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Attorneys

Patent Owners Beware: Don’t Sleep on Your Rights!

October 9 2015

By: Audrey Millemann

Laches, a judicially created defense based on the plaintiff’s delay and prejudice to the defendant, is a proper defense to the recovery of damages in a patent infringement suit, even though the Supreme Court ruled in 2014 that laches does not apply in copyright infringement cases.

A divided en banc Federal Circuit Court of Appeals held in SCA Hygiene Products v. First Quality Baby Products (September 18, 2015) 2015 U.S. App. LEXIS 16621 that Congress specifically provided for a laches defense in the Patent Act, unlike the Copyright Act.

SCA owned a patent for adult incontinence devices; First Quality was a competitor. In 2003, SCA sent First Quality a letter stating that it believed First Quality’s products infringed SCA’s patent. First Quality replied that SCA’s patent was invalid based on a prior art patent. In 2004, SCA filed a petition for reexamination of its patent in the Patent and Trademark Office, citing the prior art patent. In 2007, the PTO upheld SCA’s patent. SCA had not informed First Quality of the reexamination because the reexamination proceedings were public, but First Quality believed that SCA had dropped its accusation in response to First Quality’s letter. During this time, First Quality had made significant investments in its business. SCA knew First Quality was expanding its business, but did not inform First Quality of the reexamination decision. In 2010, seven years after its last communication with First Quality, SCA sued First Quality for patent infringement.

The trial court granted First Quality’s motion for summary judgment on laches and equitable estoppel. SCA appealed. A panel of the Federal Circuit affirmed the trial court’s decision on the laches defense and reversed it on the equitable estoppel defense.

On rehearing before the en banc Federal Circuit, SCA contended that the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S.Ct. 1962 (2014) eliminated laches as a defense. In Petrella, the Supreme Court held that laches is not a defense to a claim of copyright infringement brought within the Copyright Act’s statute of limitations. SCA argued that laches should not apply as a defense in patent infringement cases within the Patent Act’s six-year period for obtaining damages.

The Federal Circuit held that the Patent Act was not like the Copyright Act because the patent statutes expressly provided for both a six-year time limit on the recovery of monetary damages and a defense of laches.

The court explained that laches was codified in 35 U.S.C. §282(b)(1), which sets forth, in general terms, that defenses of “absence of liability” are permitted. The court relied on the commentary of the drafters of the Patent Act, which specifically stated that laches was a proper defense. The court noted that its holding is not new, as courts have interpreted §282 to permit laches as a proper defense to patent infringement claims for decades.

The court next addressed whether laches is a defense only to equitable relief (injunctions) or whether it is also a defense to legal relief (monetary damages). Although the patent statutes do not provide the answer to this question, the court concluded that laches is a defense to all forms of relief, based on this state of the case law in 1952 when the patent statutes were enacted. At that time, courts applied laches to bar both equitable and legal relief, and Congress intended to codify existing law in enacting the Patent Act. In analyzing Patrella, the court explained that the Supreme Court had:

“eliminate[d] copyright’s judicially-created laches defense because Congress, through a statute of limitations, has already spoken on the timeliness of the copyright infringement claims, so there is no room for a judicially-created timeliness doctrine.”

This is in contrast to the Patent Act, which the court explained as follows:

“The statutory scheme in patent law, however, is different. While Congress has spoken on the timeliness of patent damages claims, Congress also codified laches defense in §282. Thus, because §286 provides for a time limitation on the recovery of legal remedies, and §282 provides for laches as a defense to legal relief, the separation of powers concern is not present. . . . Laches therefore remains a viable defense to legal relief in patent law.”

Lastly, the court clarified that laches is a proper defense to a permanent injunction, but not to an ongoing royalty for a defendant’s continuing infringement. The factors considered in laches (the plaintiff’s delay and prejudice to the defendant) are relevant in deciding whether an injunction is appropriate, but the plaintiff’s delay should not bar it from recovering ongoing royalties for the defendant’s current infringement.

The court also distinguished the defense of equitable estoppel from laches. Equitable estoppel is a bar to the entire claim of patent infringement, precluding any relief. This is because equitable estoppel is premised on conduct by the patent owner that demonstrates acquiescence in the defendant’s infringing acts, essentially granting the defendant a license under the patent for the patent’s term.

In concluding, the court said that Congress can certainly change the law if it so chooses, but for now, laches survives. In that case, patent owners should be vigilant in protecting their rights.