'; Laches Still Alive in Patent Cases, But Could Be Revisited Soon By Court

Laches Still Alive in Patent Cases, But Could Be Revisited Soon By Court

October 14, 2015 Chicago Daily Law Bulletin

Laches is the equitable doctrine that a right or claim will not be enforced if a long delay in asserting the right or claim has prejudiced the adverse party. Laches has long served as a defense available to accused patent infringers, originally in courts of equity, and then in patent cases generally. Despite years of precedent, the very availability of laches as a defense to patent infringement was recently called into question by a Supreme Court decision involving a copyright dispute.

The 1952 Patent Act itself does not mention laches, but does provide categories of available defenses including “noninfringement, absence of liability for infringement or unenforceability.” 35 U.S.C. 282(b)(1). The Federal Circuit has held, most notably en banc in A.C. Aukerman Co. v. R.L. Chaides Construction Co, that this section of the Patent Act served to codify laches in patent law. 960 F.2d 1020, 1028 (Fed. Cir.1992).

The Aukerman decision remains the seminal case addressing laches in patent cases. Aukerman held that two elements underlie the defense of laches: (a) the patentee’s delay in bringing suit was unreasonable and inexcusable, and (b) the alleged infringer suffered material prejudice as a result of the delay. Aukerman at 1028. With respect to the first element, Aukerman states that the length of time which may be deemed unreasonable has no fixed boundaries but rather depends on the circumstances. Id. at 1032. The delay may be excused or tolled if the patentee offers a suitable justification for the delay. Id. at 1033. For example, delay may be justified if the patentee was involved in negotiations with the accused or was engaged in other litigations during the delay period. Id.

Regarding “material prejudice,” Aukerman recognized two categories. Evidentiary prejudice can arise by reason of a defendant's inability to present a full and fair defense on the merits. Id. at 1033. Economic prejudice may arise where a defendant and possibly others will suffer the loss of monetary investments which likely would have been prevented by earlier suit. Id. The mere accrual of damages for ongoing infringement is not sufficient to demonstrate economic prejudice. Id.

The Aukerman framework governed the application of laches in patent cases for over 20 years. However, last year, it was all called into question by a copyright case. The dispute in Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S.Ct. 1962 (2014) involved the ownership of the screenplay for the 1980 film Raging Bull. MGM, the accused infringer, argued the suit was barred by laches due to an 18-year delay in bringing suit. The Supreme Court threw out the lower courts’ finding of laches and held that laches could not bar damages within the Copyright Act’s 3-year statute of limitations. Id. at 1965; see 17 U.S.C. §507(b). The Court’s reasoning was “in the face of a statute of limitations enacted by Congress, laches cannot be invoked to bar legal relief” Id. at 1974

While the Supreme Court did not expressly extend this holding to patent law, the Patent Act does contain a six year limitation on damages that serves a function similar to the copyright law’s statute of limitations. See 35 U.S.C. §286. In a footnote, the Supreme Court distinguished copyright from trademark on the basis that the Lanham Act contains no statute of limitations and expressly provides for laches in trademark cases. Petrella 134 S.Ct. at 1973, FN 15; see 15 U.S.C. § 1115(b)(9). The Supreme Court declined to similarly distinguish the patent law, ominously noting “[w]e have not had occasion to review the Federal Circuit’s position.” Id.

After 18 months in which the fate of laches in patent cases was uncertain, the Federal Circuit considered the issue, en banc, in SCA Hygiene Products Aktiebolag v. First Quality Baby Products LLC, ----F.3d----, 2015 WL 5474261 (Fed. Cir. September 18, 2015). The Federal Circuit concluded that laches remains viable in patent cases even after Petrella. Central to its analysis was an affirmation of Aukerman’s holding that laches is codified by §282(b). Id. at * 9. Although §282(b) does not expressly mention laches, the Federal Circuit relied on House and Senate Reports as well as contemporaneous commentary by P.J. Federico to support its holding. Id. at *8-9. The Federal Circuit further concluded that because the pre-1952 case law “strongly supports” the availability of laches to bar legal relief, and because “[s]ection 282 codified whatever laches doctrine existed when Congress enacted the Patent Act in 1952”, laches, as codified by Congress, bars legal remedies. Id. at *13.

In somewhat ironic fashion, the Federal Circuit then used the Petrella case as a springboard for expanding the laches defense. The Federal Circuit had previously held that a defense of laches cannot bar prospective relief and only bars pre-suit damages. Aukerman, 960 F.2d at 1038. However, the Federal Circuit re-examined this principle in light of Petrella and the Supreme Court’s decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). The Court concluded that laches, in combination with other Ebay factors can now warrant the denial of an injunction. SCA Hygiene, 2015 WL 5474261 at *17. However, barring extraordinary circumstances, laches cannot preclude an ongoing reasonable royalty. Id.

So, the doctrine of laches remains a viable defense for accused patent infringers, and, indeed, has broader reach than before. Of course, this could change should the Supreme Court have “occasion to review the Federal Circuit’s position” as foreshadowed by Petrella.