent owner can request. This is not a statute of limitations—merely a limitation on damages from a particular starting point. Section 286 is therefore not analogous to the statute of limitations in the Copyright Act, which limits the time when a lawsuit for copyright infringement can be filed. Justice Breyer was also the author of the dissent in Petrella, although he had two other justices that joined him in that dissent.

But it is the majority opinion that prevails. As a result, the defense of laches in patent infringement (and copyright actions where the action is filed within the statute of limitation) is dead.

So what are the takeaways?

First, patent owners got a rare recent win from the Supreme Court—patent owners can now generally eliminate the risk that their actions will be dismissed for long delays. And there can be all sorts of reasons a patent owner may want to wait to bring suit. For example, the patent owner may want to allow the infringer to make greater sales thereby increasing the patent owners' potential damages, wait for better timing, take time to line up the best experts, or may need time to raise funds to bring the suit.

Second, potential infringers need to be more vigilant. First Quality thought it had a strong defense. SCA filed a reexamination and ultimately received a strong validation of its reexamined patent at the USPTO, yet First Quality did not appear to know this. First Quality put in a lot of time and money developing and producing its products only to get slammed with a patent infringement lawsuit nearly seven years later. Keeping an eye on asserted patents at regular intervals (through the Public PAIR feature of the USPTO) is a good strategy to avoid being caught off guard about ex parte validity proceedings.

Third, the doctrine of equitable estoppel may still be a strong defense to delays in bringing suit for patent infringement where the defendant relied on the patent owner's actions (or inactions). Here, First Quality prevailed on the defense of equitable estoppel at the District Court. So First Quality may still prevail on this defense, but it remains to be seen.

Fourth, PTAB trials to challenge validity of a patent were not yet available at the time SCA filed its (ex parte) reexamination. But had a PTAB inter partes review proceeding been available at the time, such action would have put First Quality in the driver seat as to participation and notice, and may have changed the outcome. (PTAB defendants have been overwhelmingly successful thus far.)

Fifth, where the defendant has a strong noninfringement or invalidity position, it may choose to skip asserting equitable defenses altogether and focus its resources on the best legal (as opposed to equitable) dispositive challenge(s).

Last, for anyone that believes they see a pattern regarding IP and the death of laches as a defense, the Supreme Court made clear in its earlier Petrella case that the Lanham Act (the Trademark Act) has no statute of limitations and expressly provides for defensive use of equitable principles, including laches[1].

[1] See Petrella fn 15 "In contrast to the Copyright Act, the Lanham Act, which governs trademarks, contains no statute of limitations, and expressly provides for defensive use of “equitable principles, including laches.” 15 U. S. C. §1115(b)(9). But cf. post, at 8, 11 (citing Hot Wax, Inc. v. Turtle Wax, Inc., 191 F. 3d 813 (CA7 1999), but failing to observe that Lanham Act contains no statute of limitations)."

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