In their March 21 decision on SCA Hygiene Products AB v. First Quality Baby Products LLC, the Supreme Court eliminated the laches defense in patent prosecution cases, potentially making it easier for patent-holders to “lie in wait” in order to obtain greater damages. The decision perhaps flew under the radar in the wake of the Varsity Brands decision, but could have a wide-ranging financial impact on patent-holders in the future.

In patent infringement cases, monetary damages are available only for infringements occurring in the six years prior to the filing of the suit. This means that patent-holders can often obtain greater damages by waiting longer, as the infringing party invests more and more resources into its technology; later six-year periods will include higher levels of investment and infringement. These behaviors are limited by so-called equitable defenses, of which laches was the workhorse—a defense that limited damages if the defendant could prove that the plaintiff unreasonably delayed in bringing suit (and the defendant was prejudiced as a result). Now, that defense is no longer available.

This decision was a corollary of the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, Inc., where Petrella sued for copyright infringement eighteen years after the infringing screenplay (“Raging Bull”) was released. The Court rejected the laches defense in that case, ruling that it could not be used to shorten the copyright statute of limitations. But the Federal Circuit then distinguished patent law cases, holding that laches remained a viable method for barring infringement claims during the six-year statutory period.

In SCA Hygiene Products, however, the Court followed its reasoning in Petrella in adhering to separation of powers principles. While the Patent Act does not include a per se statute of limitations, the six-year limit on recovery of damages was said to reflect Congressional intent to determine the appropriate time period; allowing judges to adjust that period using laches gives them a “legislation-overriding” vote.

Justice Breyer, in his dissent, addressed the policy concerns with eliminating the laches defense; since the Patent Act allows patentees to sue at any time after an infringement takes place, a company could potentially invest hundreds of millions of dollars in new technology before finding out later that it is patented. Eliminating the laches defense creates a “gap” to fill in the Patent Act in terms of proscribing bad-faith delay, especially when delay tends to hurt defendants more than plaintiffs. Some other equitable defenses can help pick up the slack; the majority mentions equitable estoppel as a safety net that can be used more heavily. However, equitable estoppel requires a showing that the patent owner misled the patentee into infringing on the patent, and that the patentee relied on the deception. Breyer mentions that he hopes equitable estoppel can fill the gap, but is reluctant to change “the settled expectations of the inventing community.”

Still, unless there is a legislative remedy forthcoming, the laches defense is no longer usable in cases like these. In the coming months, we should learn more about how courts (or Congress) plan to address Breyer’s concerns.

 

Kenji Alexander is a J.D. candidate, ’18, at the NYU School of Law.