In a strong reversal of the Federal Circuit, the US Supreme Court held in SCA Hygiene Products Aktiebolag v First Quality Baby Products, LLC, No. 15-927 (March 21, 2017), that delay by a patentee will not give rise to a laches defense during the statutory six-year damages period under 35 U.S.C. § 286. Justice Samuel Alito authored the 7–1 majority opinion, extending the court’s decision in Petrella v. Metro-Goldwyn-Mayer, Inc. (2014), which held that laches is inapplicable for copyright infringement, a provision similar to Section 286 of the Patent Act.
In SCA v First Quality, SCA filed a patent infringement case against First Quality in August 2010. First Quality moved for summary judgment based on laches and equitable estoppel defenses, which was granted by the district court. After the court’s decision in Petrella, the Federal Circuit issued a decision upholding the district court’s decision and barring SCA’s claims based on laches. The Federal Circuit based its decision on Federal Circuit precedent in A.C. Aukerman Co. v. R. L. Chaides Constr. Co. (1992) (en banc). The Federal Circuit reheard the case en banc to reconsider Aukerman based on Petrella, but reaffirmed its ruling in a 6–5 decision, finding that the Patent Act codified the defense of laches in Section 282 that barred the recovery of damages.
Justice Alito, writing for the majority, explored the historical basis of the laches defense and its development as a defense by courts of equity prior to 1938 when courts of law and equity were merged. The Supreme Court analogized to the bases for the Petrella decision, in which the court based its decision on the principles of separation of powers and the role of laches in equity.
In Petrella, the court found that because statutes of limitations serve a similar role as does laches, the fact that Congress chose to limit the rights of claimants through a statute of limitations evidences its intention of basing the timeliness of a claim on a “hard and fast rule” as opposed to a “case-specific judicial determination,” resulting from a laches defense. The court stated that giving effect to a laches defense within a limitations period as determined by Congress “would give judges a ‘legislation-overriding’ role that is beyond the Judiciary’s power.” SCA slip op. at 4 (citing Petrella slip op. at 14).
The Supreme Court knocked down First Quality’s argument that Section 282 of the Patent Act provides an exception to Section 286, which states that it applies “[e]xcept as otherwise provided by law.” In response, the court stated that it would be unusual for Congress to include both “a statute of limitations for damages and a laches provision applicable to a damages claim.” Neither First Quality nor the Federal Circuit identified any federal statute that provides such a duality to prevent untimely claims.
The Supreme Court reviewed the cases relied upon by the Federal Circuit to show applicability of a laches defense in patent cases post-1952, but found that they did not support such a precedent. With respect to pre-1938 claims at equity, the court found that if any rule did exist that laches should apply, this could easily be avoided by a plaintiff suing for damages at law. As to the pre-1938 claims at law, the cases did not show sufficient precedent to override “the presumption that Congress legislates against the background of general common-law principles.” (SCA slip op. at 14). Finally, the number of post-merger of law and equity cases were insufficient to evidence a settled and uniform practice of allowing a laches defense to damages claims.
The Supreme Court noted that its determination regarding laches does not preclude a defense based on equitable estoppel, which provides protection against “unscrupulous patentees inducing potential targets of infringement suits to invest in the production of arguably infringing products.”
While plaintiffs no longer have to worry that a delay on their part in enforcing an infringement claim will preclude their damages claims under the doctrine of laches, there is still the possibility of the defendant raising the issue of equitable estoppel based on certain improper acts of the plaintiff. Defendants should take care not to rely as their defense on a delay in enforcement by a patent owner, without more, in pursuing infringing activity.