Laches Limited To Being An Equitable Defense In Patent Cases

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In SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, the Supreme Court made plain that laches is merely an equitable defense in patent cases, and will not bar a damage claim if brought within the six year statute of limitations of 35 U. S. C. §286, coming to the same conclusions as it had previously with respect to the laches defense in Copyright Act cases. Petrella v. Metro-Goldwyn-Mayer, Inc., Doc. No. 12-1315 (May 19, 2014).

Justice Alito, speaking for a 7-1 Court, explained that Petrella’s holding rested on both separation-of-powers principles and the traditional role of laches in equity. A statute of limitations reflects a congressional decision that timeliness is better judged by a hard and fast rule instead of a case-specific judicial determination. Applying laches within a limitations period would improperly overrule that legislative determination. Moreover, applying laches within a limitations period would clash with the gap-filling purpose for which the defense developed in the equity courts.

The SCA Court explained that Petrella applies equally under the Patent Act as it did with the Copyright Act. The Copyright Act’s language expressed a congressional judgment that a claim filed within three years of accrual cannot be dismissed on timeliness grounds. Similarly, Patent Act §286 represents Congress’s judgment that a patentee may recover damages for any infringement committed within six years of the filing of the claim.

The Court rejected the argument that the Patent Act was not a true statute of limitations because a true limitations period runs from the date a cause of action accrues, whereas the §286 limitations period runs backward from the filing of the complaint. The Court did so because, in Petrella, the Copyright Act’s limitations period was also described as running backward from the date the suit was filed.

The Court also rejected that a true statute of limitations begins to run when the plaintiff discovers a cause of action, noting that ordinarily a statute of limitations begins to run on the date that the claim accrues, not when the cause of action is discovered.

Justice Alito also disagreed with the Federal Circuit’s conclusion §282 of the Patent Act, which provides for “defenses in any action involving the validity or infringement of a patent,” codified laches, or that laches is a defense within §282(b)(1) based on “unenforceability.” The Court found that even if §282 incorporates a laches defense, it does not necessarily follow that the defense may be invoked to bar a claim for damages incurred within the period set out in §286. The Court observed that

Indeed, 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. Neither the Federal Circuit, nor any party, has identified a single federal statute that provides such dual protection against untimely claims.

The SCA Court rejected the notion that pre-1952 practice permitted laches to be asserted against damages claims, explaining that by 1952 there was a well-established rule that laches could not be invoked to bar a claim for damages incurred within a limitations period specified by Congress. As a result, only a broad and unambiguous consensus of lower court decisions could support the inference that the enactment of §282(b)(1) in 1952 codified a very different patent-law-specific rule. None of the pre-existing lower court decisions established such a broad, unambiguous consensus in favor of applying laches to damages claims in the patent context.

The Court explained that the most that pre-existing equity cases showed was that laches could defeat a damages claim in an equity court, not that the defense could entirely prevent a patentee from recovering damages.

The Court also explained that, even considering all pre-existing cases at law that squarely held that laches could be applied to a damages claim within the limitations period, that number would be insufficient to overcome the presumption that Congress legislates against the background of general common-law principles. Indeed, Justice Alito explained, that after the merger of law and equity in 1938, there was scant evidence supporting that courts continued to apply laches to damages claims.

Justice Breyer dissented, explaining that laches is a doctrine that bars a plaintiff’s claim when there has been unreasonable, prejudicial delay in commencing suit. Justice Breyer observed that the question was whether a court can apply laches in a patent infringement action for damages brought within the statute of limitations; and that the Court holds that a court cannot, because laches is a “gap-filling doctrine,” generally applicable where there is no statute of limitations. In Justice Breyer’s view, there remains a “gap” to fill. Laches fills this gap. And for more than a century courts with virtual unanimity have applied laches in patent damages cases. Congress, when it wrote the 1952 statute, was aware of and intended to codify that judicial practice.

The “gap” according to Justice Breyer, derives from the language of §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.” Section 282 then explains what “otherwise” means: “unenforceability” shall be a defense “in any action involving the validity or infringement of a patent.”

Two features of this statutory language were important to Justice Breyer.

First, the limitations provision does not set forth a period of time in which to sue, beginning when a claim accrues and then expiring some time later. Rather, it permits a patentee to sue at any time after an infringement takes place. It simply limits damages to those caused within the preceding six years.

Second, the Patent Act’s language strongly suggests that Congress, when writing the statutory provisions at issue, intended to permit courts to continue to use laches to fill this gap.

What is clear is that under the Copyright and Patent Acts, laches is not a defense to damage claims. Query the result in Lanham Act cases, where there is no federal statute of limitations.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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