On Tuesday, March 21st, the U.S. Supreme Court issued a decision in SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, a case which looked at the issue of whether and to what extent the defense of laches may bar a claim for patent infringement brought within the six-year statutory limitations period, as defined by 35 U.S.C. Section 286. In a 7-1 vote, the Supreme Court decided that the equitable defense of laches cannot be invoked against claims for infringement occurring during the statutory period.
The case between SCA and First Quality began back to 2003, when SCA notified First Quality that its adult incontinence products infringed upon patents held by SCA. First Quality held a patent that predated SCA’s patent, rendering it invalid. In 2007, SCA’s patent was declared valid following reexamination at the U.S. Patent and Trademark Office (USPTO) and SCA pursued patent infringement claims against First Quality in 2010. First Quality was granted summary judgment by the district court on the grounds of equitable estoppel and laches, a decision that was affirmed by the U.S. Court of Appeals for the Federal Circuit in September 2015.
In reaching its decision, the Supreme Court relied heavily on a copyright case it decided in January 2014, Petrella v. Metro-Goldwyn-Mayer, Inc. In that decision, the justices decided 6-3 that laches cannot be invoked against copyright infringement claims involving damages occurring during a three-year statute of limitations. According to the majority opinion delivered by Justice Samuel Alito, the reasoning in Petrella that laches cannot be invoked to bar legal relief in the face of a statute of limitations enacted by Congress led the Court to hold that laches cannot be invoked to bar legal relief to patent infringement damages incurred during the statute of limitations. The lone dissenting vote was Justice Stephen Breyer; his written opinion explained that that laches fills a “gap” allowed to exist by the statute of limitations. According to Justice Breyer, it is possible that a patent owner would simply wait to bring an infringement action until infringement is widespread, which could be more than six-years after the initial infringement began.
There will be more to write about this important patent case, which does seem to be properly characterized as a pro-patent decision.
What follows are the instant reactions of several experienced patent professionals who have closely followed this case.
“Although in a 7-1 decision, the Supreme Court vacated the Federal Circuit’s ruling that laches — an equitable doctrine barring suits after unreasonable delays — prevented SCA Hygiene Products AB from suing rival First Quality Baby Products LLC for damages do not read too much into the decision with respect to its applicability to other patent laches defenses based on principles of equity. The judge made law of prosecution laches is an equitable defense based on unenforceability under 35 U.S.C § 282 not grounded on a patent statute of limitations for patent damages. The prosecution laches defense is applied to unreasonable and unexplained delays in obtaining a patent that result in prejudice to the defendant or industry competitors of the patent owner.” (See Cancer Research Technology, Ltd. v. Barr Laboratories) “It remains to be seen what the Supreme Court will do with other equitable defenses premised on laches.”
Stephen Kunin is a partner with Oblon, McClelland, Maier & Neustadt, L.L.P. Mr. Kunin serves on the Management Committee as General Counsel and co-chairs the firm’s Post-Grant Patent practice group, representing clients in post-grant patent proceedings at the United States Patent and Trademark Office (USPTO). He also serves as an expert witness and consultant on patent policy, practice and procedure.
“In my personal point of view, the SCA Hygiene opinion by the Supreme Court may hold several unintended consequences for future patent infringement jurisprudence. The SCA Hygiene case has now effectively vitiated the equitable doctrine of laches from being a used as a proper defense in patent infringement case even if there has been an “unreasonable delay” in asserting a claim that unfairly prejudices the defendant party if such delay occurs within six years from the point where a patent infringement case is first ripe for filing. The SCA Hygiene Court’s reliance that the Congressionally enacted statutory six year recovery of damages period under § 286 is analogous to a non-existing statutory patent statute of limitations avoids addressing several fundamental statutory differences between the patent and copyright statutes enacted by Congress in titles 35 and 17, respectively. This can be seen where the Court in SCA Hygiene relied heavily on its opinion in Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 1967 (2014), which proscribed laches as a defense against timely filed copyright infringement claims, to ground the same result in SCA Hygiene.
However, under the copyright statutes, unlike the congressionally enacted patent statutes, Congress did not provide a statute for equitable defenses such as laches, but did provide a three year statute of limitations for bringing a civil copyright infringement matter. See 17 U.S.C. § 507. Moreover, the Federal Circuit in its underlying en banc opinion, correctly in my opinion, emphasized that under title 35 Congress expressly enacted § 282(b)(1) to provide for equitable defenses such as laches and unclean hands but Congress declined to enact a statute of limitations for barring suit as is found under the copyright statutes, stating that “under Petrella, ‘[t]o the extent that an infringement suit seeks relief solely for conduct occurring within the limitations period . . . courts are not at liberty to jettison Congress’ judgment on the timeliness of suit.’ SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 807 F.3d 1311, 1319 (Fed. Cir. 2015) (en banc) (citing Petrella at 1967).
In my view, the practical effect of the SCA Hygiene opinion may be that it has opened up another avenue for gamesmanship in that defendants now no longer have a basis to invoke a district court to evaluate whether a delay in bringing a patent infringement suit by a plaintiff was unreasonable, provided such delay occurs within the six year statutory limitation period for the recovery of damages. This six year “safe harbor” from laches challenge for unreasonable delay provides a plaintiff with the incentive to wait to file a patent lawsuit until the damages have run for a much longer period of time (up to six years) and the potential defendant may have in the interim period expended much capital investment, so the patent plaintiff benefits from the intentional delay to gain additional settlement leverage over the defendant.”
Bradley J. Olson is a partner in Barnes & Thornburg’s Washington, D.C., office and is a member of the firm’s Intellectual Property Department.
“Contrary to most statutes of limitations (which accrue at the time of the activity that gives rise to a cause of action) the statute of limitations for patent actions counts backwards from the time of filing. A patent holder may only recover damages for infringement that has occurred within the last six years prior to filing. Today in a 7-1 decision the Supreme Court confirmed that a patentee may recover damages for any patent infringement committed within the six-year statute of limitations in the Patent Act and that laches is not a defense to patent infringement for conduct that occurred within that window. The Supreme Court’s decision rests on an interpretation of Congress’s intent when enacting the Patent Act of 1952 (that Act is the basis of modern patent law). Essentially, since Congress put in a statute of limitations, they intended for damages to be available within that window and did not intend to allow another defense to further limit damages that are within the window,” Collard says.
“This decision favors patent holders and works against accused infringers who sought to limit damages to even less than the six-year statutory period based on the unique facts of their case. Even though this decision favors patent holders, it provides certainty for all parties, making the damages window clearer based on the filing date. And even though the Court confirmed that laches not a defense to infringement within the six-year window, patent holders must still not delay in filing their cases if the infringement has been ongoing for more than six years. Each day they wait is one day less of damages they may recover,” Collard says.
Case Collard is a partner at the international law firm Dorsey & Whitney who focuses on intellectual property disputes and developing strategies for safeguarding intellectual property rights. He prosecutes and defends cases around the country. He’s been following this case closely and of the decision says.
“The decision was widely expected and again illustrates the Supreme Court’s disinclination to have “special rules” for patent law that widely diverge from the resolution of analogous questions in related legal fields. In particular, the Court viewed the Federal Circuit as in effect having improperly legislated its own patent statute of limitations to further limit the one that Congress had provided.
The background of the case is that the Supreme Court had recently ruled that the defense of laches could not be applied in copyright cases to preclude recovery of damages incurred within the 3-year retrospective limitations period prior to suit. The 8-1 majority here did not see a great deal of difference between patent and copyright law in this respect (the patent statute is similar, but provides for a 6-year retrospective period). The principal area of the Court’s discussion (and the focus of the dissent by Justice Breyer) was the statutory savings clause relating to patent infringement defenses in general. The majority did not find persuasive that, historically, there was any established doctrine that laches could be a defense against patent infringement damages arising in the six years preceding the suit.
It is tempting to ask what implications this has for other cases, such as the case on patent venue that will be decided in the next couple of months. I would say, “very little.” What the decision does do is cut way back on a defense that occasionally allows a patent infringement defendant to escape liability for damages. Due to the infrequency that this defense prevailed, I would say this decision will not have a monumental impact.
Ron Abramson is a litigator with many years of experience in the software, telecommunications and Internet industries. His practice focuses primarily on patent, copyright, trademark, and trade secret litigation and related strategic counseling, negotiations, and transactions.
“Although one of the increasingly rare favorable decisions in favor of a patent owner, the Supreme Court’s decision in SCA Hygiene continues to leave open a significant question that needs to be addressed. When does a cause of action for infringement accrue? First Quality argued that accrual occurs when “a plaintiff knows of a cause of action.” However, just as in the prior Petrella decision – the foundation for the decision in SCA Hygiene – the Supreme Court noted that some claims might be subject to the discovery rule for accrual. Yet as in Petrella, the Court again intentionally ducked rendering an opinion as to when an infringement (copyright or patent) claim accrues. If the majority had addressed this issue, the Court would have quelled the primary argument in Justice Breyer’s dissent. Justice Breyer asserts that laches must exist because infringement could begin occurring earlier than six years from filing a lawsuit (for example in year 1 with a lawsuit filed in year 10) and, therefore, laches is necessary to bar such claim. A determination as to when a cause of action for infringement accrues would have solved that issue and rendered the analogy to a statute of limitations complete.”
Sam Miller, a shareholder and co-chair of the Baker Donelson’s Intellectual Property Litigation Team, advises, protects and defends businesses, organizations, and individuals involved in patent, copyright, trademark, trade dress, false advertising, right of publicity, and other technology-related matters.
“An explicit statute of limitation trumps the equitable principle of laches. Petrella v. Metro Goldwyn-Mayer. 134 S. Ct. 1962 (2014) Asking the same question (albeit in the patent rather than the copyright context) post-Patrella was not expected to lead to a different result, but the Federal Circuit saw a distinction in the historic treatment of laches in patent cases in SCA Hygiene. Not surprisingly, on appeal to the High Court, laches was found inapplicable to patent damage periods for the same reason it had been rejected in the copyright context ?the statute of limitations controls. Rather unremarkable.
Of most interest to me was Justice Breyer’s dissent (also dissented in Petrella). Much of Breyer’s dissent analyzes various aspects of the 1952 Patent Act and concludes that Congress was aware of laches, and indirectly codified it to avoid unscrupulous patentees “lying in wait” to pounce upon infringers relying upon patentee inaction. Yet, the 1952 Act separately speaks to such “reliance” concerns in 35 U.S.C. 252. Section 252 is not discussed in the dissent.
Section 252 is directed to equitable intervening rights created in the context of a broadening reissue patent. That is, where a patent issues with a certain claims scope, and the public relies on that scope, a later broadening of that claim scope in reissue may trigger equitable “protection of investments” intervening with respect to the change in claim scope. The “equitable terms” provided for by equitable intervening rights is typically a diminished royalty or like accommodation where the infringing inventory may still be offered for sale, use, import, etc. Section 252 explicitly codifies an equitable defense to patent damages based upon a reliance interest of the public. Had Congress really intended to codify equitable principles in wholesale fashion with respect to patent damages, seems to me that Section 252 would be rendered superfluous. I think the majority has the right of it.”
Scott A. McKeown is a member of the firm’s Management Committee, and chairs the Post-Grant Patent practice group focusing on post-grant counseling, litigation and related prosecution issues. He leads the Post-Grant Patent team responsible for electronics, wireless communications, software and computer-related inventions and business methods.