SCA Hygiene v. First Quality was decided en banc on September 18, 2015 on appeal from the Western District of Kentucky. Late October in 2003, plaintiff SCA alleged through a letter that defendant First Quality’s absorbent diapers infringed its patent. First Quality replied about a month later that the patent was invalid. In July 2004, SCA requested reexamination at the PTO of the patent-in-suit without notifying First Quality. The PTO confirmed the patentability of all original claims in 2007. Meanwhile, and over the next few years, First Quality heavily invested in its absorbent diapers business, expanding several lines, and acquiring another company. SCA was aware of these activities, but never mentioned the patent-in-suit to First Quality during this time. In 2010, three years after the reexamination ended, and seven years after the 2003 letter, SCA filed a complaint against First Quality. The district court granted First Quality’s summary judgment motion of laches and equitable estoppel. A Federal Circuit panel affirmed as to laches, but reversed as to equitable estoppel. SCA then filed a petition for rehearing en banc, which was granted.
The Federal Circuit reinstated the panel opinion’s reversal of the district court’s grant of summary judgment on equitable estoppel, and held that laches may bar the recovery of damages for a suit brought within the limitations period.
Two questions were before the court: (1) whether laches may bar a claim for patent damages occurring within the six-year limitations period established by § 286, and (2) whether laches can bar permanent injunctive relief or an ongoing royalty for continuing infringing acts.
In Petrella v. MGM, the Supreme Court held that laches is no defense to a copyright infringement suit brought within the Copyright Act’s statutory limitations period. Under § 286 of the Patent Act, “[e]xcept as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.” Because Petrella focused on the fact that Congress prescribed a time period for recovery of damages, and because § 286 is a congressionally prescribed limitations on recovering damages, the Federal Circuit found “no substantive distinction material to the Petrella analysis between § 286 and the copyright statute of limitations.”
Notwithstanding, the Federal Circuit held that Congress codified a laches defense in § 282(b)(1). The sections provides that “[n]oninfringement, absence of liability for infringement or unenforceability” “shall be defenses in any action involving the validity of a patent.” Relying on the legislative history, the Court determined that Congress intended for the section to have a broad reach, which includes “the defenses such as that the patented invention has not been made, used or sold by the defendant; license; and equitable defenses such as laches, estoppel and unclean hands.”
If § 282(b)(1)’s laches defense operates against both legal and equitable relief (and not just equitable relief), it does not implicate Petrella. The Court then held that § 282(b)(1)’s laches may bar the recovery of legal remedies (in addition to equitable relief). Because the statute and legislative history were silent as to the content of the laches defense, § 282 “retains the substance of the common law as it existed at the time Congress enacted the Patent Act [in 1952].” Prior to 1952, the case law showed that “courts consistently applied laches to preclude recovery of legal damages:” “[n]early every circuit recognized that laches could be a defense to legal relief.” And because § 282 “codified whatever laches doctrine existed when Congress enacted the Patent Act in 1952,” the section may bar legal relief. “The fact that § 286 speaks to the timeliness of damages claims does not alter the outcome.” “If …Congress decides that the § 286 damages limitation and the § 282 laches defense are incompatible, it can change the law.”
As to the second question the Court held that laches may in some instances bar injunctive relief, but that it does not, absent egregious circumstances, bar an ongoing royalty. Many of the facts relevant to laches are relevant to the balance of the hardships and the irreparable harm factors for granting an injunction, so “district courts should consider all material facts, including those giving rise to laches, in exercising its discretion under eBay to grant or deny an injunction.” Regarding ongoing royalties, “equity normally dictates that courts award ongoing royalties, despite laches.” “[D]elay in exercising a patent right, without more, does not mean that the patentee has abandoned its right to its invention. Rather, the patentee has abandoned its right to collect damages during the delay.” Whereas estoppel bars the entire suit, including ongoing royalties, laches does not (this is because estoppel is different and more exacting than laches).
Judge Hughes, joined by Judges Moore, Wallach, Taranto, and Chen, concurred-in-part and dissented-in-part. Because the Supreme Court has “repeatedly cautioned [against creating] special rules for patent cases,” and because the Supreme Court in Petrella “emphasized that it had never approved the use of laches to bar a claim for legal damages brought within a statutory limitations period,” Judge Hughes argued that “laches is no defense to a claim for damages filed within [§ 286’s] statutory limitations period.”
To overcome this conclusion, there would have to be “compelling evidence that Congress incorporated laches into the Patent Act as an additional time-bar on claims for legal damages.” Because § 286 expresses Congress’ judgment on the timeliness of damages claims (the six-year period), Judge Hughes argues, “[i]f § 282 includes a defense of laches that applies to claims for damages, it would conflict with this judgment.”
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