Laches As a Defense to Patent Damages Survives – For Now

In last week’s 6-5 decision in SCA Hygiene Prod. v. First Quality Baby Prod., LLC, No. 2013-1564, 2015 WL 5474261 (Fed. Cir. Sept. 18, 2015), the US Court of Appeals for the Federal Circuit, sitting en banc, reaffirmed that laches remains a viable defense in patent infringement lawsuits. The decision was reached despite the relatively recent U.S. Supreme Court decision in Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S.Ct. 1962 (2014), where the high court struck laches as an available copyright infringement defense. However, the Federal Circuit’s sharp divide on this issue suggests that further review by the U.S. Supreme Court may be on its way.

Laches Defense Prior To SCA Hygiene

In the seminal case, A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc), the US Court of Appeals set out five rules regarding the laches defense:

(1) Laches is cognizable under 35 U.S.C. § 282 (1988) as an equitable defense to a claim for patent infringement.

(2) Where the defense of laches is established, the patentee’s claim for damages prior to suit may be barred.

(3) Two elements underlie the defense of laches: (a) the patentee’s delay in bringing suit was unreasonable and inexcusable, and (b) the alleged infringer suffered material prejudice attributable to the delay. The district court should consider these factors and all of the evidence and other circumstances to determine whether equity should intercede to bar pre-filing damages.

(4) A presumption of laches arises where a patentee delays bringing suit for more than six years after the date the patentee knew or should have known of the alleged infringer’s activity.

(5) A presumption has the effect of shifting the burden of going forward with evidence, not the burden of persuasion.

Accordingly, the laches defense has been expressly available to defendants in patent infringement lawsuits for over two decades now.

Yet, last year in Petrella, the U.S. Supreme Court held that the doctrine of laches cannot be used to bar monetary damages for copyright infringement when the claim is brought within the Copyright Act’s three-year statute of limitations. According to the Supreme Court, “in face of a statute of limitations enacted by Congress, laches cannot be invoked to bar legal relief.” Petrella, 134 S.Ct. at 1974. Since the Patent Act has its own six-year time limit for seeking damages, the Petrella decision cast considerable doubt on the viability of laches in patent law.

The SCA Hygiene En Banc Decision

Despite acknowledging the potential impact of Petrella, the majority of the Federal Circuit en banc panel held that Petrella does not apply to patent cases because unlike the Copyright Act, the Patent Act was expressly written to permit the equitable defense of laches. Thus, according to the majority, the Federal Circuit has “no judicial authority to question the law’s propriety” as to the availability of laches as a defense in patent cases.

The dissent was quick to point out the fact that the Patent Act says nothing about laches. Instead, according to the dissent, the majority’s only evidence that Congress intended to incorporate a defense of laches into the Patent Act was a lone statement in P.J. Federico’s Commentary on the New Patent Act, and “an inference that Congress departed from a common-law principle could not properly rest entirely on a statement made two years after the enactment of the Patent Act by one person who, though central to its drafting, was not a member of Congress voting on the measure.” The dissent further accused the majority of creating a special rule for patent case through the SCA Hygiene decision.

Based on the Federal Circuit’s sharp divide in SCA Hygiene, as well as the dissents accusation that the majority is creating a special rule for patent cases, which the U.S. Supreme Court has previously cautioned against, review by the high court seems likely.