Supreme Court Decides SCA Hygiene Products v. First Quality Baby Products

By Gene Quinn & Steve Brachmann
March 21, 2017

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.

 

Stephen G. Kunin
Partner, Oblon, McClelland, Maier & Neustadt

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.

 

Bradley Olson
Partner, Barnes & Thornburg

“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.

 

Case Collard
Partner, Dorsey & Whitney

“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. 

 

Ronald Abramson
Litigator, Lewis Baach

“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. 

 

Sam Miller
Shareholder, Baker Donelson

“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.

Scott McKeown

Partner, Oblon, McClelland, Maier & Neustadt, L.L.P.
Founder of PatentsPostGrant.com

“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.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Gene Quinn

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 13 Comments comments.

  1. Eric Berend March 22, 2017 7:27 am

    Justice Breyer’s presumptions of malfeasance on the part of patent owners, is but a portion of his overall hostility towards patents and patents owners, in general. In the future, I believe historians will regard his repugnance for U.S. patents as legendary – to the point of motivating the issuance of extra-Constitutional interpretations, at times.

    In every decision, he searches assiduously for any pretext, any scrap or iota of even faint resemblance to a logical reason, for derogating the standing, rights, and remedies to harm of inventors and patent owners; and regardless, of how ultra vires his opinion may be.

  2. EG March 22, 2017 7:52 am

    Hey Gene,

    With respect to SCOTUS’ decision in SCA Hygiene Products, consider that oral argument in Impression Products v. Lexmark occurred yesterday relating to patent exhaustion/first sale doctrine. No mention was made by the advocates or the Justices of SCA Hygiene Products during the oral argument. That’s very odd, given that there is also a parallel copyright case (Kirtsaeng) on copyright exhaustion/first sale doctrine, although in the copyright, the first sale doctrine is statutory whereas there is no corresponding patent statute. It’ll be interesting as to whether SCOTUS also sees this parallel between SCA Hygiene Products and Impression Products.

  3. EG March 22, 2017 7:56 am

    One Eric to Another,

    Yeah, Breyer is the most virulently anti-patent of the SCOTUS Justices, on par with William O. Douglas. Breyer’s Mayo v. Prometheus opinion is an outrage for not only screwing up the law on patent-eligibility, but for also factually misstating that a “law of nature” was involved, given that the drug whose metabolites were being monitored didn’t exist in “nature.” Go figure.

  4. step back March 22, 2017 11:34 am

    Although I am definitely pro-patent, I don’t celebrate the irrational analysis put to paper by either the majority or the virulently anti-inventor Breyer.

    What does copyright law have to do with patents except for the fact that both statutory schemes spring out of the same enumerated Constitutional power and call for providing “exclusive rights” to inventors and authors for their respective works?

    Breyer of course is really out of touch in his belief that inventors have 20 years to lie in wait under their troll’s bridge.

  5. Edward Heller March 22, 2017 5:46 pm

    Prosecution laches requires more than just unreasonable and unexcused delay, it requires prejudice to the party asserting the defense or to the public generally, and it also generally requires the assertion of new claims that we recognize as late claims. If the claims that eventually issue are continuously prosecuted, even for long periods, neither the Supreme Court nor the Federal Circuit have ever found laches. This applies as well to divisionals that may be filed serially and count as continued prosecution.

    Moreover, there must be a gap in prosecution. But a gap in prosecution, such as by filing continuations, alone is not enough. There still must be showing of prejudice.

  6. Edward Heller March 22, 2017 5:50 pm

    step, even though copyright and patent rights protect different IP, they both say essentially the same thing: that the rightful owner of a copy has right to use and sell it free of the IP. Thus the only serious question one must ask is whether the person having a copy (chattel) is a rightful owner.

  7. Anon March 22, 2017 7:22 pm

    The entire spectrum of “sell” and “lease” – and which sticks in the bundle of property rights are so affected – make the issue not nearly as black and white as your post indicates, Mr. Heller.

    To be perfectly clear, the real “scourge” here is lack of control evidenced by the party wishing to “play games” with the spectum of “lease/sell.”

    Lexmark set up a “lease” model that was in effect no different (except asking price) than the sales market and exercised no care in controlling the “leased” goods in the open stream of commerce.

    They could have controlled those items in any number of ways, from physical configurations (which draws into question the concept of a designed-to-be-replenished good), to contractual controls. Yes, privity concerns do effect any contract, and it very well may be that to put in and enforce a continued responsibility for establishing privity into a “secondary market” may have its difficulties, but such does not – and cannot – act as an excuse. Not wanting to sue your customers may mean that your attempts at “leasing” are not true lease situations.

    These fundamentals should apply no matter the good (self-replicating or not 😉 ).

  8. step back March 23, 2017 1:53 am

    @6 Ed, how “creative” of you. The “only” question?

    By the way, I once owned a hard copy book but somehow the ink on its pages wore out. So I “repaired” the book by adding new ink to it organized in the same way as the old ink was. Because the paper of the pages was also wore down, I repaired them too. All within my rights as an “owner” of the repairable chattel of course.

  9. Anon March 23, 2017 7:43 am

    step back,

    You “hint” at a doctrinal concern as to the expectation of the item that you have.

    One has to ask if a book is meant to be repaired/restored in such a manner.

    (for a quick albeit not perfectly aligned analogy, great art in museums across the world are “restored” with new paper and new media ALL the time)

    But looking closer at this particular case of printers, ink and the vehicle that that ink comes in are designed to be replenished.

    Can you really “lease” an item designed to be replenished in the larger picture of the overall device?

  10. EG March 23, 2017 10:41 am

    “Can you really ‘lease’ an item designed to be replenished in the larger picture of the overall device?

    Hey Anon,

    Intriguing question. With regard to SB’s “restoring” his copy of the book, would “fair use” come into play?

  11. Anon March 23, 2017 4:54 pm

    EG,

    How would the four factors of Fair Play play out in your view?

    Is there really “copying” going on in the first place? Copying typically means that you have the original and that you have a second item copied from the first item.

    The example given starts with one item and ends with one item (only in better condition).

  12. step back March 24, 2017 10:48 am

    Anon,

    The example I gave actually has three items:
    The worn out original book
    The revitalized (repaired) book, and
    A third book from which I determined how to “organize” the ink in the revitalized book. I just forgot (cough cough) to “mention” that third book.

  13. Anon March 24, 2017 5:48 pm

    Thanks step – I presumed that the revitalization was not a separate item.

    If, in fact, you merely now have two items (leaving aside for the moment that third item), then your use of the word “revitalize” is in error, as the item that you putively used that word on remains in its original state.

    A rose by any other name…