Friday, September 18, 2015

CAFC on laches in SCA Hygiene Products v. First Quality

We convene en banc to resolve whether, in light of the
Supreme Court’s recent decision in Petrella v. MetroGoldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014), laches
remains a defense to legal relief in a patent infringement
suit. We conclude that Congress codified a laches defense
in 35 U.S.C. § 282(b)(1) that may bar legal remedies.
Accordingly, we have no judicial authority to question the
law’s propriety. Whether Congress considered the quandary in Petrella is irrelevant—in the 1952 Patent Act,
Congress settled that laches and a time limitation on the
recovery of damages can coexist in patent law. We must
respect that statutory law.
Nevertheless, we must adjust the laches defense in
one respect to harmonize it with Petrella and other Supreme Court precedent. We emphasize that equitable
principles apply whenever an accused infringer seeks to
use laches to bar ongoing relief. Specifically, as to injunc-
tions, considerations of laches fit naturally within the
eBay framework. In contrast, Menendez v. Holt, 128 U.S.
514 (1888), and Petrella counsel that laches will only
foreclose an ongoing royalty in extraordinary circumstances.

As to reasoning:

Four different portions of Aukerman’s reasoning are
especially relevant to this case. First, we determined in
Aukerman that laches was codified in 35 U.S.C. § 282.
Aukerman explained that, “[a]s a defense to a claim of
patent infringement, laches was well established at the
time of recodification of the patent laws in 1952.” Id. at
1029. We also credited P.J. Federico’s Commentary on the
New Patent Act for its observation that the second paragraph
of § 282 includes “equitable defenses such as laches,
estoppel and unclean hands.” Id. (quoting P.J.
Federico, Commentary on the New Patent Act, 35 U.S.C.A.
1, 55 (West 1954) (hereinafter Federico Commentary)).

Second, Aukerman addressed the argument that laches
conflicts with 35 U.S.C. § 286, which limits recovery of
damages to the six years prior to the complaint. We
explained that “[i]n other areas of our jurisdiction, laches
is routinely applied within the prescribed statute of
limitations period for bringing the claim.” Id. at 1030
(citing Cornetta v. United States, 851 F.2d 1372 (Fed. Cir.
1988) (en banc) (military pay); Reconstruction Finance
Corp. v. Harrisons & Crosfield Ltd., 204 F.2d 366 (2d
Cir.), cert. denied, 346 U.S. 854 (1953) (breach of contract)).
Moreover, we observed that § 286 (or a virtually
identical analogue) “has been in the patent statute since
1897,” and that, “[w]ithout exception, all circuits recognized
laches as a defense to a charge of patent infringement
despite the reenactment of the damages limitation
in the 1952 statute.” Id. Aukerman also noted that
“section 286 is not a statute of limitations in the sense of
barring a suit for infringement.” Id. Rather, “the effect of
section 286 is to limit recovery to damages for infringing
acts committed within six years of the date of the filing of
the infringement action.” Id. Finally, we reasoned that
laches and a statute of limitations are not inherently
incompatible. “By section 286, Congress imposed an
arbitrary limitation on the period for which damages may
be awarded on any claim for patent infringement. Laches,
on the other hand, invokes the discretionary power of
the district court to limit the defendant’s liability for
infringement by reason of the equities between the particular
parties.” Id. (emphasis in original).
Third, we rejected the argument “that laches, by reason
of being an equitable defense, may be applied only to
monetary awards resulting from an equitable accounting,
not to legal claims for damages.” Aukerman, 960 F.2d at
1031. According to the Aukerman court, the merger of
law and equity courts allowed laches to bar legal relief.
When in 1915 Congress enacted 28 U.S.C. § 398—which
authorized parties to plead equitable defenses at law
without having to file a separate bill in equity—“laches
became available to bar legal relief, including patent
damage actions.” Id. We also found persuasive the fact
that Federal Rule of Civil Procedure 8(c) recognizes laches
as a defense in civil actions. Id.
Fourth, Aukerman considered whether laches bars recovery
of pre-filing damages only, or whether it precludes
the entire suit. In ruling that laches prohibits recovery of
pre-filing damages only, Aukerman relied on the Supreme
Court’s Menendez decision. Aukerman quoted the following
portion of Menendez:



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