** LEGAL UPDATE **
In a case called SCA Hygiene Prods. Aktiebolag, et al. v. First Quality Baby Prods., LLC, et al., the U.S. Supreme Court was called upon to determine whether the equitable defense of "laches" applies to the six-year damages limitation period contained in 35 U.S.C. § 286 for patent claims. Previously, defendants could use the laches defense (discussed below) to reduce the damages owed to a plaintiff that delayed in filing its patent infringement lawsuit. But in this case, decided on March 21, 2017, the Supreme Court largely eliminated that defense.
This case focuses on the equitable defense of laches, which is a defense that defendants in a patent infringement lawsuit can claim, essentially stating that a plaintiff has taken too long to sue and thus created a significant disadvantage to the defendant, known as "prejudice."
Laches is different from a statute of limitations, which is the maximum amount of time that a plaintiff has to file a claim under the law. Laches is less certain, and is more fact-dependent.
An example helps to illustrate how a laches defense could be used. Imagine that you owned a patent on a particular widget used in constructing large machinery. You saw that your friend was building a similar machine, and seemed to use a widget that looked a lot like yours, without permission. You did not say anything until he finishing producing his expensive machine. As soon as he was prepared to sell it, you file a lawsuit. Here, your friend might claim that laches prevents your lawsuit.
In the case before the Supreme Court, the facts showed that SCA Hygiene Products Aktiebolag and SCA Personal Care, Inc. (together, SCA), manufacture and sell adult incontinence products. In October 2003, SCA sent a letter to First Quality, accusing it of infringing on SCA’s patent. First Quality wrote back, denying that allegation and stating that one of its own patents actually rendered SCA’s claimed patent invalid. SCA left the matter alone, and both companies continued to manufacture and sell their respective products.
But then, after a delay, SCA filed a petition to have the U.S. Patent and Trademark Office (PTO) reexamine whether its patent was valid over First Quality’s patent. In 2007, the PTO confirmed that, indeed, SCA’s patent did have validity. But SCA did not sue First Quality until 2010.
Believing that it was prejudiced by this delay, First Quality moved for summary judgment based on theories of laches and estoppel. The district court granted First Quality’s motion, and the U.S. Court of Appeals for the Federal Circuit affirmed, giving credence to the laches defense.
The Supreme Court agreed to hear the case to resolve whether the defense of laches can bar a claim for patent infringement brought within the Patent Act’s six-year statutory limitations period.
In a 7-1 decision by Justice Samuel Alito, the Court held that laches "cannot be interposed as a defense against damages where the infringement occurred within the period prescribed by § 286.”
Where there is a specific statute of limitations enacted by Congress, the courts should not use laches, which is meant only to serve a “gap-filling purpose” where there is no controlling legislation. Here, there is no dispute that SCA’s claims fit within the Patent Act’s six-year limitations period under 35 U.S.C. § 286.
The Court’s analysis relied heavily on a somewhat analogous recent copyright case, Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014). In Petrella, the Court held that the statute of limitations provisions of the Copyright Act (17 U.S.C.§ 507(b)), precluded a defendant’s use of a laches defense in response to charges of copyright infringement. “[L]aches,” the Court explained in Petrella, “cannot be invoked to bar legal relief ” “[i]n the face of a statute of limitations enacted by Congress.”
The logic and outcome of SCA Hygiene is similar. “Petrella’s holding rested on both separation-of-powers principles and the traditional role of laches in equity,” the Court wrote. “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. The enactment of a 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.”
Therefore, Justice Alito’s decision continued, applying laches within a limitations period specified by Congress “would give judges a ‘legislation overriding’ role that is beyond the Judiciary’s power.” In other words, it would be improper to ignore the clear statute passed by Congress.
In some ways, SCA Hygiene creates some consistency across intellectual property law. By harmonizing patent law with its recent copyright decision in Petrella, the Supreme Court has created uniformity and predictability around the equitable defense of laches.
Effective date: March 21, 2017