SCA Hygiene Case Provides a Clear Win for Patent Owners

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In SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, the Supreme Court last week overruled the Federal Circuit’s en banc decision that laches (unreasonable delay in bringing a claim) can bar recovery of monetary damages. Rather, the Court held that laches is not a defense against a claim for monetary damages for infringement that occurred within the six-year limit of 35 U.S.C. § 286. Section 286 limits recovery of damages to infringement committed within six years of the filing of the complaint for infringement.

In Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014), the Court confronted the similar question of whether laches could bar recovery of damages in a copyright infringement action brought within the statute of limitations. The Court concluded that it could not, holding that laches “cannot be invoked to preclude adjudication of a claim for damages brought within the [statute of limitations].” 134 S. Ct. at 1967.

The Court reasoned that Congress spoke to the timeliness of claims through the statute of limitations and that courts were not free to override that determination through the equitable doctrine of laches. In SCA Hygiene, the Court concluded that the same reasoning applied in the patent infringement context.

Federal Circuit considers Petrella case

Sitting en banc, the Federal Circuit considered whether the Supreme Court’s decision in Petrella overruled its holding in A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992), that laches is a viable defense against monetary damages in a patent infringement action. The Federal Circuit concluded that Petrella did not overrule and indeed confirmed its precedent that laches is a defense against monetary damages in an infringement action.

Based on the legislative history and commentary to the 1952 Patent Act, the Federal Circuit determined that Congress codified laches as a defense under 35 U.S.C. § 282(b). The court then questioned whether laches, as codified, was only a defense against equitable relief or also could be applied to bar recovery of monetary damages. For that question, the court turned to the common law leading up to the enactment of the 1952 Act, and it determined that courts consistently applied laches to preclude recovery of legal damages in patent infringement cases.

Finally, the court concluded that Petrella in fact supported that outcome. The court characterized Petrella as a decision premised on separation of powers. Because Congress has spoken to the issue of laches in § 282, the court was powerless to overturn Congress’s determination, even if some tension existed between the court’s reading of § 282 and the damages limitation in § 286.[1]

Supreme Court disagrees with Federal Circuit

The Supreme Court rejected the Federal Circuit’s reasoning. The Court began by comparing the Copyright Act’s statute of limitations with Section 286’s damages limitation. It concluded that although the provisions were worded differently, both expressed a Congressional judgment on the timeliness of claims that courts could not override.

The Court then turned to the Federal Circuit’s reading of Section 282 of the Patent Act. The Court explained that even if Section 282 incorporated a laches defense for some purpose, it did not “necessarily follow” that laches could bar timely legal claims. The Court noted that “it would be exceedingly unusual, if not unprecedented, if Congress chose to include in the Patent Act both a statute of limitations for damages and a laches provision applicable to a damages claim.”

The Court then turned to the common law, finding that at the time of the 1952 Patent Act, the “most prominent feature of the relevant legal landscape” that Congress was legislating against “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.” The Court then rejected the argument that patent cases were an established exception to that general rule.

Only “a broad and unambiguous consensus of lower court decisions” could support a patent-specific rule, and having surveyed the relevant cases, the Court concluded that there was no consensus supporting such a rule. As a result, the reasoning of Petrella and the prevailing general rule that laches cannot be invoked as a defense against monetary damages incurred within a statutory time limit controlled.

Implications of Court’s decision

One key aspect of the Supreme Court’s holding is that it did not consider how laches applies to equitable relief in patent cases. The Federal Circuit’s decision also held that laches should be considered when a district court exercises its discretion to award injunctive relief, which was a change in the prior law. The Supreme Court expressly did not address that portion of the Federal Circuit’s decision.

Based upon the Supreme Court’s decision, § 286 provides a six-year look-back window for filing an infringement complaint that cannot be overcome by a defense of laches. As long as acts of infringement have occurred within the six-year window preceding the filing of a complaint, the time when the patentee first learned of the infringement is irrelevant.

While the doctrine of equitable estoppel may still provide some protection for accused infringers, this ruling is a clear win for patent owners, allowing them to delay bringing a case for infringement until an accused product proves to be profitable. Meanwhile, accused infringers cannot rely on the patent owner’s delay alone to avoid any liability.

[1] The Federal Circuit also held that laches should be considered when a district court exercises its discretion to award injunctive relief. The Supreme Court expressly did not address that portion of the Federal Circuit’s decision.