The Supreme Court issued six patent law decisions in its latest term, continuing the Court’s trend of being very interested in intellectual property law. One of those cases dealt with how long a patent owner can “hold it,” so to speak. In SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC.580 U.S. _ (2017), the issue on appeal was whether laches applies to infringement of a patent directed to adult incontinence products
Whether the equitable defense of laches applies to patent Infringement – and if it does, to what extent and under what circumstances – is an issue that surprisingly had not been resolved. This is surprising to some degree because patents have been granted since Jefferson was president and the U.S. Patent Office was established in 1836. Why don’t general legal principles relating to laches apply to patent law?
The reason is that our patent statutes have a rather quirky “so-called” statute of limitations. 35 USC § 286. It is different from a typical statute of limitations that sets forth a period of time in which to sue after some event occurs. Our patent law, on the other hand, looks backwards from the date an infringement claim is filed to establish a time limitation for infringement damages recovery. The statute states (emphasis added): “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.” In this context, where the patent owner can obtain damages for only six years of infringement, does laches apply?
In brief, the patent owner initially wrote to the defendant in 2003, claiming patent infringement. In 2007, the patent was validated in a reexamination proceeding before the U.S. Patent Office and a lawsuit was filed in 2010. The district court dismissed the case on summary judgment, holding that the patent owner delayed unreasonably in filing suit and, therefore, laches applied. The patent owner appealed to the Federal Circuit Court of Appeals (the CAFC – the appellate court with exclusive jurisdiction to hear patent suit appeals). In a 6-5 en banc decision, the CAFC affirmed, holding that the patent law statute of limitations and laches could co-exist.
As is quite typical, the Supreme Court did not agree with the decision of the CAFC. In a 7-1 decision, Justice Alito writing for the majority, rejected the CAFC’s reasoning that the patent act codified the laches defense by virtue of Congress’ use of the qualifying phrase of 35 USC 286: “Except as otherwise provided by law.”
The Court defined laches and its purpose by stating: “Laches is a defense developed by courts of equity to protect defendants against unreasonable, prejudicial delay in commencing suit.” However, Justice Alito then explained that where there is a statute which defines a prescribed period for damages recovery, “[l]aches cannot be interposed as a defense ….”
The Court also observed that it would be exceedingly unusual for Congress to include both a statute of limitations for damages and laches provision applicable to a damages claim, and that in this situation the two cannot coexist. According to the Court, the statutory qualifier “[e]xcept as otherwise provided by law” is there to provide protection against “unscrupulous patentees” and that the doctrine of equitable estoppel still may exist to deal with those situations.
Every attorney is concerned about the applicable statute of limitations when a client is aggrieved, and must also then consider the always lurking laches defense. When it comes to patent infringement, however, the concern is somewhat lessened because the so-called patent statute of limitations is not a statute that precludes filing suit; rather, it is a limitation on damages. In view of this, here are a few points to remember:
- Patent infringement damages are limited to six years prior to the date suit is filed. This creates an incentive to sue early, since additional damages for infringement can accrue after suit is filed.
- Failing to “mark” a patented product may adversely affect the amount of damages that can be recovered (see our December 2012 Attorney at Law Magazine IP column on this topic – email us for a copy).
- Although laches is not a defense for the six-year period of damages, inequitable conduct by the patent owner is still a possible defense. Accordingly, laches may still be available as a defense in some form, in view of unreasonable conduct by the patent owner.
A dirty diaper can wait, but if the patent owner makes it smell worse by inequitable actions, it may be a different story! Z. Peter Sawicki and James L. Young