SCOTUS: Timing is everything in patent infringement cases
Three years ago, the U.S. Supreme Court ruled that “laches” — a plaintiff’s unreasonable delay in pursuing an infringement claim — couldn’t preempt a claim for damages sustained within the Copyright Act’s statute of limitations. Now the Court has extended its reasoning to patents, eliminating the laches defense for infringement allegedly committed within the Patent Act’s six-year statute of limitations. The Court’s decision rejects the position long taken by the Federal Circuit Court of Appeals, which hears all appeals involving patent infringement.
SCA Hygiene Products Aktiebolag (SCA) owns a patent for a disposable diaper used by potty-training children as well as incontinent adults. In 2003, it notified First Quality Baby Products that its adult incontinence products infringed the patent. First Quality responded that its own patent preceded SCA’s, rendering SCA’s patent invalid. In 2004, SCA sought re-examination of its patent, and, in 2007, the U.S. Patent and Trademark Office (USPTO) confirmed that patent’s validity.
SCA waited until 2010 to sue First Quality for infringement. The trial court dismissed the case before trial on the grounds of laches and equitable estoppel. While SCA’s appeal was pending, the Supreme Court issued its ruling regarding the defense of laches in copyright infringement actions. Nonetheless, on appeal the Federal Circuit affirmed the trial court’s laches holding. SCA then appealed to the Supreme Court.
The copyright answer
As the Supreme Court explained, its holding in the copyright case, Petrella v. Metro-Goldwyn-Mayer, Inc., rested in part on separation-of-powers principles. It’s up to Congress to establish a hard and fast rule for what constitutes a timely lawsuit. Allowing a laches defense to bar an infringement action brought within the statute of limitations would equate to allowing the judicial branch to override this.
Moreover, the Court said, laches developed as a “gap-filling” doctrine, intended for situations where Congress hasn’t provided a fixed time limitation. Where Congress has established a statute of limitations, no gap exists, and the rationale for laches doesn’t apply.
The patent defense
The Court concluded that its reasoning in Petrella “easily” fit the six-year statute of limitations for patent infringement claims, too. According to the Court, that limitation represents Congress’s judgment that a patentee may recover damages for any infringement committed within six years of the claim’s filing.
It dismissed the notion that Section 282 of the Patent Act codified the laches defense. Sec. 282 provides that “unenforceability” is a defense to claims of patent invalidity or infringement. First Quality argued, and the Federal Circuit agreed, that laches was a defense based on unenforceability, and, therefore, the section codified laches as a defense to all infringement claims — including those for damages suffered within the six-year period. But the Supreme Court found that “it would be exceedingly unusual, if not unprecedented, if Congress chose to include in the Patent Act both a statute of limitations for damages and a laches provision applicable to a damages claim.”
The Court also faulted the appeals court and First Quality for relying on lower court patent cases decided before the Patent Act was enacted in 1952 to argue that Sec. 282 permitted the pre-1952 practice of allowing the laches defense against damages claims. To the contrary, the Court found that the most prominent feature of the relevant law at the time was the “well-established rule” that laches couldn’t be invoked to bar a claim for damages incurred within a limitations period set by Congress. And neither the appeals court nor First Quality cited a sufficiently broad and unambiguous consensus of lower court decisions that could support the inference that Sec. 282 codifies a different rule for patent law.
Time is precious
The Supreme Court’s elimination of the laches defense within the statute of limitations period means that accused infringers must be more cautious about assuming they’re safe just because they haven’t heard from patentees in several years. Once an accused infringer receives notice from a patentee, it may make sense to promptly pursue legal action to obtain confirmation that they’re not actually infringing another party’s patent, whether from a court or the USPTO. •
A possible alternative to laches
The U.S. Supreme Court eliminated the laches defense within the statute of limitations period (see main article). But accused infringers may have another weapon when they believe patentees have acted inequitably. The Court explicitly noted this option in its SCA Hygiene Products Aktiebolag v. First Quality Baby Products decision.
As the Court observed, “the doctrine of equitable estoppel provides protection against … unscrupulous patentees inducing potential targets of infringement suits to invest in the production of arguably infringing products” or engaging in another act that somehow misleads the defendant. Equitable estoppel bars an infringement claim if the defendant can show:
The patentee used misleading conduct to make the defendant reasonably believe the patentee didn’t intend to enforce its patent against the defendant,
The defendant relied on that conduct, and
Due to its reliance, the defendant would be “materially prejudiced,” or significantly disadvantaged, if the patentee were allowed to proceed with its claim.
The appellate court in SCA Hygiene held that equitable estoppel might apply, but the Supreme Court didn’t consider this issue. It’s possible that the defendant could ultimately prevail on the basis of equitable estoppel, rather than laches.