The Fate of Patent Laches: SOL

On Tuesday, the U.S. Supreme Court abolished a decades-old rule that allowed for application of the equitable defense of laches in patent cases. Until now, patent owners were required to justify filing suit after a period of delay or risk forfeiting the right to obtain certain pre-suit damages. SCA Hygiene v. First Quality Baby Prods., No. 15-927 (S. Ct. Mar. 21, 2017) (7-1). Now, the six-year statute of limitations for patent infringement cases applies without qualification.

The Supreme Court’s Decision 

The Supreme Court’s decision reverses established precedent of the U.S. Court of Appeals for the Federal Circuit that the equitable doctrine of laches can bar a patent owner from obtaining damages for pre-suit infringement if the filing of the lawsuit was delayed “unreasonably.” For delay periods exceeding six years, the Federal Circuit imposed a rebuttable presumption of laches that the patentee was required to overcome.

In reversing this rule, the Supreme Court explained that the Patent Act contains a six-year statute of limitations (35 U.S.C. § 286) that expressly allows recovery of pre-suit damages for up to six years of infringement. Slip op. at 6. To bar the patent owner from recovering those damages violated the “congressional decision” embodied in Section 286 and gave judges a “legislation-overriding role that is beyond the Judiciary’s power.” Slip. op. at 4. The Court aligned its holding in SCA Hygiene with its earlier decision in Petrella v. MGM, Inc. (2014), which used the same reasoning to abolish laches in the context of copyright infringement.

Key Implications of the Supreme Court’s Decision

This decision is a significant win for patent owners because it permits recovery of up to six years of pre-litigation damages even for stale patent infringement claims. The new rule also applies to expired patents, provided that the patent owner files suit within the six-year limitations period following expiration of the patent.

There are several important implications from the SCA Hygiene decision:

• Potential Surge in NPE Activity. Activity by non-practicing patent assertion entities (NPEs) is likely to increase as legacy patents are dusted off and added to the pool of asserted assets. NPEs will now be tempted to re-assert some potential infringement claims that had grown stale over recent years. As a result, anti-patent troll defense mechanisms (such as inter partes reviews and Section 101 challenges) may also see increased use in response to any surge in NPE lawsuits.
• IP Monetization Opportunity. Clients with patent portfolios should re-evaluate the monetization value of their intellectual property. This decision creates a unique and potentially time-sensitive occasion for patent owners to re-evaluate the extent to which they may hold unasserted patent infringement claims that are suddenly more valuable. Patent owners should also consider whether they can leverage this change in the law to derive additional value from expired or soon-to-expire patents lurking in their portfolios.
• Increased Focus on Other Defenses. Other defenses, and in particular the defense of equitable estoppel, are likely to be more heavily relied upon by patent infringement defendants to combat stale infringement claims. Equitable estoppel was often more difficult for a patent infringement defendant to prove than the now-abolished defense of laches. A critical question is whether and to what extent the Federal Circuit’s precedent defining the scope of the equitable estoppel defense evolves, and potentially broadens, in response to the elimination of the laches defense, which had previously made proving equitable estoppel redundant and unnecessary in many circumstances.