United States: Litigation Alert: Supreme Court Extends Petrella Rule Barring Laches To Patent Context

Three years ago, in Petrella v. Metro-Goldwyn-Mayer, Inc., the Supreme Court held that the equitable defense of laches is not available against copyright claims for damages brought within the Copyright Act's three-year statute of limitations. 134 S. Ct. 1962 (2014). Last week, in SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, the Court extended the reasoning of Petrella to patent infringement claims, vacating the Federal Circuit's en banc decision to the contrary. In a 7-1 decision delivered by Justice Alito, the Court ruled that a patent defendant cannot invoke laches as a defense against damages where the infringement occurred within the six-year damages limitation period established by 35 U.S.C. § 286. In so doing, the Court's decision overruled long-standing Federal Circuit precedent. See A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1028–32 (Fed. Cir. 1992); see also SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC ("SCA Hygiene En Banc"), 807 F.3d 1311 (Fed. Cir. 2015) (en banc) (revisiting Aukerman in light of Petrella).

The High Court Rejects Laches as a Defense to Patent Claims for Damages

The majority opinion found that the case called for a straightforward application of Petrella. "Laches," Justice Alito wrote, "is a gap-filling doctrine, and where there is a statute of limitations, there is no gap to fill." As in Petrella, the Court largely based its holding on separation-of-powers principles: "When Congress enacts a statute of limitations, it speaks directly to the issue of timeliness and provides a rule for determining whether a claim is timely enough to permit relief." That § 286 is not a true statute of limitations, but instead limits the damages recovery period, did not, in the Court's opinion, distinguish patent infringement matters from Petrella. Rather, the Court found that § 286 "represents a judgment by Congress that a patentee may recover damages for any infringement committed within six years of the filing of the claim," thus barring any application of laches within that period.

The Court disagreed that the patent context compelled an outcome any different from the one it had reached in Petrella. It found unpersuasive the Federal Circuit's long-held view that 35 U.S.C. § 282 contemplates laches as a defense to all patent infringement claims; even if true, the Court said, "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." Equally unavailing were the respondent's arguments based on pre-1952 decisions by courts of law and courts of equity, including cases decided after the merger of equity and law in 1938: "After surveying the pre-1952 case law, we are not convinced that Congress, in enacting § 282 of the Patent Act, 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."

Dissenting Opinion Highlights the Impact of Delays in Filing Patent Lawsuits

Justice Breyer delivered the sole dissent, motivated by his concern that absent the laches defense, patentees may have little disincentive to delay suing until the alleged infringer achieves commercial success. Justice Breyer pointed to material differences between patent law and copyright that in his estimation distinguish Petrella. As an initial matter, he observed 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." But Justice Breyer also noted that the consequences to the defendant of delayed notice of infringement are far more severe in the patent than in the copyright context. For example, the passage of time may well result in the loss of invalidating prior art, or may make it impossible for a business to switch away from a now widely embedded technology.

Limits of SCA Hygiene and Availability of Equitable Estoppel as an Alternative Defense

What, if anything, remains of the laches defense in patent infringement cases? The Supreme Court's decision applies only to damages, and does not disturb the Federal Circuit's conclusion below that patent defendants may raise laches as a defense to equitable relief. In particular, the Federal Circuit had noted that laches could be an effective defense to permanent injunction, as a plaintiff's delay in filing suit, and a defendant's reliance on that delay, are considerations that fit naturally within the eBay v. MercExchange framework. SCA Hygiene En Banc, 807 F.3d at 1331. The appellate court stated that "principles of equity" may also apply to consideration of an award of ongoing royalties, but characterized the application of laches to bar such royalties as atypical; and it held that barring an ongoing royalty based on laches is appropriate only in "egregious circumstances." Id. at 1332–33.

The Supreme Court also made clear in SCA Hygiene that patent defendants may still properly rely on the doctrine of equitable estoppel. As a defense, equitable estoppel is more difficult to establish than laches, as it requires (1) misleading conduct by the patentee that leads the defendant to reasonably infer that the patent will not be enforced, (2) reliance on that conduct by the defendant, and (3) material prejudice to the defendant if the patentee is allowed to proceed. A.C. Aukerman, 960 F.2d at 1028, 1042–43. But equitable estoppel is also the more powerful defense, as it may bar a patentee's claim entirely. Id. at 1028, 1041.

SCA Hygiene marks yet another instance where the Supreme Court has overturned patent-specific rules set forth by the Federal Circuit. And while it does not leave accused infringers entirely without redress for unreasonable delays in filing suit, the laches defense to patent infringement damages will be missed in those instances where a patentee delayed filing suit but did not engage in sufficiently misleading conduct to trigger equitable estoppel.

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