On March 21, 2017, the U.S. Supreme Court confirmed that “laches” is not a defense to infringement during a statutory damages period set by Congress in SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC.1 Laches is an equitable defense to an infringement claim that bars recovery by the plaintiff when the plaintiff unreasonably delays in seeking relief. The Supreme Court addressed similar laches arguments in Petrella v. Metro-Goldwyn-Mayer, Inc.,2 where it decided that a claim filed within three years of accrual under the Copyright Act cannot be dismissed as untimely. The Supreme Court determined that “Petrella’s reasoning easily fits the provision at issue here,” and concluded that the equitable defense of laches should not be available during the statutory damages period specified in the Patent Act. Justice Alito authored the (7-1) opinion for the Court, and Justice Breyer filed a dissenting opinion.
Petitioners SCY Hygiene Products Aktiebolag and SCA Personal Care (collectively, “SCA”) manufacture and sell adult incontinence products. In 2003, SCA sent a notice letter to First Quality Baby Products, LLC, alleging patent infringement. First Quality responded, asserting that it owned a prior patent over “the same diaper construction,” that its patent invalidates SCA’s patent, and that SCA’s patent could therefore not support an infringement claim. In 2004, without notifying First Quality, SCA filed a reexamination proceeding with the U.S. Patent and Trademark Office (USPTO) to determine whether its patent was valid in light of First Quality’s patent. In 2007, the USPTO confirmed the validity of SCA’s patent. In 2010, SCA sued First Quality for patent infringement. First Quality moved for summary judgment based on laches and equitable estoppel on the theory that SCA unreasonably delayed in bringing suit and the suit was now untimely. The district court granted summary judgment for First Quality on both grounds. SCA appealed. While on appeal to the Federal Circuit, the Supreme Court decided Petrella, holding that laches cannot defeat a damages claim brought within the three-year period prescribed by the Copyright Act’s statute of limitations. Nevertheless, the Federal Circuit panel upheld its reading of the patent statute allowing the laches defense. The Federal Circuit reheard the appeal en banc to reconsider its precedent in light of Petrella, but upheld the panel decision (6-5) and concluded that Congress had “codified a laches defense” that “barred recovery of legal remedies.” SCA petitioned for certiorari and the Supreme Court granted SCA’s petition.
The Court’s Analysis
The Patent Act provides that “[e]xcept as otherwise provided by law, no recovery shall be had for any [patent] infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.”3 Similarly, in copyright law, the statute precludes a civil action for infringement “unless it is commenced within three years after the claim accrued.”4 The Supreme Court explained in Petrella that such language indicates a congressional judgment that a claim filed within three years of accrual cannot be dismissed on timeliness grounds. The Court straightforwardly applied the logic of Petrella to the Patent Act, concluding that Section 286 similarly represents a judgment by Congress that a patentee may recover damages for any infringement committed within six years of the filing of the claim.
The Court’s opinion relies on separation-of-powers principles, the traditional role of laches in equity (as opposed to law), the expansive language used in Petrella, and the lack of lower court consensus in favor of applying laches to damages claims in the patent context. The Supreme Court explained that courts are not at liberty to jettison congressional judgment on the timeliness of suits, and when Congress enacts a statute of limitations, it speaks directly to the issue of timeliness and provides a rule for determining whether a claim is timely enough to permit relief. The Court determined that enactment of a statute of limitations necessarily reflects a congressional decision that the timeliness of covered claims is better judged on the basis of a generally hard-and-fast rule rather than a case-specific judicial determination that occurs when a laches defense is asserted. The Court reasoned that to apply laches within a limitations period specified by Congress would give judges a legislation-overriding role that is beyond the judiciary’s power.
The Court explained that applying laches within Section 286’s six-year limitations period would clash with the historic purpose for which the defense was developed in equity courts, i.e., an equitable remedy to claims for which the legislature has provided no fixed time limitation. The Court discounted the Federal Circuit’s reasoning that Section 282, which allows “unenforceability” as a defense, creates an exception to Section 286’s six-year period, because the circuit court failed to explain how the specific language created an exception and because the applicability of laches in one case may not categorically render a patent unenforceable against others. As the Court explained, “it would be exceedingly unusual, if not unprecedented, if Congress chose to include in the Patent Act both a statute of limitations for damages and a laches provision applicable to a damages claim” because laches is a “gap-filling doctrine,” and where there is a statute of limitations, there is no gap to fill.
Justice Breyer authored a dissenting opinion and reasoned that, even considering the Patent Act’s statute of limitations, a “gap” exists when patentees wait for a potential infringer to invest heavily in developing a product and strategically delay in bringing an infringement suit. Justice Breyer also reasoned that without a strong laches doctrine that runs during Section 286’s six-year period, patentees can unreasonably and prejudicially delay in bringing suits, or worse, file multiple suits based on the most recent infringing act to effectively extend the six-year period. Justice Breyer explained that Congress intended for Section282 to codify equitable defenses such as laches in order to fill this gap, while the majority opinion seems to rely on the doctrine of equitable estoppel to address unreasonable and prejudicial delay.
The Court’s decision marks a change in the status quo of patent litigation, in which laches was often pled as a defense. By removing laches as an equitable defense to patent infringement within Section 286’s six-year damages period, the Court removed a judicially created tool for courts to adjudicate a patentee’s delay. With the threat of a laches defense removed, strategic patentees may now be incentivized to lie and wait, bringing patent infringement suits that target products after their success has been established in the market, at the time when litigation is capable of inflicting the greatest competitive advantage or even after critical defense witnesses and evidence have become unavailable.
For more information on how the Supreme Court’s decision may impact your situation or circumstances, please contact any member of the patent litigation practice at Wilson Sonsini Goodrich & Rosati.
Compliments of Wilson Sonsini Goodrich & Rosati – a member of the EACCNY