CAFC Affirms Laches can Still bar Legal Relief Sought Within the Statute of Limitations in View of Petrella, but Opens up the Possibility That Laches can be Used to bar Future Relief Like Estoppel

CAFC Affirms Laches can Still bar Legal Relief Sought Within the Statute of Limitations in View of Petrella, but Opens up the Possibility That Laches can be Used to bar Future Relief Like Estoppel

San Diego Patent Prep & Pros, Inc. – Mary Fales

September 25, 2015

The CAFC recent en banc[1] opinion in SCA Hygiene Products v. First Quality Baby Products,[2] addressed two interesting issues regarding the reach of laches after the Supreme Courts ruling in Petrella.[3]  Did Petrella overrule Aukerman’s[4] prior holding that laches can bar a legal claim even if brought within the six year period under 35 USC § 286, and should laches bar more than pre-trial damages? These issues were addressed as a result of SCA petitioning the CAFC for a rehearing, en banc, for SCA Hygiene Products v. First Quality Baby Car, 767 F.3d 1339 (Fed. Cir. 2014) (“Panel Opinion”). The basic argument SCA relied on was that Petrella, a copyright case, which held that laches couldn’t be used to bar a legal claim, if the claim was filed within the codified statute of limitations time period, also applies to patent infringement cases. If this was true, it would overturn Aukerman which held laches can bar legal relief in patent infringement cases even if timely filed.  Secondly, Petrella seemed to further blur the lines of distinctions between laches and estoppel, implying that laches could bar future relief: a remedy that estoppel addresses. In response to SCA’s petition, the CAFC affirmed that i) “laches remains a defense to legal relief in a patent infringement suit after Petrella,” and ii) that “absent extraordinary circumstances, laches does not preclude an ongoing royalty.”

In Petrella, the Supreme Court held that laches was not a defense to legal relief in copyright law if the claim was timely brought within the statute of limitations and called into question portions of the Aukerman’s reasoning. The Supreme Court reasoned that laches is a “gap-filler” to apply when no statute of limitations is provided.[5] In other words, the doctrine of laches gives the courts discretionary power to apply equity when they are not bound by a statute.[6] The Court held that laches cannot be invoked to bar legal relief unless there is no statute of limitations provided for by Congress.[7] Petrella didn’t take a position as to patent infringement cases, but cast enough doubt on Aukerman for the CAFC to grant SCA’s rehearing.[8]

In support of it’s holdings, the CAFC reasoned that the copyright limitation provided in 17 USC § 507(b) gave the Petrella Court a clear separation of powers concern that 35 USC § 286 & 282(b) didn’t.[9] Petrella stated the language from § 507(b) showed congressional intent as to the extent of the timing of damages available in a copyright claim; noting that Congress could provide the copyright statutes with a laches defense, but hadn’t.[10] Whereas, the patent statutes have both the six year limitation from § 286, but also the implied laches defense under 35 USC § 282(b). The CAFC reasoned that for patents, thus, the congressional intent was for both § 286 & 282(b) to co-exist together. In addition, the CAFC rejected SCA’s argument that only equitable accounting could be granted under laches,  reasoning that even well before the Federal Rules of Civil Procedure (1938) merged law and equity together, that the common law provided for both legal and equitable relief in a patent claim.[11] Moreover, they reasoned that under the canon of construction, Congress adopted this common law meaning when they enacted 35 USC § 282(b). To further support their conclusions, the CAFC also brought out the point mentioned in Petrella, that copyright requires actual copying which meant less liability compared to an innocent patent infringer. In other words, equitable considerations are of greater importance in patent law, because of the real possibility that an innocent infringer can accrue greater liability.[12]

Next, the CAFC addressed the extent that laches can limit the recovery of ongoing relief. For over twenty years, Aukerman’s clear ruling preserved the distinctions between the types of damage relief available between the defenses of laches and estoppel. Aukerman held that laches couldn’t bar prospective relief.[13] However, Petrella stated that “the District Court, in determining appropriate injunctive relief … may take into account of [plaintiff’s] delay in commencing suit.”[14] The CAFC reasoned that  ongoing relief is equitable relief, and thus consistent with laches being an equitable remedy.[15] Also, Aukerman created a bright line rule regarding laches by relying on Menendez v. Holt, 128 U.S. 514 (1888),[16] but that Menendez actually allowed the possibility that laches could foreclose injunctive relief. Thus, in view of Petrella, eBay[17], and Menendez, the CAFC rejected their prior bright line rule from Aukerman.[18] They reiterated that there is an important distinction between laches and estoppel that should be preserved, but that equity by its very nature requires flexibility and not a bright line rule.[19] Therefore, the CAFC recognized “extraordinary circumstances” as grounds for laches to preclude an ongoing royalty.

Justices Hughes, Moore, Wallace, Taranto, and Chen dissented-in-part stating that the majority has adopted a “patent-specific” approach to laches which the Supreme Court has cautioned against, and they basically agree with the Supreme Courts separation of powers concerns.[20]

The take away: infringers should consider latches not only as a defense to pre-trial liability, but a defense to future liability as well.

[1] Judge Stoll did not participate in the decision.

[2]  SCA Hygiene Products Aktiebolag SCA Personal Care, Inc., v. First Quality Baby Products, LLC , First Quality Hygienic, Inc., First Quality Products, Inc., and First Quality Retail Services, LLC., Appeal No. 2013-1564, http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/13-1564.Opinion.9-16-2015.1.PDF, (Fed. Cir. Sept 18, 2015).

[3] Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014).

[4] A.C. Aukerman Co. v. R.L. Chaides Constriction Co., 960 F.2d 1020 (Fed. Cir. 1992).

[5] SCA Hygiene Products, Appeal No. 2013-1564 at 14.

[6] Title 7 U.S. Code § 507 provides a three year statute of limitations for copyright infringement actions.

[7] Petrella, 134 S. Ct. at 1973.

[8] SCA Hygiene Products, Appeal No. 2013-1564 at 13 and 16.

[9] Id. at 34.

[10] Id. at 16.

[11] Id. at 27 and 28.

[12] Id. at 35 and 36.

[13] Id. at 37.

[14] Petrella, 134 S. Ct. at 1978.

[15] SCA Hygiene Products, Appeal No. 2013-1564 at 38.

[16] Id. at 38.

[17] eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).

[18]SCA Hygiene Products, Appeal No. 2013-1564 at 39.  

[19] Id. at 40 and 41.

[20] SCA Hygiene Products, Appeal No. 2013-1564, dissent at 1-3.