The United States Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, Inc., et al., 134 S. Ct. 1962 (U.S. 2014) delivered a clear message to copyright holders and those who wish to capitalize on those copyrights. The ruling states that invoking laches cannot restrict the relief proscribed by the Copyright Act’s three-year statutory time limit. Laches is an unreasonable delay in pursuing a right or claim in a way that prejudices the opposing party. With this decision, the U.S. Supreme Court allowed Paula Petrella’s (Petrella’s) copyright infringement lawsuit to proceed against Metro-Goldwyn-Mayer, Inc.(MGM) notwithstanding Petrella’s 18-year delay in filing suit. The decision also set in motion a series of legal disputes regarding Petrella’s applicability to the Patent Act’s six-year limitation on damages that may, again, require resolution by the Supreme Court.
Now that Petrella is resolved on confidential terms, the attention turns to patent cases to see just how far the laches defense will go.
The Petrella Decision
In 2009, Petrella sued MGM for copyright infringement for creating and distributing copies of the movie “Raging Bull,” an account of boxer Jake LaMotta’s life story. Frank Petrella, Paula’s father, co-wrote two screenplays and one book about LaMotta’s life that form the basis for the movie. Petrella claims that upon her father’s passing, she acquired ownership to her father’s interest in the works as his statutory heir. As Frank Petrella’s sole heir, in 1991, Petrella exercised her rights and filed a renewal application for her father’s screenplay.
Seven years later, Petrella’s attorney contacted MGM and asserted that Petrella obtained the rights to the screenplay that inspired “Raging Bull” and, therefore, MGM’s exploitations of its derivative work, the “Raging Bull” motion picture, was an infringement of her exclusive rights. From 1998 through 2000, Petrella and MGM exchanged numerous letters in which Petrella accused MGM of copyright infringement and MGM denied such allegations. During the same time period, MGM continued to internationally market and distribute “Raging Bull,” which celebrated its 25th Anniversary in 2005.
Petrella sued MGM in 2009 for copyright infringement, unjust enrichment and an accounting. The district court dismissed Petrella’s claims on the grounds that they were barred by the equitable defense of laches. The Ninth Circuit affirmed the lower court’s finding and held that Petrella unreasonably delayed initiation of the lawsuit and that such delay prejudiced MGM. Of particular importance to the Ninth Circuit was the fact that she was aware of her potential claim since 1991, yet did not file her lawsuit until 18 years later, in January 2009. Petrella failed to present any evidence demonstrating why an 18-year delay was reasonable. By contrast, MGM demonstrated that the 18-year delay caused it prejudice because the company continued to make business decisions and entered into contracts relying on the belief that MGM was the rightful owner of the right to exploit “Raging Bull.”
On May 19, 2014, the Supreme Court held that Petrella could sue MGM for infringement because laches could not be applied to restrict the three-year statutory time limit created by Congress under the Copyright Act. However, the Petrella decision left open the question of whether the laches defense will be similarly applied in cases arising under the Patent Act, with the Justices expressly noting that “we have not had occasion to review the Federal Circuit’s position” on laches in patent cases.
On April 3, 2015, while the parties were briefing their motions for summary judgment on different grounds, the parties agreed to a confidential settlement, effectively ending a case that changed the landscape on what was previously thought of as dead claims.
The Legacy of “Raging Bull
”While “Raging Bull” may have ended, its impact lingers. On May 31, 2014, just twelve days after Petrella was decided, Michael Skidmore, as trustee for the Randy Craig Wolfe Trust, filed suit in the U.S. District Court for the Eastern District of Pennsylvania against Led Zeppelin and others, claiming that a 2-minute, 37-second instrumental titled “Taurus,” which was released in January 1968 on Mr. Wolfe’s (aka Randy California’s) band’s self-titled album, Spirit, was infringed by perhaps the most famous rock song of all time, “Stairway to Heaven.” (See a comparison on YouTube.)
On January 22, 2015, photographer Jacobus Rentmeester sued Nike, Inc. for copyright infringement, claiming that the Nike “Jumpman” logo infringed on a photograph he had taken of Michael Jordan in 1984. Rentmeester now claims damages for use of the image despite the passage of time.
On February 26, 2015, in the U.S. District Court for the Western District of Kentucky, Leroy Phillip Mitchell (p/k/a Prince Phillip Mitchell) sued Universal Music Group and others, including Andre Young (p/k/a Dr. Dre), claiming copyright infringement in the N.W.A. song, allegedly penned by Dr. Dre, titled, “If It Ain’t Ruff,” originally published in 1989. Mitchell alleges this song infringes his copyright in the 1977 copyrighted song, the musical composition “Star in the Ghetto.”
Infringement suits filed long after the infringement occurs are becoming more common. With the recent jury verdict in the Blurred Lines copyright infringement case being publicized so heavily, more suits may follow. But without “Raging Bull” to further challenge the issues involved in a long-delayed copyright infringement action, we look to see which case will take the mantle next.
The analysis regarding laches has not stopped at copyright infringement and now spills over to the realm of patent infringement.
The SCA Hygiene Products Decision
On September 17, 2014, the Federal Circuit issued a ruling in SCA Hygiene Products v. First Quality Baby Products that appeared to follow a similar path to Petrella, with the District Court dismissing the claim due to the untimely delay, and the Appellate Court affirming the dismissal. Whether this decision will stand remains to be seen.
In SCA Hygiene, the plaintiff accused defendant First Quality of infringing U.S. Patent No. 6,375,646 (hereinafter referred to as “the ’646 patent”), which was directed to adult diapers. In October 2003, SCA sent First Quality a letter alleging infringement of the ’646 patent. In November 2003, First Quality responded by suggesting that the ’646 patent was invalid based on First Quality’s review of the prior art. The parties continued to communicate until July 2004, at which time SCA filed a request for ex parte reexamination of the ’646 patent based on the prior art previously cited by First Quality. In March 2007, the United States Patent and Trademark Office (USPTO) affirmed patentability of the ’646 patent. At no time during these proceedings did SCA file suit against First Quality for patent infringement. However, in August 2010, SCA finally brought suit against First Quality for infringement of the ’646 patent.
As the above timeline illustrates, SCA waited more than six years to file suit against First Quality for infringement on the ’646 patent (which was undergoing reexamination by the USPTO for almost three years). First Quality moved for summary judgment asserting laches (and equitable estoppel) based on SCA’s failure to file suit within the six-year period.
To successfully defend a patent suit based on the doctrine of laches, the accused infringer must prove by a preponderance of the evidence that a patent owner (1) unreasonably and inexcusably delayed filing an infringement suit, (2) to the material prejudice of the accused infringer. In the case of a six-year or longer delay in filing suit, a presumption that the delay is unreasonable, inexcusable and prejudicial applies. If these elements are present, a court will then balance the equities to determine whether laches is appropriate. When deemed appropriate, the laches defense bars retrospective relief for damages occurring prior to the suit; however, prospective damages remain available.
In SCA Hygiene, the District Court granted First Quality’s motion for summary judgment, finding that SCA’s delay in filing suit was unreasonable and that entertaining the suit would cause material prejudice to First Quality because First Quality would suffer significant losses that could have been prevented if SCA had filed suit in a more timely fashion.
On appeal, the Federal Circuit affirmed the District Court’s grant of summary judgment on the basis of laches. However, in an order issued on December 30, 2014, the Federal Circuit vacated its September decision that SCA’s delay in filing suit was unreasonable and therefore barred by the equitable defense of laches. The panel decided that the appeal warranted en banc consideration, thereby vacating the September decision and reinstating SCA’s appeal. In the December 30 order, the Federal Circuit mandated that SCA and First Quality file new briefs to address the following issues:
Issue 1: In light of the Supreme Court’s decision in Petrella, should the Federal Circuit’s en banc decision in A.C. Aukerman Co. v. R.L. Chaides Constr. Co. be overruled so that the defense of laches is not applicable to bar a claim for damages based on patent infringement occurring within the six-year damages limitations period established by 35 U.S.C. §286.
Issue 2: In light of the fact that there is no statute of limitations for claims of patent infringement and in view of Supreme Court precedent, should the defense of laches be available under some circumstances to bar an entire infringement suit for either damages or injunctive relief.
The SCA Hygiene decision was based heavily on the 1992 case of A.C. Aukerman Co. v. R.L. Chaides Constr. Co., which held that when there is an unreasonable delay, laches can be invoked to bar all damages based on infringement that took place before the case was filed despite the Patent Act’s provision allowing damages going back six years. 960 F.2d 1020, 1029-1031 (Fed. Cir. 1992) (en banc). Recently, the validity of the A.C. Aukerman holding was called into question in light of the Petrella holding.
If the Court adopts the Petrella decision’s reasoning and applies it to patent cases, a defendant runs the risk of being held liable for damages resulting from infringing conduct that may have occurred more than six years prior to the patent holder filing suit. The application of Petrella to patent cases could encourage a plaintiff to sit on its hands because Petrella extends the plaintiff’s ability to claim additional damages without fear of the Court striking the plaintiff’s claims on the basis of laches.