Why wait more than a week after the Supreme Court issued its March 21 decision in SCA Hygiene Products Aktiebolag et al. v. First Quality Baby Products, LLC, et al. to send a “Breaking News” eAlert? Because the Supreme Court said delay doesn’t matter!
Well, at least not in the context of patent infringement litigation. In a nearly unanimous decision (only Justice Breyer dissented), the SCOTUS overturned more than a century of legal jurisprudence and the expectations of the public by holding that laches does not apply to patent infringement cases. Laches is an equitable defense that says one cannot sleep on one’s rights (lay in wait) and allow damages to run up before filing suit. SCA Hygiene asked the Court to determine whether the defense of laches remained a viable defense to patent infringement actions when a complaint for patent infringement is brought during the six-year statute of limitations of 35 U.S.C. §286.
As predicted by many (including me), the Supreme Court found that the defense of laches does not apply to claims brought within the statute of limitations using the same reasoning it did in holding laches is not a defense in copyright infringement claims. See Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 572 U.S. ___ (2014).
What Justice Breyer understood, and the rest of his brethren seemed to miss, is that the patent statute of limitations is different from the copyright statute of limitations (and different from most all other statutes of repose) in that it looks backward from the filing of the complaint rather than running forward from the bad act or discovery of the bad act. For example, if a truck careens off the road and strikes your house, you have one year to file a lawsuit from the date of the accident. With respect to copyright infringement, you have three years to file a lawsuit from the date of first infringement. But with a patent infringement action it is different. One looks backward from the filing date of the complaint to recover up to six years of damages – regardless of when the infringement started or when patentee learned of the infringement.
Consider this example: a patent holder obtains a patent in year one and knows that Good Company is infringing its patent. Patents last up to 20 years and patent infringement is a strict liability offense. For 19 years the patent holder waits and watches as Good Company invests in and builds a market for its infringing product. At the end of year 19, the patent holder brings a patent infringement suit against Good Company. After last week’s ruling, Good Company no longer has a laches defense to the patent holder’s suit. Patent holder may be able to recover damages for the previous six years prior to bringing suit. (However, another potential equitable defense, the doctrine of equitable estoppel, may apply).
This is good news for patent holders. This decision should make patents more valuable and put patent holders in a better bargaining position in licensing and settlement discussions. For those accused of patent infringement, not such good news.