Federal Circuit Finds that Laches Remains a Viable Defense in Patent Cases
On September 18, 2015, a split Federal Circuit in SCA Hygiene Products Aktiebolag, et al. v. First Quality Baby Products, LLC, et al., No. 2013-1564, ruled en banc that laches remains a defense to legal relief in patent infringement suits. The Court further addressed the extent to which laches can limit recovery by barring injunctive relief or an ongoing royalty for continuing infringing acts.
The Federal Circuit’s decision follows the Supreme Court’s 2014 ruling in , 134 S. Ct. 1962 (2014). In Petrella, a copyright case, the Supreme Court eliminated the “judicially-created Petrella v. Metro Goldwyn-Mayer, Inc.laches defense because Congress, through a statute of limitations, ha[d] already spoken on the timeliness of copyright infringement claims.” Of significant interest was the Supreme Court’s consideration of arguments based on patent law and its remark that it had “not had occasion to review the Federal Circuit position [that laches can bar damages incurred prior to the commencement of a patent infringement suit].”
Distinguishing Petrella, the en banc Federal Circuit concluded that Congress had codified laches under 35 U.S.C. §282 of the Patent Act of 1952 as a defense to patent infringement suits. The Federal Circuit also noted that, unlike copyright law where independent creation is a defense, “the calculus is different” under patent law because innocence is not a defense. The Federal Circuit observed that “without laches, innovators have no safeguard against tardy claims demanding a portion of their commercial success.” The Federal Circuit also appeared swayed by the large number of amici in the case encompassing diverse industries (i.e., biotechnology, electronics, manufacturing, pharmaceuticals, software, agriculture, apparel, health care, telecommunications, and finance) that overwhelmingly support retaining laches in patent law.
Regarding the extent to which laches can limit recovery of ongoing relief, the Federal Circuit rejected a bright-line rule limiting laches to pre-suit damages and stressed that “[p]aramount to both [the injunction and ongoing royalty analyses] are the flexible rules of equity and, as a corollary, district court discretion.” For injunctive relief, the Federal Circuit held that the evidence of laches should be considered in conjunction with the four-factor test established in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). Under eBay, “a plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.” A balancing of hardships would encapsulate many of the facts relevant to laches. As for an ongoing royalty, the Federal Circuit held that, absent egregious circumstances, laches does not bar recovery for continuing infringing acts.
If you have any questions or wish to discuss how this decision impacts your business, please contact one of our Brinks Attorneys.