The Equitable Defense of Laches: SCA Hygiene Products v. First Quality Baby Products

The equitable defense of laches has been a useful tool for defendants in intellectual property litigation for over a hundred years, but a recent case in the U.S. Supreme Court could potentially remove the defense in patent infringement cases.

In SCA Hygiene Products AB v. First Quality Baby Products LLC, the Supreme Court must decide whether the doctrine of laches bars patent infringement claims filed within the six-year statutory limitation period established under 35 U.S.C. § 286 of the Patent Act.

In order to successfully use laches as a defense in a patent case, a defendant must prove that the plaintiff engaged in an unreasonable and inexcusable delay in filing suit, as well as, prejudice to the defendant.  Before a court will allow laches as a defense, it must balance the equitable factors such as the defendant’s culpability, the plaintiff’s excuses for delay, the length of delay, and the severity of the prejudice.  If the delay is more than six years, then the burden shifts to the plaintiff who must then prove that the defendant was not prejudiced or that the delay was not unreasonable.

The defense of laches is a common issue in both copyright and patent cases because courts view each individual infringing act as a new act of infringement.  Therefore, the six-year period is refreshed each and every time a copy of the infringing product is manufactured, used, or sold.  For instance, if a company produced an infringing product for over 20 years, the statute allows patent owners to extend back six years for damages.  However, because certain patent owners could sit on their rights for a long period, courts will allow the laches doctrine to bar the collection of back damages.

The SCA Hygiene Products AB v. First Quality Baby Products LLC case involves two companies that manufacture incontinence products for adults.  In 2003, SCA Hygiene Products AB (SCA) sent a cease and desist letter to First Quality Baby Products LLC (First Quality) claiming that First Quality was allegedly infringing one of SCA’s patents.  First Quality denied infringement claiming that the SCA patent was invalid.  In 2004, SCA filed for an ex parte reexamination of its patent with the U.S. Patent and Trademark Office (PTO).  Three years later, the PTO confirmed that the SCA patent was indeed valid.  SCA did not contact First Quality regarding this reexamination.

In 2010, SCA filed suit against First Quality in district court for patent infringement.  First Quality argued that SCA’s claim was barred by the laches defense and moved for a summary judgment which the district court granted.

SCA then appealed to the U.S. Court of Appeals for the Federal Circuit claiming that the laches defense could not be used in this case because its suit was filed four years after the company became aware of First Quality’s infringement, and the three years that SCA’s patent was under reexamination should not count towards the six-year limitation period for damages.  The Federal Circuit rejected this argument, affirming the district court’s decision and holding en banc that laches still remains a legitimate defense that can bar infringement claims occurring within the six-year limitations period of 35 U.S.C. § 286.  The Federal Circuit found that because SCA’s delay exceeded six years, the presumption of laches applied.  The court concluded that SCA could not justify its delay for not bringing suit after the PTO reexamination and such a delay resulted in prejudice against First Quality because of the significant product investments First Quality made throughout that period.

However, after the Supreme Court released its 6-3 decision in Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014), SCA moved for a rehearing before the entire appellate court claiming that the same analysis the Supreme Court used in Petrella should also be applied in patent cases.  In Petrella, the Supreme Court ruled that the equitable defense of laches is not available to copyright defendants in claims for damages.  The Court stated that because Congress explicitly codified a three-year period to bring claims under the Copyright Act, the laches defense cannot bar claims properly filed during that period.  SCA noted how a similar provision in the Patent Act also states that damages cannot be recovered for patent infringement occurring more than six years before the patent owner filed the complaint.  Nevertheless, after a rehearing on the matter, the appellate court ruled that the Petrella opinion does not change the court’s previous jurisprudence which allowed the unreasonable delay defense to be used in patent infringement cases brought within the six-year limitation period.

SCA then filed a petition for writ of certiorari to the Supreme Court arguing that the same conclusion reached in Petrella (that laches do not apply to copyright infringement cases brought within the three-year limitations period of the Copyright Act) should also be used in patent infringement cases, namely, that laches should not apply during the six-year limitation period of the Patent Act.  The Supreme Court granted SCA’s petition on May 2, 2016.

On November 1, 2016, the Supreme Court held oral arguments during which the Justices seemed to support SCA’s argument and in favor of applying Petrella to patent cases.  Many of the Justices appeared unpersuaded by First Quality’s arguments and asked the respondent’s counsel to explain why laches should remain a defense when it is not explicitly provided for under the patent statutes.  First Quality continued to argue that § 286 does not act as a statute of limitations but rather as a limit on the recovery of damages.  First Quality claimed that analysis in Petrella should not apply to patent cases because unlike the Copyright Act, Congress intended to include the laches defense in § 282 of the Patent Act by making “unenforceability” defenses available “in any action.”  First Quality insisted that the term “unenforceability” includes laches as a defense to damages.

Based on oral arguments, it is expected the Court will reverse the Federal Circuit’s decision and conclude that laches do not apply to patent infringement cases brought within the six-year damages period.  Similar to Petrella, the Court’s analysis will likely derive from the fact that laches is used as a defense to equitable relief and should not affect recovery of legal damages.