On September 18, 2015, the en banc Federal Circuit upheld the viability of the laches defense in patent infringement suits. SCA Hygiene Products v. First Quality Baby Products, No. 13-1564, September 18, 2015. More specifically, the court ruled that in the patent context: (i) "[l]aches bars legal relief," (ii) "courts must weigh the facts underlying laches in the eBay framework when considering an injunction," and (iii) "absent extraordinary circumstances, laches does not preclude an ongoing royalty."
SCA Hygiene Products and First Quality Baby Products are competitors in the adult incontinence products market. In October 2003, SCA wrote a letter to First Quality, expressing the belief that one of First Quality's products infringed U.S. Patent No. 6,375,646 ('646 patent). In November 2003, First Quality responded, claiming that the patent was invalid. SCA did not reply, but in July 2004, SCA requested reexamination of the '646 patent. In March 2007, the PTO confirmed the patentability of all original claims of the '646 patent and issued several other claims. Then, in August 2010, SCA filed a patent infringement suit against First Quality based on the '646 patent. At that point, it had been nearly seven years since SCA and First Quality had communicated regarding the '646 patent, and in that time, First Quality had invested heavily in its protective underwear business.
In the district court, First Quality moved for summary judgment, raising the laches defense among others. The district granted summary judgment on laches, and SCA appealed.
Laches is an equitable defense, often defined as unreasonable,
prejudicial delay in commencing suit. It has long been recognized
as a defense in patent cases. At the same time, 35 U.S.C. §
286 limits damages to the six years prior to the filing of the
complaint in a patent infringement suit. In A.C.
Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d
1020 (Fed. Cir. 1992), the en banc Federal Circuit held
that there was no conflict between the equitable defense of laches
and the statutory limitation on recovery codified at 35 U.S.C.
§ 286. The Aukerman court further held that laches
bars a patentee's claim for damages prior to suit, but that
laches could not bar the entire suit.
While SCA's appeal was pending, the U.S. Supreme Court
addressed the viability of the laches defense in the copyright
context, where 17 U.S.C. § 507(b) bars the bringing of a
copyright suit more than three years after the claim has accrued.
Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014).
With respect to copyright cases, the Supreme Court held that laches
could not be invoked to bar a claim for damages brought within the
three-year window, but that laches could be invoked in
extraordinary circumstances to bar equitable relief.
On September 17, 2014, a panel of the Federal Circuit affirmed the
district court with respect to its laches ruling. That panel held
that the Supreme Court's Petrella decision did not
abolish the laches defense in patent law, and the panel instead
applied Aukerman. SCA filed a petition for rehearing
en banc, which the Federal Circuit granted on December 30,
2014. In granting rehearing en banc, the Federal Circuit
posed two questions—in general terms, whether laches bars
claims for damages in patent infringement suits, and whether laches
could bar entire patent infringement suits.
On September 18, 2015, the en banc court upheld the
viability of the laches defense in patent infringement suits. After
summarizing the reasoning of both Aukerman and
Petrella, the court began by considering the character of
35 U.S.C. § 286. Petrella had analyzed 17 U.S.C
§ 507(b) and concluded that it was a statute of limitations.
The Federal Circuit, by contrast, concluded that § 286 was a
damages limitation, and not a statute of limitations. Ultimately,
however, the court found that distinction irrelevant to its
resolution of the case under Petrella. The court explained
that "the question under Petrella is whether Congress
has prescribed a time period for recovery of damages," and
therefore § 286 invoked the Petrella analysis as
would statutes of limitations.
Importantly, the court then held that Congress codified a laches
defense at 35 U.S.C. § 282(b)(1), which provides that
"[n]oninfringement, absence of liability for infringement or
unenforceability" "shall be defenses in any action
involving the validity or infringement of a patent." The court
explained that the plain terms of § 282 are broad, and that
the House and Senate Reports on the provision reinforce its
expansive reach. The court also focused on commentary authored by
P.J. Federico, a principal draftsman of the 1952 recodification of
the Patent Act. In that commentary, Federico had written that the
defenses captured by "''[n]oninfringement, absence of
liability for infringement or unenforceability' ... would
include ... equitable defenses such as laches.'"
The court then turned to address the question of whether laches as
codified in the Patent Act bars recovery of legal relief. The court
found no guidance in the text of the Act nor in its legislative
history. Instead, the court invoked the canon that when Congress
fails to explicitly or implicitly evince its intention on an issue,
it must be presumed that Congress intended to retain the substance
of the common law. The court noted that with respect to the Patent
Act, Congress's purpose was "to codify the prevailing law
wholesale, except where changes were expressly noted." The
court thus reviewed the pre-1952 case law on laches and found that
"by 1952, courts consistently applied laches to preclude
recovery of legal damages." Indeed, "[n]early every
circuit recognized that laches could be a defense to legal relief
prior to 1952." The court gave particular attention to two
such cases where courts had considered the argument that laches
might operate as a defense to bar only equitable relief,
emphasizing that both of those cases ruled that laches could bar
legal relief as well. After reviewing this case law, the court
noted that neither SCA, nor its amici, nor the dissent, had been
able to point to a single patent infringement case before a court
of appeals where it was held that laches did not apply to legal
relief.
The court next pointed out that Petrella rested on
separation of powers concerns—Congress had spoken to the
timeliness of copyright claims in the Copyright Act (§
507(b)), so there was no room for the judicially created doctrine
of laches. But in the Patent Act, not only was there a provision on
the timeliness of damage claims (§ 286), but there was also a
provision recognizing the laches defense (§ 282(b)(1)). Thus
with respect to patent infringement cases, due respect for
congressional authority required that the court preserve the laches
defense.
The court also emphasized a distinction between copyright and
patent law that informed its analysis—"[i]ndependent
invention is no defense in patent law, so without laches,
innovators have no safeguard against tardy claims demanding a
portion of their success."
With respect to the court's second question, namely whether
laches could bar prospective relief, the court reexamined
Aukerman in light of Petrella and eBay Inc.
v. MercExchange, L.L.C., 547 U.S. 388 (2006). According to
eBay, in order to secure an injunction, a "plaintiff
must demonstrate: (1) that it has suffered an irreparable injury;
(2) that remedies available at law, such as monetary damages, are
inadequate to compensate for that injury; (3) that, considering the
balance of hardships between the plaintiff and defendant, a remedy
in equity is warranted; and (4) that the public interest would not
be disserved by a permanent injunction." Id. at 391.
And according to Petrella, "the District Court, in
determining appropriate injunctive relief ... may take account of
[the plaintiff's] delay in commencing suit." 134 S. Ct. at
1978. The court concluded that laches "fits naturally"
into the eBay framework and directed that "district
courts should consider all material facts, including those giving
rise to laches, in exercising its discretion under eBay to
grant or deny an injunction."
The court reached a somewhat different conclusion with respect to
ongoing royalties: "while the principles of equity apply,
equity normally dictates that courts award ongoing royalties,
despite laches." The court distinguished the doctrine of
equitable estoppel, the gravamen of which "is misleading and
consequent loss." Petrella, 134 S. Ct. at 1977.
Equitable estoppel bars the entire suit, including ongoing
royalties, whereas a patentee guilty of laches, absent egregious
circumstances, typically does not forfeit its entitlement to
royalties going forward.
Five judges concurred in part and dissented in part. These judges
agreed with the majority that laches is available to bar equitable
relief but dissented that "laches is no defense to a claim for
damages filed within the statutory limitations period established
by 35 U.S.C. § 286."
In the wake of the Federal Circuit's decision, laches remains
available to protect the company that "may independently
develop an invention and spend enormous sums of money to usher the
resultant product through regulatory approval and marketing, only
to have a patentee emerge six years later to seek the most
profitable six years of revenues." The decision was trumpeted
by some commentators and media outlets as maintaining the viability
of a "Patent Troll Weapon." However, for a variety of
reasons, including the 6–5 nature of that decision and the
decision's frequent invocation of Petrella, it is
possible that the Supreme Court may step in to review the issue in
the near future.
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