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.
