Laches Can Limit Patent Damages, En Banc Federal Circuit Rules

Originally published by Barry Barnett.

En banc court sidesteps high court

In Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 1974 (2014) (post here), the Supreme Court ruled that the defense of laches — unreasonable delay in bringing suit — does not preclude recovery of damages for copyright infringement during the usual statute of limitations period (three years under the Copyright Act). Does the same rule apply to patent cases?

The en banc Federal Circuit held last week, by the smallest of margins (6-5), that Petrella does not govern cases under patent law. Defendants may thus cite a patent holder’s delay in filing a lawsuit as a ground for reducing or barring damages within the six-year pre-suit period that patent law generally allows.

Origins in diapers

The case arose in the Western District of Kentucky and concerned “pants-type diapers” for adults. The patent holder, SCA Hygiene Products, sued First Quality for infringement almost seven years after threatening suit but not following through and three years after obtaining from the U.S. Patent and Trademark Office a ruling that confirmed the patentability of the SCA patent’s subject matter. The district court granted summary judgment to First Quality on its laches defense.

A panel of the Federal Circuit affirmed. It “rejected SCA’s argument that the Supreme Court’s Petrella decision abolished laches in patent law, reasoning instead that the panel was bound by this court’s prior en banc opinion in A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc), and that Petrella left Aukerman intact. SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, No. 13-1564 (Fed. Cir. Sept. 18, 2015). SCA sought and obtained rehearing of the case by the all 11 of the then-members of the Federal Circuit.*

Full court affirms

By a 6-5 margin, the en banc court agreed with the panel’s ruling. The main point of the majority, which Chief Judge Prost authored, concerned section 282, which since 1952 has provided thus:

(b) Defenses.— 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.

(2) Invalidity of the patent or any claim in suit on any ground specified in part II as a condition for patentability.

(3) Invalidity of the patent or any claim in suit for failure to comply with—

(A) any requirement of section 112, except that the failure to disclose the best mode shall not be a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable; or

(B) any requirement of section 251.

(4) Any other fact or act made a defense by this title.

Although section 282(b) nowhere mentions “laches”, the majority concluded that in 1952 “Congress codified a laches defense in § 282″. SCA Hygiene, slip op. at 22. It relied on its own and other lower courts’ rulings on whether patent law permitted a laches defense — which in the old days applied only in equity — to a legal claim for damages and on comments by P.J. Federico, “a principal draftsman of the 1952 recodification” of the patent statute. Id. at 20 (quoting Diamond v. Chakrabarty, 447 U.S. 303, 321 (1980)).

Dissent

The five dissenters urged that Petrella did decide the issue before the court. The opinion summed up the arguments thus:

The majority brushes aside the teachings of Petrella and finds based on vague legislative history and muddled case law that Congress intended to depart from the common-law principle that laches only bars equitable relief where a statutory limitations period applies. See Maj. Op. at 18–35. Two flaws pervade the majority’s analysis. First, the majority interprets 35 U.S.C. § 282 in isolation, without regard to Congress’ intent [to allow recovery of damages for six years before the filing of a suit for infringement] expressed in § 286. Second, in addition to misreading the pre-1952 cases it cites, the majority limits the scope of its review to favorable patent cases. The majority ignores Supreme Court precedent and other federal court decisions holding that laches does not bar claims for legal relief filed within a statutory limitations period. Properly analyzed, we cannot reasonably infer from the Patent Act that Congress intended to depart from this common-law principle.

Id., slip op. at 5 (Hughes, J., dissenting).

My view

The majority bases its distinction between copyright law and patent law on a slender reed — the notion that in 1952 Congress silently took away in section 282(b) what it expressly gave in section 286. The dissent presses its point that the Supreme Court has never allowed laches to bar a legal claim for damages during the limitations period that Congress allows for the relevant claim — three years for copyright infringement and six for patent infringement.

Interestingly, two of the dissenters, including the author of the dissent, had served on the panel that unanimously upheld the summary judgment on laches grounds. What changed their minds? Please let us know if you do.

I predicted, by the way, that Petrella would control under patent law. I will not now deviate from that prediction, although now the Supreme Court will have to take a hand, contrary to my expectation in the wake of Petrella last year (2014).

____________
* The court now has 12 members.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

from Texas Bar Today http://ift.tt/1V5GKjK
via Abogado Aly Website