United States: SCOTUS Declares That Time Has Expired For Laches Defense In Patent Cases

On March 21, the Supreme Court of the United States held in Hygiene Products Aktiebolag v. First Quality Baby Products that laches is not a defense to a damages claim when the Patent Act's six-year statute of limitations has yet to expire. This decision aligns with the Court's ruling in Petrella v. Metro-Goldwyn-Mayer Inc., 572 U.S. ___ (2014), in which the Court determined that laches cannot be invoked as a defense to bar relief in copyright disputes so long as the claim is filed within the Copyright Act's three-year statute of limitations.

SCA Hygiene Products Aktiebolag and SCA Personal Care Inc. (SCA) first notified First Quality Baby Products LLC (First Quality) in 2003 that its adult diapers infringed SCA's patented technology. After several years of invalidity proceedings, in 2010 SCA sued Quality First in the United States Court for the Western District of Kentucky. First Quality prevailed on summary judgment on the basis of laches and equitable estoppel, and SCA appealed to the Federal Circuit. While SCA's appeal was pending, the Supreme Court issued the Petrella decision. However, based on precedent set before the enactment of the Patent Act, the Federal Circuit ruled that laches could still be asserted for claims involving patents when the statute of limitations had yet to expire under 35 U.S.C. § 286.

The Supreme Court reversed the Federal Circuit's ruling and held that Patrella was controlling for the defense of laches under the Patent Act for two primary reasons. First, the purpose of laches is to shield defendants from untimely claims, which ultimately serves the same purpose as a congressionally mandated statute of limitations. If laches is uniformly applied within the Patent Act's statute of limitations, the judiciary would not override the role of Congress, and this would create the uncertainty of individual courts deciding the timeliness of claims on a case-by-case basis. Second, following the Patrella decision in the context of patent damages avoids any inconsistency with laches' development in equity. Since the defense of laches is an equitable means of preventing unfairness when a statute of limitations is inapplicable, the Supreme Court held that the defense is improperly applied where a statute of limitations is readily available, such as in the context of the Patent Act.

Although First Quality and the Federal Circuit reasoned that the Patent Act's statute of limitations is inapplicable as to laches, the Supreme Court remained unpersuaded. First Quality argued that since § 286 looks back in time from the date a suit was filed as opposed to commencing at a particular date on which a claim accrues, the Patent Act does not provide an absolute statute of limitations. The Supreme Court rejected this interpretation, since it relied on the "Discovery Rule" of claims (which it had not established even applied to the Patent Act) rather than the general norm of claims accruing when a cause of action is completely present. The Supreme Court also held that the Federal Circuit's logic related to § 282(b) of the Patent Act was misguided. Although § 282(b) states generally that "unenforceability" shall be a defense in a patent matter, it did not logically follow that the section could be invoked to override an express statute of limitations. Nor is "unenforceability" necessarily synonymous with "laches." Finally, the Federal Circuit also erred by relying on case law decided prior to the enactment of the Patent Act to determine that laches could apply to the damages claim, and that Congress must have intended such when it enacted § 282(b). The Supreme Court held that at the time of the Patent Act's enactment, it was a well-established rule that laches could not be invoked to bar damages when such claims fell within the statute of limitations.

This decision overturns the Federal Circuit's Aukerman decision and eliminates the defense of laches in patent cases. Thus, absent the reliance necessary for equitable estoppel, patent owners may be able to get access to the full six-year window of damages, even if there is unreasonable delay leading to material prejudice. However, unreasonable delay is not without its risks in patent cases, as such delay could weigh against an injunction or enhanced damages. Unreasonable delay could also support an equitable estoppel argument (and in this case, equitable estoppel apparently remains a live issue on remand) and impact a fee award if the suit is unsuccessful. And there are situations in which the infringement evidence is more at risk for loss than the invalidity evidence. Plus, outside the six-year window, there is zero recovery. However, some of the amici argued that reduced "laches pressure" will encourage the productive use of delay (i.e., more thorough investigations), and will increase the chances of settlement (perhaps by allowing time for USPTO procedures to clarify rights).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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