IP Law Daily Laches cannot preclude damages claim within Patent Act’s 6-year statute of limitations, High Court rules
Tuesday, March 21, 2017

Laches cannot preclude damages claim within Patent Act’s 6-year statute of limitations, High Court rules

By Peter Reap, J.D., LL.M.

Laches may not be invoked as a defense against a patent infringement claim for damages brought within the Patent Act’s six-year statute of limitations, the U.S. Supreme Court has ruled, in a 7-1 opinion authored by Justice Samuel Alito. In an infringement suit brought by adult incontinence products manufacturers SCA Hygiene Products Aktiebolag and SCA Personal Care, Inc. (collectively, "SCA"), against their competitor, First Quality Baby Products ("First"), the High Court opined that the reasoning of Petrella v. Metro-Goldwyn-Mayer, Inc., which held that laches cannot preclude a claim for damages incurred within the Copyright Act’s three-year limitations period, applied to the Patent Act. Therefore, the decision of the U.S. Court of Appeals for the Federal Circuit, affirming a district court’s determination that SCA’s patent infringement claim was barred by laches, was vacated in part and the case remanded for further proceedings (SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, March 21, 2017, Alito, S.).

SCA manufactures and sells adult incontinence products. In October 2003, SCA sent a letter to First, alleging that First was making and selling products that infringed SCA’s rights under U.S. Patent No.6,375,646 B1 (the "’646 patent"). First responded that one of its patents—U.S. Patent No. 5,415,649 (the "Watanabe patent")—antedated the ’646 patent and revealed "the same diaper construction." As a result, First maintained, the ’646 patent was invalid.

In July 2004, SCA asked the USPTO to initiate a reexamination proceeding to determine whether the ’646 patent was valid in light of the Watanabe patent. Three years later, in March 2007, the USPTO issued a certificate confirming the validity of the ’646 patent.

In August 2010, SCA filed this patent infringement action against First. First moved for summary judgment based on laches and equitable estoppel, and the district court granted that motion on both grounds. On appeal, the Federal Circuit affirmed, finding that, based on a Federal Circuit precedent, A. C. Aukerman Co. v. R. L. Chaides Constr. Co., 960 F. 2d 1020 (1992) (en banc), SCA’s claims were barred by laches. In a 6-to-5 en banc decision, the Federal Circuit reaffirmed Aukerman’s holding that laches can be asserted to defeat a claim for damages incurred within the 6-year period set out in the Patent Act.

Petrella arose out of a copyright dispute relating to the film "Raging Bull," the Supreme Court noted. The Copyright Act’s statute of limitations requires a copyright holder claiming infringement to file suit "within three years after the claim accrued." 17 U.S.C. §507(b). In Petrella, the plaintiff sought relief for alleged acts of infringement that accrued within that three-year period, but the lower courts nevertheless held that laches barred her claims. The High Court reversed, holding that laches cannot defeat a damages claim brought within the period prescribed by the Copyright Act’s statute of limitations.

Petrella’s reasoning easily fit the provision of the Patent Act at issue here, according to the Supreme Court. As noted, the statute in Petrella precludes a civil action for copyright infringement "unless it is commenced within three years after the claim accrued." 17 U S.C. §507(b). This language reflected a congressional judgment that a claim filed within three years of accrual cannot be dismissed on timeliness grounds, the Court opined.

The same reasoning applied in this case. Section 286 of the Patent Act provides: "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." By the logic of Petrella, this provision 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 Supreme Court explained.

First contended that this case differed from Petrella because §286 of the Patent Act is not a true statute of limitations. A true statute of limitations, it argued, "runs forward from the date a cause of action accrues," but §286 "runs backward from the time of suit." Petrella could not reasonably be distinguished on this ground, the Court reasoned.

According to First, §286 of the Patent Act is different because it "turns only on when the infringer is sued, regardless of when the patentee learned of the infringement." This argument misunderstood the way in which statutes of limitations generally work, the Court said. First asserted that the accrual of a claim, the event that triggers the running of a statute of limitations, occurs when "a plaintiff knows of a cause of action," but that was not ordinarily true, the Court reasoned. As stated in Petrella, "[a] claim ordinarily accrues ‘when [a] plaintiff has a complete and present cause of action.’" While some claims are subject to a "discovery rule" under which the limitations period begins when the plaintiff discovers or should have discovered the injury giving rise to the claim, that is not a universal feature of statutes of limitations. And in Petrella, the Court specifically noted that "we have not passed on the question" whether the Copyright Act’s statute of limitations is governed by such a rule. For these reasons, Petrella could not be dismissed as applicable only to what First regarded as true statutes of limitations, the Court concluded.

In the Federal Circuit’s view, §282 of the Patent Act creates an exception to §286 by codifying laches as a defense to all patent infringement claims, including claims for damages suffered within §286’s 6-year period. Section 282(b), which does not specifically mention laches, provides in relevant part as follows: "The following shall be defenses in any action involving the validity or infringement of a patent and shall be pleaded: (1) Noninfringement, absence of liability for infringement or unenforceability."

The en banc majority of the appellate court never identified which word or phrase in §282 codifies laches as a defense, but First argued that laches falls within §282(b)(1) because laches is a defense based on "unenforceability." SCA disputed this interpretation of §282(b)(1), arguing that laches does not make a patent categorically unenforceable. The Supreme Court did not need to decide this question, it noted. Even if one were to assume, for the sake of argument, that §282(b)(1) incorporates a laches defense of some dimension, it did not necessarily follow that this defense may be invoked to bar a claim for damages incurred within the period set out in §286. Neither the Federal Circuit, nor First, nor any of First’s amici identified a single federal statute that provides such dual protection against untimely claims, the Court observed.

In holding that Congress codified a damages-limiting laches defense, the Federal Circuit relied on patent cases decided by the lower courts prior to the enactment of the Patent Act. These cases were insufficient to support the suggested interpretation of the Patent Act, the Court said. The most prominent feature of the relevant legal landscape at the time of enactment of the Patent Act was the well-established general rule that laches cannot be invoked to bar a claim for damages incurred within a limitations period specified by Congress. If Congress examined the relevant legal landscape when it adopted §282, it could not have missed Supreme Court cases endorsing this general rule.

In light of the general rule regarding the relationship between laches and statutes of limitations, nothing less than a broad and unambiguous consensus of lower court decisions could support the inference that §282(b)(1) codifies a very different patent-law-specific rule, according to the High Court. No such consensus was to be found.

First pointed to post-1952 court of appeals decisions holding that laches can be invoked as a defense against a damages claim. Noting that Congress amended §282 without altering the "unenforceability" language that is said to incorporate a laches defense, First argued that Congress implicitly ratified these decisions. The Supreme Court rejected this argument—nothing that Congress has done since 1952 has altered the meaning of §282, it said.

Finally, the various policy arguments advanced by First and its supporting amici were rejected. The Court could not overrule Congress’s judgment based on its own policy views.

Dissent. In a dissenting opinion, Justice Stephen Breyer argued that "the majority has ignored the fact that, despite the 1952 Act’s statute of limitations, there remains a ‘gap’ to fill."

According to Justice Breyer, two features of this statutory language were important. First, the limitations provision, unlike those in many other statutes, does not set forth a period of time in which to sue, beginning when a claim accrues and then expiring some time later. It simply limits damages to those caused within the preceding six years. That means that a patentee, after learning of a possible infringement in year one, might wait until year 10 or year 20 to bring a lawsuit. And if he wins, he can collect damages for the preceding six years of infringement. This fact creates a gap, because a patentee might wait for a decade or more while the infringer (who may not know he is an infringer) invests heavily in the development of the infringing product, while evidence that the infringer might use to show that the patent is invalid disappears with time.

Second, the Patent Act’s language strongly suggests that Congress intended to permit courts to continue to use laches to fill this gap. The statute says that there are "except[ions]" to its six-year damages limitation rule. It lists "unenforceability" as one of those exceptions. At common law, the word "unenforceability" had a meaning that encompassed laches, in Justice Breyer’s view.

The case is No. 15-297.

Attorneys: G. Eric Brunstad Jr. (Dechert LLP) for SCA Hygiene Products Aktiebolag. Kenneth P. George (Amster Rothstein & Ebenstein LLP) and Seth P. Waxman (Wilmer Cutler Pickering Hale and Dorr LLP) for First Quality Baby Products, LLC.

Companies: SCA Hygiene Products Aktiebolag; First Quality Baby Products, LLC

MainStory: TopStory Patent

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