Sca Hygiene Prods. V. First Quality Baby Prods.,

Yesterday the Supreme Court held in a 7-1 decision that the equitable defence force of laches is no defense to the legal remedy of patent damages where the infringement occurred during the statutory menstruation of 35 United states of americaC. § 286. SCA Hygiene Prods. AB 5. First Quality Babe Prods., LLC, 580 U.S. ___, slip op. at *xvi (Mar. 21, 2017) (No. 15-927).

SCA and First Quality are competitors in the field of adult incontinence products.  Both companies have been innovators and agree patents for their products.  In 2003, SCA sent a letter of the alphabet to First Quality alleging patent infringement of U.S. Patent No. half dozen,375,646 B1 (the "'646 Patent").  First Quality responded to the allegations by pointing to its own patent equally invalidating prior art of the '646 Patent.  The following twelvemonth, SCA requested an ex parte reexamination of the '646 Patent in the USPTO based on Start Quality'south patent.  3 years later on, in 2007, the USPTO affirmed the validity of the '646 Patent over Outset Quality's patent.  In 2010, vii years after the starting time letter and without any further intervening advice, SCA filed adjust against First Quality for patent infringement of the '646 Patent.

Given the long delay by SCA, First Quality sought the benefit of the equitable defenses of laches and equitable estoppel against SCA'due south damages claim.  Section 286 provides for a six year statute of limitations in patent cases concerning the remedy of amercement.  § 286 ("Except every bit otherwise provided by police, no recovery shall be had for any infringement committed more than than six years prior to the filing of the complaint or counterclaim for infringement in the action.").  This issue came to a head in the lower courtroom at summary judgment, and the commune court ruled in favor of Starting time Quality.  The commune court likewise granted summary judgment to First Quality for the defense of equitable estoppel (more on this defence in the Practice Annotation department, infra).

SCA appealed to the Federal Circuit, which affirmed the lower courtroom'due south judgment on laches, but reversed on equitable estoppel finding that at that place were material bug of fact outstanding for this defense.  The panel's decision on laches was based on its 20-plus twelvemonth old en banc precedential opinion in A.C. Aukerman Co. v. R.L. Chaides Constr. Co.  960 F.2d 1020 (Fed. Cir. 1992) (en banc) (ruling that laches and equitable estoppel are not limited by "simple or difficult and fast rules" in claims of patent infringement).  However, earlier the appellate console issued its opinion following Aukerman, the Supreme Courtroom issued its opinion in Petrella v. Metro-Goldwyn-Mayer, Inc.; a copyright example that presented virtually the same issue of the propriety of applying the equitable defense force of laches to the legal remedy of amercement where Congress had included a statute of limitations in the underlying statutory scheme.  In Petrella, the Supreme Courtroom held that laches could not be practical to a copyright damages merits within the Copyright Deed's three year statute of limitations.  572 U.Southward. ___, slip op. at *13 (May xix, 2014).  In calorie-free of the contrary Petrella opinion, the Federal Excursion vacated the panel decision and reheard the appeal before the entire court.  In the ensuing 6-5 en banc decision, the Federal Excursion boldly stuck to its guns and reaffirmed Aukerman and the availability of laches within the vi year period of § 286.  807 F.3d 1311 (2015).  SCA appealed to the Supreme Court.

The Supreme Court began with a full general overview of laches defense.  Laches protects a defendant who has been harmed by an "unreasonable, prejudicial filibuster in commencing suit" against information technology by a complaining party.  A claim of amercement, the Court said, is the "quintessential legal remedy."  Laches, on the other hand, was "a defense developed by courts of equity" without statutory ground.  The parties argued over whether laches had in fact been used as a defence force against damages prior to and afterward the Patent Deed of 1952 was promulgated by Congress, which included cases at both law and equity.  Key to the Supreme Court's conclusion in the instant SCA Hygiene case was the law and disinterestedness divide, long since merged in federal courts (in 1938, prior to the enactment in 1952 of the Patent Human activity and the first version of the § 286 statute of limitations).  The aforementioned event was prominent in Petrella.

Ultimately, the Supreme Court ruled that the half-dozen year statute of limitations period of § 286 was Congress's spoken give-and-take on a defence against untimely patent infringement claims.  Laches, which likewise provides a defense to untimely claims, was created by disinterestedness courts where no statute of limitations existed every bit a "gap filling" defence.  Because Congress had explicitly gear up forth a six twelvemonth period in § 286, there was no "gap" for a laches defense force to fill, at least every bit far as the legal remedy of damages was concerned.  By extension, the Court ruled that the Federal Excursion'due south rule in Aukerman and its progeny effectively (and improperly) provided judges with a "legislation-overriding" tool that circumvented Congress's judgment of a "hard and fast dominion" on the timeliness of a claim for patent amercement.

The Supreme Court likewise dissected the Federal Excursion opinion beneath.  The Federal Excursion bulk rationalized the Aukerman dominion on the phrase "[due east]xcept as otherwise provided by police" in § 286, finding that this codification laches equally a defense in view of § 282.  Section 282 provides that certain defenses shall be pleaded, including "unenforceability."  In non and then subtle terms, the Supreme Court took the Federal Circuit to job for its rationale in the lower SCA Hygiene conclusion ("The en banc majority beneath never identified which word or phrase in §282 codifies laches as a defence.").  Even if § 282 does codify laches to some degree, the Court was incredulous that such treatment would have whatsoever effect on a legal remedy given the swell weight of say-so on laches not being applicative to amercement claims ("Indeed, information technology would exist exceedingly unusual, if not unprecedented, if Congress chose to include in the Patent Human activity both a statute of limitations for damages and a laches provision applicative to a amercement claim.").  The Supreme Court also picked apart the numerous cases cited by the Federal Circuit it said demonstrated a well-settled consensus in support of the rule of Aukerman.  The Court concluded that only a mere handful of cases that directly applied laches to a claim of amercement (in a federal equity court pre-merger) could not "establish a settled, national consensus" that could possibly overcome a strong presumption that Congress would not legislate silently against full general mutual police principles.

Justice Breyer, who also wrote the dissent in Petrella, penned the lonely dissent of the Court.  His dissent focused on the policy and judicial history of laches that was dispatched rather summarily by the Court's bulk.  Equally to policy, Justice Breyer found that a "gap" does in fact exist in which laches has and should continue to protect accused infringers.  This gap "permits a patentee to sue at any fourth dimension after an infringement takes place" past substantially allowing the patentee to sit on a claim while the infringer expends valuable resources to develop and market a product.  Thus, the infringer could be "locked-in" to a patent infringing production or process that cannot be easily or readily changed, all while the patentee waited for the damages to pile loftier.  Justice Breyer also would find the long history of laches as a defense force in police force and equity confronting patent damages to be compelling, citing to commentaries by the principal drafter of the Patent Human action of 1952 equally stating that Congressional intent was to codify laches and other equitable defenses in § 282.  In conclusion, Justice Breyer states that both SCA Hygiene and Petrella were wrongly decided, despite the confessed consistency in the ii opinions.

Practice Note:

The SCA Hygiene decision is still another high profile rejection of Federal Excursion-promulgated police force in the past decade.  The Federal Excursion'south long standing precedent of Aukerman is now unquestionably dead, at least as to laches.  The absence of the "gap filling" defense of laches to claims of damages presents a real threat to the status quo, merely the Supreme Court made no blanch in striking down Aukerman.

Justice Breyer'due south fear that a patentee tin can lie in wait for a potential accused to accrue substantial damages should non be ignored past practitioners.  The SCA Hygiene decision could very well awake a 1000 sleeping giants.  A visitor may have idea (even forgotten) that a merits has long been stale, but such claim notwithstanding may still rise to exist a serious threat to a production line, so long as some alleged act of infringement has occurred in the past six years.

It is important to note that the Supreme Court did not address or disturb the propriety of applying the equitable defense force of equitable estoppel confronting a damages merits (as well a rule in Aukerman) or the use of laches as a defense force against injunctive relief.  Equally to the latter, the plain wording of the holding would support a continued practice of applying laches to injunctive relief claims.  Where an defendant infringer is "locked-in" for a detail infringing product or process, a threat of injunction (and the availability of a strong defence force to it) tin significantly bear upon the settlement leverage of the parties.  Practitioners should proceed to investigate and evaluate laches defenses, equally this volition be useful in counteracting any threats of preliminary or permanent injunction during/following litigation.

As to the erstwhile, equitable estoppel provides a far stronger defense as "all relief on a claim may be barred."  Generally, a accused must show (ane) a misleading communication to the defendant by the patentee (words, conduct, or silence may suffice), (2) reliance by the defendant, and (3) the defendant would exist harmed materially if the patentee is later on permitted to assert a claim inconsistent with the before relied upon conduct.  Furthermore, equitable estoppel does non require an "unreasonable" amount of time to pass for it to attach to a patentee's merits, just such delay may be evidence of the patentee'southward misleading "conduct."  However, a defendant must necessarily be aware of the allegations and the patentee'south conduct for equitable estoppel to attach.  Whereas laches has no requirement for awareness of a potential claim, equitable estoppel will be little or no aid in a case where a patentee "lies in wait" without providing any notice or other communication to an accused infringer.  For whatever damages theories that will require indirect infringement under either §§ 271(b) or (c), both of which include an element of noesis of the patent at conform, lying in look will non always be an effective strategy for a patentee.  Nevertheless, some circumstances may be where this tin can exist a real threat.  For example, where mere direct infringement nether § 271(a) is required, such as for an apparatus, device, composition, or the like, patentees may be able to spring from nowhere to assert a claim of patent amercement for up to six years of infringing acts with no recourse to the defense of laches or equitable estoppel.

by: Amy Thou. Pepke and Clifford Ragsdale Lamar 2

mcintirelacir1946.blogspot.com

Source: https://www.butlersnow.com/2017/03/laches-no-defense-patent-damages/

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