United States: Supreme Court To Consider Patent Laches In Wake Of Copyright Laches Decision

When we last discussed patent laches here, the Federal Circuit had voted to rehear, en banc, SCA Hygiene Products' patent infringement claim, which invoked a laches defense. At that time, the Supreme Court had recently decided in Petrella v. Metro-Goldwyn-Mayer, Inc.1 that laches was not a defense to a copyright infringement claim brought within the codified statute of limitations. The en banc Federal Circuit subsequently ruled in SCA Hygiene last September that, despite Petrella's copyright holding, laches is still a viable bar to legal relief in patent cases.

Laches is an equitable defense to a claim that is available if an unreasonable delay in asserting the claim has unfairly prejudiced the party being sued. In the patent infringement context, this might include a patentee's allowing damages to accrue before bringing a patent infringement suit against an infringer that might have otherwise stopped infringing had it been notified in a timely manner. Laches is a common-law defense that has long been available to alleged infringers, but the Supreme Court has decided to consider whether the Federal Circuit correctly ruled that it applies to bar legal damages in the patent context despite the Court's holding in Petrella.

In Aukerman,2 the en banc Federal Circuit had previously ruled that laches does apply as a defense to a claim for patent infringement damages. The question presented in the SCA Hygiene case is as follows: "Whether and to what extent the defense of laches may bar a claim for patent infringement brought within the Patent Act's six-year statutory limitations period, 35 U.S.C. § 286."

The en banc Federal Circuit in SCA Hygiene, in a 6-5 decision, distinguished laches in the patent context from the copyright context considered in Petrella on the grounds that in the Patent Act only did Congress provide for both the laches defense and a time limitation on damages. The time limitation on patent damages is defined by 35 U.S.C. § 286:

Except as otherwise provided by law, 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.

In the case of claims against the United States Government for use of a patented invention, the period before bringing suit, up to six years, between the date of receipt of a written claim for compensation by the department or agency of the Government having authority to settle such claim, and the date of mailing by the Government of a notice to the claimant that his claim has been denied shall not be counted as part of the period referred to in the preceding paragraph.

The Federal Circuit interpreted § 286 as a damages limitation rather than a statute of limitations, but reasoned that that distinction was irrelevant to whether Petrella precluded a laches defense in the patent context. The Federal Circuit reasoned that in patent law, unlike copyright law, however, Congress had codified a laches defense in 35 U.S.C. § 282(b)(1):

(b) Defenses.—The following shall be defenses in any action involving the validity or infringement of a patent and shall be pleaded:

(1)   Noninfringement, absence of liability for infringement or unenforceability.

(2)   Invalidity of the patent or any claim in suit on any ground specified in part II as a condition for patentability.

(3)  Invalidity of the patent or any claim in suit for failure to comply with—

(A)   any requirement of section 112, except that the failure to disclose the best mode shall not be a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable; or

(B)   any requirement of section 251.

(4)   Any other fact or act made a defense by this title.

Specifically, the Federal Circuit relied on the language and legislative history of § 282(b)(1) and P. J. Federico's contemporary Commentary on the New Patent Act to conclude that § 282(b)(1) codified a laches defense. The court noted that Federico was a principal draftsman of the 1952 Patent Act and that Federico stated in his Commentary that § 282(b)(1) included, inter alia, "equitable defenses such as laches, estoppel and unclean hands."

But the court noted that the statute did not define the content of the laches defense. Because laches is an equitable remedy previously governed by the common law, the Federal Circuit applied the canon that a statute covering an issue previously governed by the common law retains the substance of the common law unless Congress expressly or impliedly intended otherwise. Because the Federal Circuit found no such intent, it concluded that § 282 "retains the substance of the common law as it existed at the time [1952] Congress enacted the Patent Act."

The next question therefore was whether before 1952 laches was a common-law bar to legal relief or to only equitable relief. The Federal Circuit relied on the Federal Rules of Civil Procedure to conclude that in 1938 law and equity had merged. And the court suggested that equity courts' characterizing both legal and equitable relief as "accounting" "could explain a unique willingness in patent law to apply laches to bar a traditionally legal remedy." Finally, the court reviewed the pre-1952 case law and concluded that the courts "consistently applied laches to preclude recovery of legal damages."

Because Congress codified laches in the Patent Act and not in the copyright law considered in Petrella, and because Congress did not intend to undermine the application of common-law laches in patent cases to legal relief, the Federal Circuit distinguished laches in the patent context from the copyright holding in Petrella. As noted, however, this was a 6-5 en banc decision based on statutory interpretation.

The dissent argued that § 286 is a limitations period that cannot be distinguished from the statute of limitations relevant in Petrella. It noted that "the Supreme Court has made abundantly clear that there must be a particular justification in the statute before this court may announce special rules for patent cases that depart from the rules for other areas of civil litigation." It accused the court of not reading § 282 and § 286 together, and of cherry-picking favorable cases to support its decision and ignoring cases, including Supreme Court cases, holding that laches does not bar claims for legal relief filed within a statutory limitations period. The dissent reasoned that Federico's statement two years after the enactment of the Patent Act could not support an inference that Congress departed from a common-law principle and did not suggest that Congress incorporated a distinctive version of laches that bars a claim for legal damages: "To the extent that Congress codified laches . . . , it was as a defense to equitable relief only, not as a defense to legal relief otherwise permitted under § 286."

The Supreme Court will now consider whether laches may bar a patent infringement claim brought within the six years defined in 35 U.S.C. § 286 even though laches does not bar a copyright infringement claim within the codified statute of limitations. Of considerable note is the current makeup of the Court, seating eight justices after the recent death of Justice Antonin Scalia, a noted textualist who joined Petrella's 6-3 majority. If the Court rules on this case with eight justices and splits 4-4, the Federal Circuit's en banc decision will control.

It will be interesting to see whether the federal government takes a position in this case and whether the Court overturns the Federal Circuit's ruling in Aukerman. The Federal Circuit found that Petrella did not undermine or overturn Aukerman. The Supreme Court will likely clarify this issue.

Footnotes

1 572 U.S. __ (2014).

2 A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020 (Fed. Cir. 1992).

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