Client Alert

The Laches Defense Loses Its Grip in Patent Law

21 Mar 2017

Until today, laches had been available as a defense in patent litigation without much debate.  The defense often arose in the context of demand letters: a patentee would threaten an accused infringer, but would then wait several years before finally pulling the trigger on a lawsuit.  An accused infringer who could prove some prejudice as a result of the unreasonable delay could invoke the laches defense to bar damages up to the time of suit.  Moreover, the delay was presumed to be unreasonable if the patentee had waited more than six years after having knowledge of the alleged infringement.  The Supreme Court’s ruling today in SCA Hygiene v. First Quality, however, has eliminated laches in patent cases.

Background.  In 2014, the Supreme Court held in Petrella v. Metro-Goldwyn Mayer that laches could not be used as a defense to bar a claim for copyright infringement.  A key issue in Petrella was the fact that the Copyright Act includes a three-year statute of limitations for bringing a claim for damages, which the Supreme Court found trumps any equitable defense to an action brought during the statutory time period: “in the face of a statute of limitations enacted by Congress, laches cannot be invoked to bar legal relief.

One year later, in SCA Hygiene v. First Quality, the applicability of Petrella in the patent litigation context was tested in the Federal Circuit.  The initial panel rejected the argument that Petrella abolished the defense in patent cases, and the full Federal Circuit subsequently upheld the panel decision following rehearing en banc, and reconfirmed that laches is a cognizable defense in patent litigation.  In particular, the court was persuaded by the argument that Congress had codified an exception to § 286 by providing in § 282 that “unenforceability” shall be a defense in patent litigation, and that laches is a defense based on unenforceability.

Today’s Ruling.  In a 7-to-1 decision (with Justice Breyer dissenting), the Supreme Court vacated the Federal Circuit’s judgment.  The Supreme Court based its decision on the similarity between the six-year statute in patent law and the three-year statute of limitations in copyright law as applied in Petrella.  Although the statutes are worded differently, the Court found that “Petrella’s reasoning easily fits the provision at issue here.”  The Court inferred that the six-year patent statute “represents a judgment by Congress that a patentee may recover damages for any infringement committed within six years of the filing of the claim.”  The Justices were unpersuaded by First Quality’s argument that the two statues are different because § 286 is not a “true statute of limitations” because it “runs backward from the time of suit” as opposed to running forward from the date a cause of action accrues.  Referring to this characterization of the statutes as “debatable taxonomy,” the Court held that “Petrella cannot reasonably be distinguished on this ground.”

The Court also addressed the Federal Circuit’s reasoning that laches was included within the § 282 defense of unenforceability.  Faulting the Federal Circuit en banc majority for having “never identified which word or phrase in § 282 codifies laches as a defense,” the Court stated 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 dismissed the various policy arguments made by First Quality and its supporting amici, “because we cannot overrule Congress’s judgment based on our own policy views.”  The Court ultimately held that laches is not available as a defense against damages where the infringement occurred within the period prescribed by § 286.

Although laches will now be gone, the Court noted that the doctrine of equitable estoppel would still “provide[] protection against …unscrupulous patentees inducing potential targets of infringement suits to invest in the production of arguably infringing products.”

Takeaway.  The Supreme Court’s SCA Hygiene decision could change the way patent holders and potential infringers proceed in the future.  It is now clear that patentees may decide when to bring suit without risk of being accused of an unreasonable delay.  The patent holder may, for example, wait for several years to see if an infringing product is really succeeding in the marketplace before bringing suit.  A patentee no longer needs to be diligent in pursuing litigation, and an accused infringer may no longer point to unreasonable delay or prejudice as a defense.  For this reason, potential infringers cannot assume that they are “out of the woods” after a patent holder who has issued a demand letter goes away for a lengthy period.  The potential infringer may be sued at any time within six years of infringement—even if the patent holder has known about the infringing product for ten years or more.  For this reason, today’s decision will provide patent plaintiffs with additional flexibility and will undoubtedly trouble patent defendants in the future.



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