The U.S. Supreme Court ruled on Tuesday that that laches cannot be a defense in many patent infringement cases, holding its 2014 decision in Petrella v. Metro-Goldwyn-Mayer Inc., largely eliminating the defense in copyright cases applies equally to patent law. In SCA Hygiene Products AB et al. v. First Quality Baby Products LLC et al., case number 15-927, in a 7-1 decision, the Court vacated the ruling by the U.S. Court of Appeals for the Federal Circuit that laches — which bars suits after unreasonable delays — prevented SCA Hygiene Products AB from suing rival First Quality Baby Products LLC. Per the Court, because the Patent Act holds that patent owners can only recover damages for infringement that occurred more than six years before the complaint was filed, "laches cannot be interposed as a defense against damages where the infringement occurred within the period prescribed by [the statute]."
Discussing Petrella, the Court noted that the holding there rested on both separation-of-powers principles and the traditional role of laches in equity. The Court said that a Congressionally-enacted statute of limitations “”necessarily reflects a congressional decision that the timeliness of covered claims is better judged on the basis of a generally hard and fast rule rather than the sort of case-specific judicial determination that occurs when a laches defense is asserted.” Thus, applying laches within a limitations period specified by Congress would give judges a “legislation-overriding” role that is beyond the Judiciary’s power. The Court also found that applying laches within the limitations period would clash with the purpose for which the defense developed in the equity courts. The Court rejected Justice Breyer’s dissenting argument of a “gap” in the statutory scheme because the Patent Act’s statute of limitations might permit a patentee to wait until an infringing product has become successful before suing for infringement. Per the Court, the argument, also rejected in Petrella, implies that, insofar as the lack of a laches defense could produce policy outcomes judges deem undesirable, there is a “gap” for laches to fill, notwithstanding the presence of a statute of limitations. But that is precisely the kind of “legislation-overriding” judicial role that Petrella rightly disclaimed.
The Court found that the reasoning it used in Petrella, that the three-year statute of limitations for copyright infringement represents a Congressional judgment that a claim filed within that period cannot be dismissed on timeliness grounds, also applies to patent cases, citing 35 U.S.C. § 286’s six-year limitation on recovery of damages in patent cases. Per the Court, “By the logic of Petrella, we infer that this provision represents a judgment by Congress that a patentee may recover damages for any infringement committed within six years of the filing of the claim.”
The Court rejected First Quality’s argument that Petrella is distinguishable because §286 is not a true statute of limitations because it “runs backward from the time of suit,” noting that Petrella described the Copyright Act’s statute of limitations in almost identical terms. The Court also rejected First Quality’s argument that §286 of the Patent Act is different because it “turns only on when the infringer is sued, regardless of when the patentee learned of the infringement,” saying that the argument misunderstands the way in which statutes of limitations generally work. As the Court wrote in Petrella, “[a] claim ordinarily accrues ‘when [a] plaintiff has a complete and present cause of action.’” The Court found that application of a “discovery rule” (under which the limitations period begins when the plaintiff discovers or should have discovered the injury giving rise to the claim) is not a universal feature of statutes of limitations. Moreover, the Court in Petrella specifically noted that “we have not passed on the question” whether the Copyright Act’s statute of limitations is governed by such a discovery rule.
The Court also found fault with the Federal Circuit’s ruling that 35 U.S.C. §282 creates an exception to §286 by codifying laches as a defense to all patent infringement claims, including claims for damages suffered within §286’s 6-year period. The Court said, “Even if we assume for the sake of argument that §282(b)(1) incorporates a laches defense of some dimension, it does not necessarily follow that this defense may be invoked to bar a claim for damages incurred within the period set out in §286.” The Court found that “it would be exceedingly unusual, if not unprecedented,” for Congress to have included in the Patent Act both a statute of limitations for damages and a laches provision applicable to a damages claim.
The Court surveyed pre-1952 decisions, including those decided in equity, those decided in law and those decided after the merger of equity and law in 1938, concluding “we are not convinced that Congress, in enacting §282 [ ], departed from the general rule regarding the application of laches to damages suffered within the time for filing suit set out in a statute of limitations.”
In a lengthy dissent, as noted Justice Breyer warned that the Court was ignoring the legal history whereby courts have almost without exception have applied laches in patent damages cases, a practice codified by Congress in the 1952 Patent Act. Justice Breyer expressed his “fear that the majority, in ignoring this legal history, opens a new ‘gap’ in the patent law, threatening harmful and unfair legal consequences.” Per Justice Breyer, the limitations provision of 35 U.S.C. §286 does not set forth a period of time in which to sue, but permits a patentee to sue at any time after an infringement takes place, merely limiting damages to those caused within the preceding six years. This creates a gap “because a patentee might wait for a decade or more while the infringer (who perhaps does not know or believe he is an infringer) invests heavily in the development of the infringing product (of which the patentee’s invention could be only a small component), while evidence that the infringer might use to show the patent is invalid disappears with time. Then, if the product is a success, the patentee can bring his lawsuit, hoping to collect a significant recovery.”
Justice Breyer also took issue with the Court’s reliance on Petrella, noting “relevant differences” between patent law and copyright law, including that copyright law, unlike patent law, “does not contain a century and a half of history during which courts held that laches and a statute of limitations could coexist.” Justice Breyer also noted the evidentiary distinction between patent and copyright cases. As the Court pointed out in Petrella, the evidentiary loss that occurs while a copyright holder waits to bring suit is “at least as likely to affect plaintiffs as it is to disadvantage defendants.” However, copyright infringement requires proof of copying. The death of witnesses and loss of documents from the time of the alleged infringement can therefore significantly impair the copyright holder’s ability to prove his case. There is no such requirement in a patent suit. “Patent infringement is a strict-liability offense: There need not be any copying, only an end product (or process) that invades the area the patentee has carved out in his patent.” At the same time, however, delays in bringing patent suits may well harm patent defendants seeking to prove patent invalidity under 35 U.S.C. §§ 102, 103 and/or 112. “These kinds of defenses can depend upon contemporaneous evidence that may be lost over time, and they arise far more frequently in patent cases than any of their counterparts do in copyright cases.” Finally, Justice Breyer identified a “lock-in” problem likely to be more serious where patents are at issue. That is, once a business chooses to rely on a particular technology, it can become expensive to switch, even if it would have been cheap to do so earlier. “As a result, a patentee has considerable incentive to delay suit until the costs of switching—and accordingly the settlement value of a claim—are high.”