Laches May Bar Patent Damages for Suits Filed Within Six Years of Infringement By Jennifer J. Jedra

 

The defense of laches may apply to patent infringement damages claims even in suits filed within the six-year period of 35 U.S.C. §286, according to a 6-5 decision of the en banc Federal Circuit. SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, en banc Fed. Cir., No. 2013-1564, 9/18/2015.

The central issue involved the impact of the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014) holding that laches does not apply to copyright infringement occurring within the window provided by the statute of limitations on patent law. The Court’s opinion in this case, authored by Chief Judge Prost, concluded that the laches rules for patent cases are generally not affected by the Supreme Court’s Petrella decision on copyright laches.

Chief Judge Prost explained that Congress, in providing an unenforceability defense at 35 U.S.C. §282, codified the laches defense as a bar to the legal relief of damages, notwithstanding the provisions of Section 286.  However, Aukerman‘s bright-line rule that laches may only bar pre-suit damages cannot continue in light of Petrella. According to the Court, the availability of injunctive relief or ongoing royalties now depends on an analysis of the circumstances of the delay under eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).

Background

The Supreme Court in Petrella, held that laches may not bar a copyright infringement suit that is based on acts within the statute of limitations period, even though the initial violation occurred years earlier.

The Federal Circuit panel in this case affirmed a summary judgment dismissing SCA’s patent infringement suit for laches. Citing the bar of Section 286 on damages for infringements occurring more than six years before the patent action was filed, the Court found that this action was filed six years and nine months after notice of infringement to First Quality.

The panel declined to address the impact of Petrella, explaining that patent laches is controlled by A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc), which can be overturned only by the en banc court or by the Supreme Court. Aukerman held that laches is a defense to infringement under the unenforceability defense of Section 282, and that it can be presumed from a delay that exceeds six years after the patentee knew or should have known of the alleged infringer’s activity.

In December 2014, the Federal Circuit granted en banc review in this case, posing two specific questions for briefing: (1) must Aukerman be overruled in light of Petrella to bar the laches defense to claims for damages based on infringing acts within the six-year period of Section 286?; and (2) should laches, under some circumstances, bar an entire infringement suit for either damages or injunctive relief?

Analysis

The Court’s analysis, among other things, relied on the following conclusions:

  • It is irrelevant that Section 286 is a damages limitation (rather than a statute of limitations) that will preclude bringing a claim because Petrella focused on a prescribed time period for the recovery of damages, which appears in both copyright and patent law.
  • Section 282, by its plain terms, sets out defenses in infringement or validity suits, and the legislative history confirms that Congress intended the statute to have broad reach.
  • Neither the statute nor the legislative history sheds any light on whether laches, as codified in Section 282, is a defense to the legal relief of damages. If it bars only equitable relief, under Petrella, it may not bar legal damages. If it applies to both, then Section 282 “obligates us to apply laches as a defense to legal relief, notwithstanding Section 286’s time limitation on the recovery of damages.”
  • Under these circumstances, it must be presumed that Congress intended to retain the substance of common law.
  • After reviewing the case law, the Court concluded that courts consistently applied laches to preclude recovery of legal damages.

The Court also relied on a major difference between copyright and patent laws: copyright infringement requires evidence of copying, but innocence is no defense to patent infringement. Because copyright infringement requires proof of access, a potential defendant is typically aware of a risk that it is infringing and can estimate its exposure when making its initial investment decision. The calculus is different under patent law.

The Court offered the following example:

For example, in the medical device industry, a company may independently develop an invention and spend enormous sums of money to usher the resultant product through regulatory approval and marketing, only to have a patentee emerge six years later to seek the most profitable six years of revenues (see Roche Br. 19–23; IPO Br. 19). In the high tech industry, amici advise that businesses receive demand letters every day—many of which assert unmeritorious claims—and it is often impractical for companies to determine which claims have merit (see Dell Br. 23–27). Independent invention is no defense in patent law, so without laches, innovators have no safeguard against tardy claims demanding a portion of their commercial success. Consequently, “there is a recurring risk that a stale patent claim will inflict significant hardship on a defendant who has lost the meaningful ability to choose between alternative technologies and whose investment in research, development, and further innovation may be jeopardized.” Dell Br. 27.

The Court provided the following explanation for finding that Petrella does not control the result here:The fact that §286 speaks to the timeliness of damages claims does not alter the outcome. Petrella fundamentally concerns separation of powers. That is, Petrella eliminates copyright’s judicially-created laches defense because Congress, through a statute of limitations, has already spoken on the timeliness of copyright infringement claims, so there is no room for a judicially-created timeliness doctrine. * * * The statutory scheme in patent law, however, is different. While Congress has spoken on the timeliness of patent damages claims, Congress also codified a 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.Despite whatever tension may exist between the § 286 damages limitation and the § 282 laches defense, “we have no authority to substitute our views for those expressed by Congress in a duly enacted statute.” Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 626 (1978). If, in light of this issue’s newfound salience, Congress decides that the § 286 damages limitation and the § 282 laches defense are incompatible, it can change the law. As a court, however, we must apply the law as enacted, which means that the § 286 damages limitation and the § 282 laches defense must continue to coexist.

To read the opinions in this case, click here.

Note: The SCA decision summary is a courtesy of the American Intellectual Property Law Association (AIPLA).

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