Federal Circuit Latches Onto Laches Defense

In SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, No. 13-1564 (Fed. Cir. Sept. 18, 2015), a divided en banc Federal Circuit held in a 6-5 decision that laches remains a defense to legal relief in a patent infringement suit, notwithstanding the Supreme Court’s recent decision in Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014), holding that laches is not a defense to a suit for damages under the Copyright Act.

At issue before the Court were two questions:

(1) Should the Federal Circuit’s en banc decision in A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992), be overruled so that the defense of laches is not applicable to bar a claim for damages based on patent infringement occurring within the six-year damages limitations period established by 35 U.S.C. § 286? (2) Should the defense of laches be available under some circumstances to bar an entire infringement suit for either damages or injunctive relief?

In answering the first question in the affirmative, the Court considered 35 U.S.C. § 286, which provides a six-year damages limitation for patent infringement.  Finding no relevant functional difference between a damages limitation and a statute of limitations, the Court found no substantive distinction material to the Petrella analysis.  However, the Court determined that Congress had codified a laches defense in 35 U.S.C. § 282(b)(1), and that laches as codified operates as a defense to both legal and equitable relief.  In the Court’s view, because § 286 provides for a time limitation on the recovery of legal remedies, and § 282 provides a laches defense to legal relief, the statutory scheme in patent law does not implicate Petrella.  The dissent disagreed, stating that the majority had no basis to conclude that Congress intended the case-specific doctrine of laches to displace the statutory damages limitations period of § 286.

On the second question, the Court found that consideration of laches fits naturally into the framework in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), rejecting Aukerman’s bright-line rule that laches could not bar permanent injunctive relief.  According to the Court, “laches in combination with the eBay factors may in some circumstances counsel against an injunction.”  However, with respect to ongoing royalties, the Court explained that “equity normally dictates that courts award ongoing royalties, despite laches.”  The Court’s reasoning rests in the distinction between estoppel and laches as presented in Menendez v. Holt, 128 U.S. 514 (1888).  In the Court’s view, absent extraordinary circumstances, laches does not preclude an ongoing royalty.  The dissent concurred in this portion of the opinion, agreeing that laches is available to bar equitable relief.

SCA was a closely watched case, garnering amici from industries as diverse as biotechnology, electronics, manufacturing, pharmaceuticals, software, agriculture, apparel, health care, telecommunications, and finance in support of retaining laches in patent law.  The Federal Circuit’s ruling maintains the standard instated in Aukerman and broadens the potential applicability of the latches defense.  Being a 6-5 decision, this may ultimately be reviewed by the Supreme Court.