In a 6-5 decision, the Federal Circuit, sitting en banc, ruled last month in SCA Hygiene Products v. First Quality Baby Products, 2013-1564, that laches remains a viable defense to patent infringement.
Writing for the majority, Judge Prost concluded that “Congress codified a laches defense in 35 U.S.C. § 282(b)(1) that may bar legal remedies,” notwithstanding Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014), in which the Supreme Court found that laches was no defense to copyright infringement in a case involving the 1980 film Raging Bull.
The case began in 2003, when SCA sent a letter accusing First Quality of infringing its patent on absorbent diapers. First Quality promptly responded by asserting that SCA’s patent was invalid in light of third-party prior art. SCA then sent its own patent into re-examination in light of the third-party patent, and in 2007, the Patent Office confirmed the patentability of all claims, as well as several others that SCA had added.
But it wasn’t until 2010—three years after the reexamination had concluded and seven years after it had last been in contact with First Quality—that SCA filed its complaint. First Quality moved for summary judgment of laches, which the district court approved and a Federal Circuit panel affirmed.
SCA petitioned for rehearing, arguing primarily that the Supreme Court’s Petrella ruling should bar the application of the laches doctrine in patent cases as well as in copyright suits.
But the full Federal Circuit rejected SCA’s position and issued a 5-4 decision affirming the laches ruling and concluding that the Supreme Court’s reservations about laches in Petrella did not fully apply in the patent context.
Citing the legislative history of the 1952 Patent Act and contemporaneous commentary, the court held that 35 U.S.C. § 282 codified a laches defense. Although laches isn’t mentioned explicitly anywhere in that section, the court concluded that Congress’ silence on the matter evinced its intent to incorporate its common-law jurisprudence into the new statute. And according to common-law precedent, “by 1952, courts consistently applied laches to preclude recovery of legal damages.”
And unlike in the copyright context, where Congress already set a statute of limitations for damages and the Supreme Court therefore found a judicially-created laches doctrine inappropriate, Congress elected in patent matters to enshrine a laches defense in the statute, as well as a six-year limitation on recoverable damages. The majority held that if “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.”
The Federal Circuit also concluded that while liability for copyright infringement requires proof of deliberate copying, patent infringement can occur innocently, and laches therefore serves as a useful and important defense. For good measure, the majority noted the overwhelming support for retaining a laches defense from amici in industries including “biotechnology, electronics, manufacturing, pharmaceuticals, software, agriculture, apparel, health care, telecommunications, and finance.”
However, the court held that laches does not ordinarily bar the award of an ongoing royalty as an equitable matter, since laches pertains to past, not future, actions.
In contrast, the five dissenting judges, claiming that the majority “overlooks Congress’ intent and Supreme Court precedent,” wrote that only the Supreme Court, not the circuit courts, can establish the common-law precedent incorporated into passage of a new statute, and the Supreme Court before 1952 was silent on the effect of laches.
The impact of the decision, however, may be limited, since laches is rarely a successful defense in patent litigation—at least when compared to non-infringement and invalidity.
As Fish principal John Dragseth told IPLaw 360, “If the facts are wonderful and your client looks like an angel and the patent owner looks like the devil,” then a laches defense may help. “But the biggest message is, ‘Don’t let this defense distract you from something better.'”
At the same time, the survival of the laches defense can help eliminate patent abuse, including by parties that unfairly lie in wait while damages accumulate.
But irrespective of its importance, laches narrowly withstood Federal Circuit scrutiny, and the doctrine may be now headed for Supreme Court review.