SCA Hygiene Prods. v. First Quality Baby Prods.

Transcription

1 The Supreme Court Eliminates Laches as Defense to Patent Infringement SUMMARY In a 7-1 decision issued yesterday in SCA Hygiene Products Aktiebolag v. First Quality Baby Products, 1 the United States Supreme Court eliminated the doctrine of laches as a defense to damages claims for patent infringement. Previously, the Federal Circuit s longstanding rule was that laches i.e., unreasonable, prejudicial delay in commencing suit could preclude recovery of damages, even for acts of infringement committed within the six-year period allowed under the Patent Act. BACKGROUND The patent statute, 35 U.S.C. 286, provides that [e]xcept as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint. However, courts have long applied the defense of laches to limit a patentee s recovery even for acts of infringement within that statutory period. Laches is a defense developed by courts of equity to protect defendants against unreasonable, prejudicial delay in commencing suit, 2 and under Federal Circuit case law, laches has been presumed where the period between a patentee s accusation of infringement and its filing of a complaint was greater than six years. In 2014, however, the Supreme Court issued its decision in Petrella v. Metro-Goldwyn-Mayer, Inc., holding that laches could not be invoked to limit recovery of damages for copyright infringement where the claim was brought within the applicable three-year limitations period. 3 That decision did not address the applicability of the laches defense under patent law. Defendant First Quality manufactures diapers that allegedly infringe SCA s patent rights. In 2003, SCA sent a letter to First Quality asserting infringement, to which First Quality responded by claiming that SCA s patent was invalid in light of First Quality s own patent. In 2007, the validity of SCA s patent was confirmed by the U.S. Patent and Trademark Office ( USPTO ) in a reexamination proceeding brought by SCA, but SCA did not notify First Quality of the reexamination and sent First Quality no further New York Washington, D.C. Los Angeles Palo Alto London Paris Frankfurt Tokyo Hong Kong Beijing Melbourne Sydney

2 correspondence regarding the patent. Then, in 2010, seven years after it first accused First Quality of infringement, SCA filed a patent infringement action against First Quality, seeking damages for acts of infringement in the six years prior to its complaint. First Quality moved for summary judgment on laches and equitable estoppel grounds, which the District Court granted. On appeal, the Federal Circuit, en banc, reasoned that Petrella was not applicable to patent claims, and reaffirmed that laches could be asserted to defeat a claim for damages incurred within the six-year period set out in 35 U.S.C. 286, holding that SCA s claims were barred by laches. In its March 21, 2017 decision, the Supreme Court vacated the Federal Circuit s decision. THE SUPREME COURT S DECISION In a 7-1 decision authored by Justice Alito, the Supreme Court held that laches cannot preclude claims for patent infringement damages that are brought within the six-year period set out in 35 U.S.C The Court held that the reasoning of Petrella applied equally to patent infringement, and rejected the Federal Circuit s conclusion that the defense of patent unenforceability set out in 35 U.S.C. 282 incorporates a laches defense that could bar an otherwise timely damages claim. In the majority opinion, the Court first notes that Petrella s reasoning easily fits the provision at issue here, because, [a]s Petrella recounted, the principal application of laches was, and remains, to claims of an equitable cast for which the Legislature has provided no fixed time limitation. 4 Accordingly, where there is a statute of limitations, there is no gap to fill, and the laches doctrine cannot apply. 5 Thus, following the logic of Petrella, and rejecting First Quality s attempt to distinguish that case, the Court concludes that Section 286 represents a judgment by Congress that a patentee may recover damages for any infringement committed within six years of the filing of the claim. 6 The Court rejected the notion that Congress implicitly incorporated the laches defense in Section 282 of the Patent Act, noting that 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. 7 After surveying the cases from both courts of equity and courts of law leading up to the Patent Act of 1952, Justice Alito s majority opinion concludes that these cases do not show a broad and unambiguous consensus that Section 282 included a laches defense. 8 Rather, the opinion notes, [t]he most prominent feature of the relevant legal landscape was the well-established general rule... that laches cannot be invoked to bar a claim for damages incurred within a limitations period specified by Congress. 9 Further, the opinion holds, [n]othing that Congress has done since 1952 has altered the meaning of Justice Breyer dissented on stare decisis grounds, finding that for more than a century courts with virtual unanimity have applied laches in patent damages cases. 11 He also concluded that the backward-looking nature of Section 286 created a gap filled by the laches defense, because the defense prevented a -2-

3 patentee from delaying suit until it determined that the infringer s product was successful, a delay during which evidence of invalidity might be lost. 12 IMPLICATIONS The Court s decision in SCA Hygiene eliminates laches as a defense to a claim seeking damages for acts of infringement within the six-year limitations period of Section 286. It thus makes it easier for a patentee to put an infringer on notice and then (if the infringer refuses to take a license or cease infringement) to wait for legitimate reasons or otherwise before bringing an infringement suit. It also increases the danger for an accused infringer, who no longer has any assurance that he or she will not be sued for infringement merely because he or she has not heard from a patentee for years. As a result, the decision may increase the number of declaratory judgment actions in district courts or inter partes review petitions in the USPTO brought by potential infringers seeking certainty that their products or processes do not infringe before making a substantial investment (and before evidence needed to establish patent invalidity or other defenses to infringement is lost or forgotten). The Court s elimination of the laches defense to infringement does not eliminate other potential defenses. As the majority opinion expressly notes, the doctrine of equitable estoppel provides protection against... unscrupulous patentees inducing potential targets of infringement suits to invest in the production of arguably infringing products. 13 Thus, the Court s decision is likely to result in the equitable estoppel defense being relied upon in situations where accused infringers might previously have turned to laches. Moreover, in light of the opinion, accused infringers may more often look for specific representations of non-infringement or invalidity by the patentee before deciding to forego a declaratory judgment action or inter partes review proceeding. Finally, the lack of a laches defense may have limited impact where patent owners do not provide sufficient notice of infringement. Potential infringers may still argue that, in the absence of marking of patented products, they were not put on notice of potential infringement for purposes of accruing damages or establishing willful infringement. * * * Copyright Sullivan & Cromwell LLP

4 ENDNOTES U.S., No (Mar. 21, 2017). Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S., 134 S. Ct. 1962, 1973 (2014). 572 U.S., 134 S. Ct U.S., No , slip op. at 5 (Mar. 21, 2017). Id. Id. at 6 (emphasis added). Id. at 9. Id. at 10. Id. at Id. at U.S., No , slip op. at 1 (Mar. 21, 2017) (Breyer, J., dissenting). Id. at U.S., No , slip op. at

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