Federal Circuit en banc rules Laches Remains Defense in a Patent Infringement Suit

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Federal Circuit Review No. 70-01
Laches Remains a Defense to Legal Relief in a Patent Infringement Suit

SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, No. 2013-1564, 2015 U.S. App. LEXIS 16621 (Fed. Cir. Sep. 18, 2015) (En banc, Before Prost, C.J., Newman, Lourie, Dyk, Moore, O’Malley, Reyna, Wallach, Taranto, Chen, and Hughes, J.) (Opinion for the court, Prost, C.J., join by Newman, Lourie, Dyk, O’Malley, and Reyna, J.) (Opinion concurring-in-part, dissenting-in-part, Hughes, J., join by Moore, Wallach, Taranto, and Chen, J.).  Click Here for a copy of the opinion.

SCA Hygiene Products (“SCA”) owns U.S. Patent No. 6,375,646 for adult incontinence products. In 2003, SCA sent First Quality a letter alleging infringement. First Quality responded by asserting that another patent (U.S. Patent No. 5,415,649) invalidates SCA’s patent. In July of 2004, SCA requested reexamination of the ‘646 patent in light of that prior art. The PTO instituted reexamination and confirmed patentability of all of the original ‘646 claims. Meanwhile, starting in 2006, First Quality invested heavily in the protective underwear business and expanded its line of incontinence products.

In 2010, more than three years after reexamination, SCA sued First Quality for infringement of the ‘646 patent. Service of this Complaint was the only communication First Quality received from SCA in nearly seven years (since 2003). First Quality moved for partial summary judgment of non-infringement, for judgments of laches and equitable estoppel. The district court granted the motion with respect to laches and equitable estoppel and dismissed the non-infringement motion as moot.

SCA appealed to the Federal Circuit, which affirmed the district court’s decision with respect to laches but reversed the equitable estoppel judgment. SCA petitioned for rehearing en banc. Specifically, SCA asked the Federal Circuit to reconsider A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992) (holding that laches may bar a claim for damages based on patent infringement occurring within the six-year damages limitation (35 U.S.C. § 286)) in light of the U.S. Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014) (holding that laches is no defense to a copyright infringement suit brought within the Copyright Act’s statutory limitations period).

The Court granted the petition and posed two en banc questions:

(1) in light of Petrella, should Aukerman be overruled?

(2) in light of the fact that there is no statute of limitations for claims of patent infringement and in view of Supreme Court precedent, should the defense of laches be available under some circumstances to bar an entire infringement suit for either damages or injunctive relief?

A relevant statutory provision is 35 U.S.C. § 286, which provides, “Except as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.” Even though this a damages provision, and not a statute of limitations per se, the Court concluded that the distinction was irrelevant in this case, because the question under Petrella was whether Congress had prescribed a time period for recovery of damages. With respect to Aukerman, the Court upheld its holding and decided that laches would remain a defense to legal relief in a patent infringement suit after Petrella. The Court came to this conclusion by first interpreting 35 U.S.C. §282(b) to include the defense of laches. § 282(b) provides:

The following shall be defenses in any action involving the validity or infringement of a patent and shall be pleaded:

(1) Noninfringement, absence of liability for infringement or unenforceablity.

(2) Invalidity of the patent or any claim in suit on any ground specified in part II as a condition for patentability

(3) Invalidity of the patent or any claim in suit for failure to comply with –

(A) any requirement of section 112…

(B) any requirement of section 251.

(4) Any other fact or act made a defense by this title.

According to the Court, the inclusive language of § 282, the characterization of § 282 as “broader” and “general” in the legislative history, and an explicit statement by a principal draftsman of the Patent Act that §282 includes laches indicated that Congress codified a laches defense in § 282. The Court further concluded that laches can bar recovery of legal remedies. The Court based its conclusion on a determination that (1) Congress intended to adopt common law laches for patents in the 1952 Patent Act and (2) common law laches can bar recovery of legal remedies based on pre-1952 case law. When Congress enacted the Patent Act in 1952, there was no mention of changes to the laches doctrine. Thus, the Court followed the common law principle that, “[w]hen a statute covers an issue previously governed by the common law, [the Court] must presume that Congress intended to retain the substance of the common law.” Since common law laches could bar legal remedies, the same was true for laches under § 282.

The second question posed by the en banc Court had a two-part inquiry: (1) whether laches can bar permanent injunctive relief and (2) whether laches can bar an ongoing royalty for continuing infringing acts. With respect to the injunctive relief, the Court rejected Aukerman’s bright line rule that laches may only bar pre-suit damages recovery. According to the Court, whether an injunction should be granted is a factual question based on the factors established in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). Laches may bar an injunction if an injunction would be inequitable. For ongoing royalties, the Court held that, absent extraordinary circumstances, a delay in exercising a patent right only means that damages were abandoned during the delay. Therefore, laches does not preclude an ongoing royalty.