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By Randy Vesprey
Womble Carlyle Sandridge & Rice, LLP
This article originally was published by Law360.com.
On November 1st, the Supreme Court will hear oral arguments to decide whether “Raging Bull” applies in patent litigation. At issue is whether and to what extent a laches defense may bar a claim for damages in patent infringement brought within the Patent Act’s six-year statutory limitations period, notwithstanding the Supreme Court’s 2014 decision in Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014) (the so-called “Raging Bull” case, so named because the lawsuit involved copyright issues surrounding the script for the 1980 Martin Scorsese film). But for amici curiae, more is at stake.
The dispute before the district court involved a patent infringement action by diaper manufacturer SCA Hygiene against First Quality Baby Products, a competing manufacturer. On summary judgment, the district court ruled, among other things, that laches barred SCA Hygiene from recovering damages accrued before suit was filed. Subsequently, a divided en banc Federal Circuit held 6-5 that laches remains a defense to bar a claim for damages based on patent infringement occurring within the six-year damages limitations period established by 35 U.S.C. § 286. The Federal Circuit also held that in some circumstances, laches may counsel against an injunction but does not preclude an ongoing royalty absent extraordinary circumstances.
In its petition for certiorari, SCA Hygiene argues that the “Patent Act’s six-year statutory limitations period” means courts may not shorten that time frame via laches. SCA Hygiene relies on the Court’s ruling in Petrella that laches is an equitable doctrine that cannot be used to shorten a statutory limitations period in copyright cases. SCA Hygiene argues that the same rule should apply to patent cases, finding support in the Court’s observation that it “ha[s] never applied laches to bar in their entirety claims for discrete wrongs occurring within a federally prescribed limitations period.” Petrella, 134 S. Ct. at 1974-75.
However, First Quality asserts that laches can be a legitimate defense in patent litigation, and argues that SCA Hygiene failed to pursue its patent infringement claims in a timely manner. The en banc Federal Circuit agreed with this assertion in finding a “principled distinction” between laches defenses in copyright and patent law. The Federal Circuit concluded that Congress specifically created the Patent Act in 1952 to coexist with time limits for damages, unlike in the Copyright Act. Specifically, Chief Judge Sharon Prost wrote, “We conclude that Congress codified a laches defense in [the Patent Act] that may bar legal remedies. Accordingly, we have no judicial authority to question the law’s propriety.” 807 F.3d 1311, 1315 (Fed. Cir. 2015).
Since granting certiorari, the Court has received several amicus briefs from interested parties, some with matters before the court, as well as various bar associations, such as the ABA. All agree that the Court’s ruling will be a big deal for the patent industry, but they disagree about how the Court should rule and why.
The prevailing policy consideration among those in support of the laches defense is that the defense protects alleged infringers from economic prejudice and prevents those who would “lie in wait” from benefitting from the efforts of good faith manufacturers. For example, Roche Molecular Systems submits that the absence of laches will inevitably lead to unintended results such as the unjust enrichment of dilatory patentees. Dell asserts that laches is one of the only remedies against delays by non-practicing entities whose motivations for litigation differ from operating companies. Operating companies may enforce patents to strengthen the market value of their product whereas non-practicing entities scan the market looking for an opportunity to assert patents that have expired or are not infrequently found invalid.
Cook Medical likewise holds up laches as one of the last defenses against patent assertion entities that delay filing suit as a weapon to make enormous settlement demands or demand higher licensing fees. According to certain manufacturers, another benefit of laches is that it prevents patent buyers from enforcing patents not previously enforced by the original patent owner. Askeladden forewarns that the elimination of laches in damages cases would encourage abusive, opportunistic and repetitive patent suits.
While ART+COM Innovationpool (“ACI”) agrees that trolls are a problem, they posit that laches is not the solution. ACI argues that laches can bar small companies with valid patent claims from obtaining relief, even when they have diligently sought to negotiate with alleged infringers. ACI suggests that, contrary to being the last bastion of the good-faith infringer against the greedy patent troll, laches may actually create a perverse incentive for industry juggernauts to drag smaller, poorer patentees through endless negotiations for the purpose of claiming a defense of laches once those negotiations fall apart.
Roche and Cook Medical submit that medical device manufacturers are especially disadvantaged by delay because of an expensive regulatory approval process. Conversely, Toro asserts that companies regularly expend great deals of money on research and development, often without broadcasting their efforts to the world, and earlier lawsuits would not change that. Further, Toro says, laches is irrelevant to frivolous claims by non-practicing entities because laches addresses timeliness, not merits.
What amici on both sides of the coin do agree on is that laches has a significant impact on innovation and business decisions. Most of those in support of a laches defense argue that laches permits good faith manufacturers to innovate and seek investments in new technologies without worrying about when the next patentee, practicing or otherwise, will emerge to threaten profits or eviscerate their business. Amici opposing the defense respond that companies seeking to make major investments in new areas could, should and do routinely assess whether there are any patents that would impede their business.
Amici supporting the laches defense also argue that alleged infringers deserve “repose”. They agree with the Federal Circuit that it is inconceivable and unfair to require an alleged infringer to follow up on every demand letter with a declaratory suit. Such a requirement would be prohibitively expensive, reduce investments in innovation and ultimately harm the public. Amici opposing the defense respond that the Federal Circuit’s application of laches will force patentees to rush headlong into litigation to preserve their rights. Rather than stave off frivolous claims, they argue, that interpretation of laches will lead to numerous lawsuits and increased litigation costs. This will cause businesses to forgo obtaining patents altogether, which would stifle innovation and rob the public of the benefits of a robust patent system.
Although the dire warnings of rampant trolling, stymied innovation, reckless time-pressured lawsuits, and harm to the public may tug at the policy heartstrings, the Court is likely to decide this case on the basis of separation of power, legislative intent, and statutory interpretation.
However the Court decides, the dire outcomes foreshadowed by amici are unlikely to come to pass.
Randy Vesprey is an IP Litigation Analyst in Womble Carlyle’s Wilmington, Del. office.