First published in LES Insights
Despite a recent Supreme Court case denying a laches defense for unreasonable delay in suing for copyright infringement, the Federal Circuit held that laches remains a viable defense for unreasonable delay in suing for patent infringement. The court also held that a laches defense for unreasonable delay in suing can prevent a permanent injunction but does not preclude an ongoing royalty, absent extraordinary circumstances.
For decades, laches has been available as a defense to the recovery of pre-suit damages in a patent infringement suit based on the plaintiff's delay and prejudice to the defendant. Last year, however, in Petrella v. Metro-Goldwyn Mayer, Inc.,1 the Supreme Court held that laches could not be used as a defense to bar a claim for copyright infringement where the plaintiff brought suit within the time allowed by the statute of limitations. In light of the Supreme Court's decision in Petrella, the active judges from the Federal Circuit decided to rehear en banc, a recent case where a panel of three Federal Circuit judges previously determined that laches was a viable defense to a claim of patent infringement given the statutory six-year limitation on damages for claims of infringement.
SCA and First Quality are competitors for adult-incontinence products. In 2003, SCA sent a letter to First Quality asserting that some of its products infringed its U.S. patent. First Quality responded, saying that the patent was invalid in view of certain prior art, so SCA filed a request for ex parte reexamination, asking the United States Patent and Trademark Office (USPTO) to evaluate its patent claims in light of the prior art cited by First Quality. Four years later, in response to SCA's request, the USPTO confirmed the patentability of all of the original claims in the asserted patent. Both during and after the reexamination proceedings, First Quality invested heavily in its line of for adult-incontinence products. SCA did not file suit against First Quality until 2010—more than six years after SCA first contacted First Quality to accuse it of infringing the patent in question. In view of SCA's six-year delay in filing suit, the district court granted First Quality's motion and dismissed the suit based on laches.
After SCA appealed, a Federal Circuit panel affirmed the district court's opinion on laches. SCA subsequently filed a petition for rehearing en banc, asking the court to reconsider its ruling in light of the U.S. Supreme Court's recent decision regarding laches in a copyright case in the Petrella case.
The Federal Circuit's En banc Decision
The en banc Federal Circuit considered two questions: 1) whether its prior caselaw should be overruled to hold that the defense of laches is not applicable in patent infringement cases and 2) whether the defense of laches should be available under some circumstances to bar an entire infringement suit for either damages or injunctive relief.
In answering the first question, the en banc court distinguished patent law from copyright law. According to the court, Petrella eliminated a judicially created laches defense for copyright cases because Congress had already enacted a statute of limitations law for copyright cases. But in patent cases, a statute, 35 U.S.C. § 286, sets a time limit for the recovering legal remedies, and 35 U.S.C. § 282 codifies laches as a defense. The en banc court held, therefore, that Congress settled the first question by statute, and that the courts do not have authority to question the statute. Laches, therefore, remains a viable defense in patent law.
As to the second question—whether laches should be available to bar an entire infringement suit for either damages or injunctive relief—the court held that where a party unreasonably delays filing suit for patent infringement, courts might properly deny a patentee's request to permanently enjoin a defendant from conducting infringing activity, but that delay in exercising a patent right, without more, does not mean that the patentee abandoned its right to the invention. Therefore, a patentee guilty of laches typically does not surrender its right to an ongoing royalty, absent extraordinary circumstances.
Strategy and Conclusions
This decision affirms the continued viability of the laches defense to the recovery of pre-suit damages in a patent infringement suit. A patent owner should promptly assert its rights upon communicating with potential infringers.
This decision also confirms that the laches defense extends to permanent injunction relief—patentees might not be able to prevent infringing activities where it unreasonably delayed filing suit if it would unduly prejudice the defendant. A party threatened with a permanent injunction may consider laches as a potential defense.