Setting the Stage for another Fight of the Soul of Patent Law

Patent-WarsBy Don Wang

On September 18, 2015, the Federal Circuit, sitting en banc, rendered another divisive decision, SCA Hygiene Products AB v. First Quality Baby Products. In the very first paragraph of the dissent opinion, Judge Hughes harshly states, “[p]atent law is governed by the same common-law principles, methods of statutory interpretation, and procedural rules as other areas of civil litigation. Today, the majority adopts a patent-specific approach to the equitable doctrine of laches. In doing so, the majority overlooks Congress’ intent and Supreme Court precedent . . .” Ouch!

The Supreme Court’s 2014 “Raging Bull” copyright decision, Petrella v. Metro-Goldwyn-Mayer, Inc, prompted the issue. In that case, the Supreme Court eliminated the “judicially-created laches defense [in copyright cases] because Congress, through a statute of limitations, ha[d] already spoken on the timeliness of copyright infringement claims.” The Patent Act similarly provides a six-year rolling limitation period, but Federal Circuit precedent held that the statute of limitations and laches defense can coexist in patent law. Interestingly, the Supreme Court specifically remarked in the Raging Bull case that it had “not had occasion to review the Federal Circuit’s position [that laches can bar past damages in patent law].” Taking the cue from the Supreme Court, SCA Hygiene appealed to the Federal Circuit en banc review and argued that there is no “principled distinction” between the statute of limitations in the Copyright Act and Patent Act.

The 11-judge panel unanimously held that, in patent cases, laches remains a viable defense to block equitable relief such as an injunction relief or ongoing royalties. However, the panel split sharply, 6-5, on whether laches can be used to eliminate damages for past infringement that occurred within the six-year statute of limitations period. The majority distinguished patent law from copyright law. It reasoned that Congress, when codifying the Patent Act in 1952, also incorporated the common law that recognized the laches defense for past damages as part of 35 U.S.C. §282. The dissent criticized the majority’s interpretation and argued instead that common law does not clearly establish a doctrine to support laches’ applicability for damages.

Due to Congress’ silence in the statutory language and legislative history, the panel debated fiercely on what comprises the common law that Congress codified into the Patent Act of 1952. The majority reasoned that Congress likely reviewed the common law of patents. In support of its conclusion, the majority cited two pre-1952 appellate court decisions that made the laches defense available for legal damages in patent cases. On the other hand, the dissent argued that the “common law for patents” should be no different from other areas of civil litigation. It specifically points to several non-patent Supreme Court cases decided prior to 1952, which held that the laches defense is unavailable for legal relief such as damages. The dissent is also cautious about creating special rules for patent cases

The dissent clearly had a Supreme Court review in mind, and that is sensible. In recent years, the Supreme Court has on several occasions tried to bring patent law back into the legal tapestry. For example, in eBay Inc. v. MercExchange, LLC, the Court made it clear that the availability of injunctive relief in patent cases is to be assessed just as it is in other type of civil litigations. In MedImmune, Inc. v. Genentech, Inc., the Court relied on its broader declaratory judgement jurisprudence to reject the Federal Circuit’s patent-specific rules. In Global-Tech Appliances, Inc. v. SEB S.A., the Supreme Court drew from criminal law jurisprudence to alter the Federal Circuit standard for inducement infringement.

However, the Circuit majority appears to be equally prepared for a Supreme Court review. Many commentators have long suspected that the abuse of the patent system by non-practicing-entities (“trolls”) concerns the Supreme Court, and the justices’ decision in Commil USA, LLC v. Cisco System, Inc. explicitly confirmed this. In the instant case, by citing the amicus briefs from various industries, the majority subtly reminds the high court that the doctrine of laches is a valuable weapon in defending against trolls. Specifically, the majority points out that innocence defense is available for copyright infringement, but not for patent infringement, thus “without laches, innovators [in patent cases] have no safeguard against tardy claims demanding a portion of their commercial success.”

Concerned with “patent-exceptionalism” on the one hand and patent trolls on the other, the Supreme Court should clarify how to weigh these two competing policies and shape the soul of modern patent law. Another blockbuster patent case is on the horizon.

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