Latches

In a 7-1 decision authored by Justice Alito, Justice Breyer dissenting, the S.Ct. held that, “[b]y the logic of Petrella [which held that laches cannot be used to bar copyright claims during a three-year statute of limitations period] we infer that this provision represents a judgment by Congress that a patentee may recover for damages for infringement committed within six years of filing the claim.”

In his dissent, Justice Breyer's wrote:

The majority responded to this argument in footnote 4 of the Court's opinion (internal citations removed):

This case has an interesting background:

• On October 31, 2003, patent holder SCA notifies defendant First Quality of infringement of Patent 6,375,646.
• On November 21, 2003, First Quality informs SCA that it thinks SCA's patent is invalid because it is anticipated by prior patent 5,415,649, and therefore it is not infringing
• On July 7, 2004, SCA requests reexamination of the '646 patent in light of the '649 patent. SCA does not notify or communicate with First Quality regarding the reexamination or otherwise, after the initial exchange.
• On March 27, 2007, the PTO confirmed patentability of all 28 original claims and issued several other claims SCA added during reexamination.
• On August 2, 2010 – over three years after reexamination concluded and nearly seven years since the original communication – SCA filed a complaint alleging First Quality of infringing the '646 patent.
• The district court granted First Quality's summary judgment motion on latches and equitable estoppel.
• SCA appealed and in an earlier panel decision, the summary judgment was affirmed the district court's analysis.
• SCA filed a petition for rehearing en banc, posing the following questions:
  1. In light of the Supreme Court's decision in Petrella v. Metro-Goldwyn-Mayer ¹⁾, should A.C. Aukerman Co. v. R.L. Chaides Constr. Co. ²⁾, be overruled so that the defense to latches is not applicable to bar a claim for damages based on patent infringement occurring within the six-year damages limitation period established by 35 U.S.C. § 286?
  2. In light of the fact that there is no statute of limitations for claims of patent infringement and in view of Supreme Court precedent, should the defense of latches be available under some circumstances to bar an entire infringement suit for either damages or injunctive relief?

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On May 2, 2016, the S.Ct. granted a petition in SCA Hygiene Products v. First Quality Baby Products, LLC. to address the question: “whether and to what extent the defense of laches may bar a claim for patent infringement. . . .”

On 11/01/16, arguments were held:

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In an en banc majority opinion authored by Chief Judge Prost, the Federal Circuit, in SCA Hygiene Products v. First Quality Baby Products, LLC, found that § 282 defenses provision of Title 35 includes laches (even though it is not mentioned) and that case law (pre-dating the Supreme Court's decision last year in Patrella) shows that laches is a defense to legal liability and hence a defense to patent infringement for prior damages, in contravention of the plain meaning of Patrella in view of § 286. Confused? Read on . . .

The majority opinion discussed judicial history of laches and equitable estoppel vis-à-vis the precedent set by Aukerman. Stated the court: “Aukerman was motivated by preserving the distinction between laches – which bars only pre-suit damages – and equitable estoppel – which bars the entire suit. Estoppel, which does not necessarily involve delay in bringing the suit, requires 'statements or conduct of the patentee which must communicate in a misleading way that the accused infringer will not be disturbed by the plaintiff patentee in the activities in which the former is currently engaged” (internal quotes and citations removed).

The court explained that although Auckerman controlled the operation of laches in patent cases for over two decades, the recent Petrella decision in the Supreme Court upset the status quo by holding that laches was not a defense to legal relief in copyright law. Petrella calls portions of Aukerman's reasoning into question, necessitating this en banc reconsideration. Specifically, In Petrella, the Supreme Court reasoned that the copyright statute of limitations itself takes account of delay, crowding out the judiciary's power to decide whether a suit is timely. Therefore, the Supreme Court found, “laches is a defense developed by courts of equity; its principal application was, and remains, to claims of an equitable cast for which the Legislature has provided no fixed time limitations.”

The en banc opinion held that, under Petrella, Section 286 acts as a prescription by Congress of a time period for recovery of damages. Characterizing Section 286 as a statute of limitations or a limitation on damages is not dispositive or a relevant consideration. Because patent infringement is a continuous tort, there is no relevant functional difference between a damages limitation and a statute of limitations. However, the majority opinion held that, based on a “sufficiently reliable source on the meaning of § 282,” the defenses provision, that that section uses inclusive language, and hence includes within it codification of laches as a statutory defense to patent infringement. This is consistent with prior interpretations of § 282.

The question remained:

Based on tenuous at best logic, the court further held, “[i]n sum, the case law strongly supports the availability of laches to bar legal relief. In applying laches to ongoing relief, the court held awarding ongoing relief requires that the court act within its equitable discretion, which, according to eBay must be exercised consistent with traditional principles of equity. This means following the four-fact test laid out in eBay.

In a dissent-in-part authored by Judge Hughs, joined by Moore, Wallace, Taranto, and Chen, Judge Hughes writes: