U.S. Supreme Court Eliminates Laches Defense for Damages in Patent Suits

Summary

The U.S. Supreme Court on Tuesday, March 21, 2017, held in a 7-1 decision that the defense of laches is not available under the Patent Act to bar claims for damages. SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC. The case now returns to the U.S. Court of Appeals for the Federal Circuit for further proceedings.

Background of the Case

In 2003, SCA sent notice to First Quality claiming First Quality's adult incontinence products infringed SCA's patent. First Quality responded that the patent was invalid in light of prior art. SCA then submitted its patent for reexamination by the Patent Office without informing First Quality. The Patent Office confirmed the patent in 2007. In August 2010, SCA sued First Quality for patent infringement. First Quality moved for summary judgment asserting that laches and equitable estoppel barred relief. The district court granted First Quality's motion on both grounds. As to laches, the district court found there was no genuine dispute that SCA's delay was unreasonable and prejudicial to First Quality, which had spent millions of dollars developing its products.

The Federal Circuit vacated the district court's ruling that equitable estoppel barred SCA's suit, but an en banc Federal Circuit narrowly affirmed the finding of laches in a 6-5 decision. The Federal Circuit struggled to distinguish the issue presented from Petrella v. Metro-Goldwyn-Mayer, Inc., a Supreme Court case decided in 2014. In Petrella, the Court abolished the defense of laches in copyright cases, inferring Congressional intent from the three year statute of limitations for copyright claims.

The Patent Act includes a statute of limitations provision similar to the Copyright Act. Specifically, 35 U.S.C. § 286 provides "[e]xcept as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to . . . infringement in the action." The Federal Circuit majority reasoned that Section 282(b), which sets forth defenses available in an action involving patent validity or infringement, had implicitly codified laches by providing for a defense of "unenforceability." Thus, according to the Federal Circuit, the defense of laches was an "otherwise provided by law" exception to Section 286. In March 2016, the Supreme Court granted certiorari to decide whether, in light of Petrella, laches should remain a defense to bar a claim for patent infringement damages.

Decision

In a 7-1 decision, the Court observed that Petrella's reasoning "easily fits the provision at issue here" and eliminated laches as a defense for patent infringement claims seeking damages. Applying the logic of Petrella, the Court inferred from Section 286 that "Congress's judgment that a patentee may recover damages for any infringement committed within six years of the filing of the claim." In criticizing the Federal Circuit's opinion, the Court observed how "it would be exceedingly unusual, if not unprecedented, if Congress chose to include in the Patent Act both a statute of limitations for damages and a laches provision applicable to a damages claim." Furthermore, as of the enactment of Section 282, Congress would have been aware of the Court's precedent that "laches cannot be invoked to bar a claim for damages incurred within a limitations period specified by Congress." The SCA Hygiene decision is another in a line of cases where the Court has faulted the Federal Circuit for applying a patent-law-specific rule that conflicts with a widely applied general rule. Thus, the Supreme Court vacated the judgment of the Federal Circuit in part and remanded the case for further proceedings.

Observations

The elimination of laches leaves parties on the hook for up to six years of pre-suit damages regardless of a patentee's delay in filing suit. Some think it may encourage patentees to wait for their damages claims to accumulate before suing unsuspecting companies. But some limits remain. Under 35 U.S.C. 287, a patentee that practices an invention must either mark products with a patent number or give notice to infringers in order to recover pre-suit damages. Further, equitable estoppel remains a viable defense and may bar a patentee's infringement claim entirely where (1) the patentee makes a misleading communication to an alleged infringer, e.g. that the patentee has no intent to file suit, (2) the accused infringer relies on the communication, and (3) the accused infringer would be materially prejudiced if the patentee were allowed to assert a claim inconsistent with the earlier communication. Finally, the Supreme Court let stand the Federal Circuit's precedent that laches remains a defense for equitable relief such as an injunction.