On March 21, 2017, the U.S. Supreme Court issued a 7-1 decision in SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, wiping out the equitable defense of laches in some patent cases. In particular, where patent infringement occurred less than six years before the complaint was filed, laches is no longer a defense to damages. The Court held that its reasoning in a 2014 copyright decision, Petrella v. MGM, applied equally to patent cases due to clear Congressional intent reflected in the Patent Act.
Laches is an equitable defense that precludes damages if an accused infringer can show unreasonable delay in bringing a claim by the patentee, which resulted in prejudice against the alleged infringer. The defense has been available in patent cases for more than a century, as explained in an 1895 case, Campbell v. City of Haverhill, 155 U.S. 610 (1895).
In 2010, SCA sued First Quality for infringement of U.S. Patent No. 6,375,646 in the Western District of Kentucky. Ultimately, the district court granted First Quality’s motion for summary judgment of no damages based on both equitable estoppel and laches. SCA appealed the decision to the Federal Circuit.
While SCA’s appeal was pending before the Federal Circuit panel, the Supreme Court decided Petrella v. Metro-Goldwyn-Mayer, Inc. __ U.S. __ (2014). In that case, the Court held an equitable laches defense could not preclude a claim for damages incurred within the Copyright Act’s three-year limitations period. See 17 U.S.C. § 507. Plainly put, the Copyright Act’s three year statute of limitations cannot be circumvented by equitable defenses, because Congress’s intent was for recovery to be available during that three-year period.
On appeal in the SCA case, a panel of Federal Circuit judges affirmed the district court’s decision, despite the Petrella ruling. At the en banc rehearing, the Federal Circuit affirmed yet again. The Federal Circuit based its decisions on case law precedent, namely A.C. Aukerman Co. v. R. L. Chaides Constr. Co., 960 F. 2d 1020 (Fed. Cir. 1992) (en banc), which barred a claim for damages based on laches. Citing that case, the Federal Circuit declined to apply Petrella to patent cases, reasoning that Congress had codified a laches defense in the Patent Act at 35 U.S.C. § 286.
The U.S. Supreme Court granted SCA’s petition for certiorari to answer whether Petrella, which rejected the defense of laches within the applicable statute of limitations period for copyright cases, also applies to patent cases.
The Supreme Court’s Decision
The Supreme Court answered that question affirmatively, holding that Petrella applies to patent cases and rejects a defense of laches for damages incurred within the six-year limitations period prescribed by Section 286. The majority explained that separation-of-powers principles and the traditional role of laches in equity warranted the conclusion. A statute of limitations evinces Congressional intent for a specific time rule, instead of an equitable case-by-case determination. Allowing courts to determine whether laches bars damages within the six-year period is “legislative-overriding,” which exceeds the Judiciary’s power. Additionally, allowing laches within the six-year period conflicts with the “gap-filling” purpose of equitable remedies, where statutory law is unavailable.
Justice Breyer wrote the only dissent. His Honor observed that abolishing laches as a defense in these circumstances could “have harmful and unfair legal consequences,” because patentees will no longer be precluded from waiting many years—potentially up to twenty years or more after applying for the patent—to bring a lawsuit. However, that effect is tempered by Section 286, which does limit the accused infringer’s liability by requiring that “no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.”
The Supreme Court’s decision likely increases the value of some infringement cases for certain patentees, while increasing uncertainty for those who are accused of infringement. In those cases that match these facts, laches cannot be asserted, successfully, to rebut damages claims that were brought within the six-year damages window. As a result, prospective litigants will need to carefully re-calculate the new value of a particular case, if this recent decision applies to the specific facts.