As the Supreme Court prepares to hear arguments for SCA Hygiene Products v. First Quality during the October 2016 term, another laches case, Medinol Ltd. v. Cordis Corp., awaits its chance to be heard before the Court. Medinol, similar to SCA Hygiene, presents the question of whether judges may use the equitable defense of laches to bar legal claims for damages that are timely within the express terms of the Patent Act.
Medinol involves several patents issued in the United States between 1999 and 2005 relating to articulated stents.[i] In 1999, Cordis sold a bare-metal stent, BX Velocity, in 1999 and in the United States in 2000. Cordis later sold its Cypher and Cypher select stents, drug-eluting stents that cover a platform bare-metal stent with a polymer sirolimus coating to release the drug inside the artery, in Europe in 2002. Cordis then released its Cypher product in the United States in 2003.
In 2000, Medinol sued Cordis for patent infringement in the United States based on allegations that the BX Velocity infringed its ‘303, ‘120 and ‘018 patents. The jury in that case found that the alleged infringed patents were obvious and non-infringed. In 2005, Medinol ended its business relationship with Boston Scientific and W.L. Gore and explored the possibility of finding a new business partner. Cordis was also searching for business opportunities to bolster its stent business and began negotiations with Medinol in 2006. The parties signed an agreement to stay all pending litigation ant toll the running of any applicable statute of limitations on any claim or cause of action which the parties have or mat have against one another. Medinol had already began considering a patent infringement suit for its ‘552, ‘811, and ‘276 patents at the time this agreement was signed.
The two companies later signed an exclusive distribution agreement and continued to amend this agreement through 2007, where Cordis’s stent business dramatically declined as a result of competing stents. In February 2011, Cordis notified Medinol that changing market dynamics and business circumstances required Cordis to stop distributing Medinol’s stents and told Medinol that it would be willing to terminate the exclusive distribution agreement before the official expiration of December 31, 2014. In August 2011, Medinol informed Cordis that it considered the early termination to be a breach of the agreement and demanded $17.1 million in damages. The agreement was officially terminated in August 2012. Shortly after the termination, new management at Cordis approached Medinol to discuss reviving the business relationship, which included the discussion of another lawsuit tolling agreement These negotiations eventually fell through due to a disagreement in discussions of potential infringement claims of the ‘552, ‘811, and ‘276 patents.
Medinol filed suit for patent infringement based on Cordis’s Cypher and Cypher Select products beginning in 2002 and 2003. Cordis argued that the period of delay should begin on November 9, 1999 for all patents because “unlike the typical laches case which involves different patents on different inventions, [these] patents are all essentially the same.” Although the district could could find no authority to support this argument, Judge Shira A. Scheindlin found Cordis’s arguments compelling, holding that, because the claims of a continuing application could only be based on the original disclosures made in the first application, they could have been made in the first application, therefore, the generally used doctrine of laches could not apply.
The Federal Circuit, relying on its decision in SCA Hygiene Products v. First Quality, affirmed the use of the laches defense to dismiss damages claims that were timely under the Patent Act’s statute of limitations.
Medinol then filed a petition for a writ of certiorari to the Supreme Court, arguing that its patience was its undoing. Medinol explained that the district court ignored the fact that it had knowingly surrendered some of its damages for past infringement for the sake of pursuing a mutually beneficial business relationship with Cordis.
The arguments made in the Medinol petition are extremely similar to the arguments made in the SCA Hygiene petition. Medinol claims that the Supreme Court in Petrella v. Metro-Goldwyn-Mayer[ii] ruled that laches cannot override the limitations periods set by Congress and that the Federal Circuit errs in reaffirming its pre-Petrella approach. Medinol attempts to pick apart the Federal Circuit’s reasoning in SCA Hygiene, addressing the court’s reliance on outside commentary and legislative history. Medinol continues to argue that, given the Federal Circuit’s exclusive jurisdiction over the district courts, “if a correction [of the Federal Circuit’s reasoning] is to come, it must come from [the Supreme Court]. Without such correction, the judicially-invented laches defense will remain available in countless patent infringement cases, in contravention of Congress’ clear intent. Likewise, there will remain an inexplicable exception to the Court’s teachings in Petrella about the proper relationship between laches and federal statutes of limitations in damages actions.”
Given the closeness of the issues and the fact that the Supreme Court has already decided to take on SCA Hygiene, it is quite possible, perhaps likely, that the Court will also take the Medinol appeal. It is also possible, however, that the Supreme Court will hold the petition until they ultimately decide SCA Hygiene and then remand the case for further consideration in light of whatever the ruling may be. Regardless, the Supreme Court will soon decide the issue of whether laches remains an applicable in patent infringement litigation. Stay tuned.
[i] U.S. Patent No. 5,980,552 (issued Nov. 9, 1999); U.S. Patent No. 6,059,811 (issued May 9, 2000); U.S. Patent No. 6,589,276 (issued July 9, 2003); U.S. Patent No. 6,875,228 (issued Apr. 5, 2005); U.S. Patent No. 5,733,303 (issued Mar. 31, 1998); U.S. Patent No. 5,843,120 (issued Dec. 1, 1998); U.S. Patent No. 5,972,018 (issued October 26, 1999).
[ii] A 2014 copyright case in which the Supreme Court ruled that if a claim for damages is timely under the relevant statute of limitations, judges cannot bar the claim by invoking the defense of laches.