When it Comes to Asserting the Defense of Laches, Patent Infringers are Out of Time
In SCA Hygiene Products v. First Quality Baby Products, the Supreme Court recently ended over a 100 years of application of the equitable doctrine of laches in patent infringement cases. Thus, an accused infringer can no longer invoke laches as a defense if the alleged infringement occurred within six years of being sued. In reaching its decision, the main issue in front of the Court was whether its 2014 decision on laches in the copyright infringement context, Petrella v. Metro-Goldwyn-Mayer, Inc., was also applicable to patent infringement. The Court held that it was.
SCA’s Uphill Battle Paid Off
SCA filed a patent infringement action in district court against First Quality in 2010, about seven years after it put First Quality on notice of infringement. First Quality brought a (then) successful summary judgment motion asserting both laches and equitable estoppel, and SCA appealed to the Federal Circuit. But before the Federal Circuit could issue an opinion, the Supreme Court released its decision in Petrella. The panel still held based on its own precedent that laches applied. The case was then reheard by the Federal Circuit en banc, which came to the same conclusion based on the same precedent. SCA’s luck finally turned when it reached the Supreme Court.
The Supreme Court relied heavily on its reasoning in Petrella in reversing the Federal Circuit. In Petrella, the Court held that since the Copyright Act sets a three-year statute of limitations, a damages claim brought within that time period cannot be defeated by an assertion of laches. The Court emphasized the “well-established general rule… that laches cannot be invoked to bar a claim for damages incurred within a limitation period specific by Congress.” The Court found Petrella directly applicable to this case, because the Patent Act likewise sets a statute of limitations (albeit a six-year period) during which infringement claims must be brought. Thus, the Court held that laches cannot be used to bar patent infringement claims filed within that period. As a result, SCA’s infringement case against First Quality will now resume in district court.
New Strategic Advantage for Patent Owners
Because patents provide up to 20 years of protection, patent owners can now bide their time before filing suit. They no longer have to bring suit within six years of putting a potential infringer on notice, regardless of the commercial success of the infringing product in that time period. Instead, patent owners can evaluate the product’s value and success in the market and wait for an economically opportune time to strike in order to maximize damages. Accordingly, many companies, particularly those vulnerable to suit by non-practicing entities, are concerned with what this could mean for them. With the laches defense off the table, as First Quality warned the Supreme Court, we may end up with “unscrupulous patentees inducing potential targets of infringement suits to invest in the production of arguably infringing products.” How this new dynamic plays out remains to be seen.
Read the decision here.