Federal Circuit Retains Laches Defense to Claims for Patent Damages

Last year in a copyright case, Petrella v. Metro-Goldwyn-Mayer, the U.S. Supreme Court held that "the equitable defense of laches (unreasonable, prejudicial delay in commencing suit)" does not bar a claim for damages occurring within three years of filing suit, though "[a]s to equitable relief, in extraordinary circumstances, laches may bar at the very threshold the particular relief requested by the plaintiff. And a plaintiff’s delay can always be brought to bear at the remedial stage, in determining appropriate injunctive relief, and in assessing the “profits of the infringer . . . attributable to the infringement.” (For my blog post on the case, see here).  The Court left open the possibility, however, that (as the Federal Circuit had earlier held in the Aukerman case) laches might bar a patent infringement claim brought within patent law's six-year statute of limitations.  Late last year, the Federal Circuit decided to hear en banc SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, to determine whether laches remains a viable defense to a patent claim after Petrella.  This past Friday, in an opinion by Chief Judge Prost, a majority of the court held that the answer is yes (link to opinion here):

We conclude that Congress codified a laches defense in 35 U.S.C. § 282(b)(1) that may bar legal remedies. Accordingly, we have no judicial authority to question the law’s propriety. Whether Congress considered the quandary in Petrella is irrelevant—in the 1952 Patent Act, Congress settled that laches and a time limitation on the recovery of damages can coexist in patent law. We must respect that statutory law.

Nevertheless, we must adjust the laches defense in one respect to harmonize it with Petrella and other Supreme Court precedent. We emphasize that equitable principles apply whenever an accused infringer seeks to use laches to bar ongoing relief. Specifically, as to injunctions, considerations of laches fit naturally within the eBay framework. In contrast, Menendez v. Holt, 128 U.S. 514 (1888), and Petrella counsel that laches will only foreclose an ongoing royalty in extraordinary circumstances.

So unreasonable, prejudicial delay in filing suit can preclude the recovery of damages for past infringement, even if the plaintiff seeks damages only for losses caused within the six years prior to the filing of the complaint.  In reaching this conclusion, the majority mostly relies on legislative history and similar materials to distinguish the patent context from the copyright context at issue in Petrella; but it also notes that copyright infringement requires proof of copying, whereas patent law does not, thus arguably creating a greater risk that a patent infringement defendant could suffer undue harm from the plaintiff's unreasonable delay in filing suit.  As for injunctive relief and ongoing royalties, however, the majority has this to say (pp. 38-41):

Many of the facts relevant to laches, such as the accused infringer’s reliance on the patentee’s delay, fall under the balance of the hardships factor. Id. Unreasonable delay in bringing suit may also be relevant to a patentee’s claim that continued infringement will cause it irreparable injury. More than anything, district courts should consider all material facts, including those giving rise to laches, in exercising its discretion under eBay to grant or deny an injunction. See eBay, 547 U.S. at 394. . . .

With respect to ongoing royalties, while the principles of equity apply, equity normally dictates that courts award ongoing royalties, despite laches. Menendez, an influential case contrasting laches and equitable estoppel in the trademark context, guides us here. According to Menendez, delay in exercising a patent right, without more, does not mean that the patentee has abandoned its right to its invention. Rather, the patentee has abandoned its right to collect damages during the delay. Equitable estoppel, on the other hand, is different—the patentee has granted a license to use the invention that extends throughout the life of the patent . . . .

In sum, we must recognize “the distinction between . . . estoppel and laches . . . .” Id. (first alteration in original). Whereas estoppel bars the entire suit, laches does not. As outlined above, laches in combination with the eBay factors may in some circumstances counsel against an injunction. However, a patentee guilty of laches typically does not surrender its right to an ongoing royalty.

Judges Hughes, Moore, Wallach, Taranto, and Chen dissented from the principal holding that laches remains a defense to a claim for past patent damages, stating that "The Supreme Court has repeatedly cautioned this court not to create special rules for patent cases."  They agree, however, that in an appropriate case laches can bar equitable relief.

To be honest, I don't have a strong inclination one way or the other on this issue, but I would note that a group of law professors, including Professor Samuel Bray (whose work I've mentioned here in the past), filed an amicus brief arguing that the court should not recognize laches as a defense to a claim for past damages.  For coverage on Patently-O, see here.