Today the Supreme Court ruled that the laches defense could not be used to limit 35 U.S.C. § 284 patent damages given the 35 U.S.C. § 286 statute of limitations that permits recovery of patent damages up to six years prior to filing an infringement suit.  Specifically, the Court ruled that “Laches cannot be interposed as a defense against damages where the infringement occurred within the period prescribed by §286.”  The result of the ruling is that the laches defense may limit equitable relief, such as an injunction, but will no longer preclude past damages in patent cases.

From a practical standpoint, the ruling may not be as significant as it otherwise might appear.  Laches is a frequently raised, but seldom successful, equitable defense in patent litigation.   Laches basically arises from a patent owner unreasonably delaying its assertion of a patent right during a period of time when the accused infringer made investments and the infringer would be prejudiced by the delayed assertion of the patent.  If successful, the defense traditionally would bar all past damages, limit injunctive relief and preclude future royalties on products purchased during the laches period.  The Federal Circuit’s en banc decision below in the instant case limited the defense so that it would no longer preclude any future royalties (see our Sep. 18, 2015 post explaining the en banc decision).  In sum, prior to today’s decision, the laches defense could limit damages prior to the filing of the lawsuit and limit injunctive relief.  This might have little impact in most patent cases where the period of past infringement may be relatively short and the patent has many years of life remaining for which future royalties would be paid even if an injunction were not granted.

Laches was a more promising defense when a litigation patent assertion entity purchased and asserted a near-end-of-life dormant patent (i.e., a never asserted patent) against defendants who have long-used the alleged infringing technology (see our Oct. 7, 2016 post on the FTC’s PAE Study and distinction between non-problematic “portfolio PAEs” and some problematic “litigation PAEs”).  In such circumstances, a laches defense could have a substantial impact because it would bar the bulk of the damages period (six years prior to the lawsuit) and would bar injunctive relief.  This would leave a remedy of only a future royalty for the short period of time remaining in the patent’s life.  For example, consider a patent with only a year remaining before it terminates.  The litigation PAE could seek seven years of damages: six years of damages prior to the lawsuit and one year of royalties before the patent terminates.  A successful laches defense would limit the damages exposure by over 85% — i.e., remove all six years of pre-suit damages, leaving only one year of future royalties before the patent expires.

The Supreme Court’s decision today will now permit six years of pre-suit damages notwithstanding a successful laches defense.  The related doctrine of equitable estoppel still remains as a defense.  Equitable estoppel is a somewhat harder defense to establish, because it requires proof that the infringer relied on some action by the patent owner indicating it would not assert the patent.  But equitable estoppel is a more effective defense, because it is a complete defense — i.e., it precludes all past and future damages and injunctive relief.

Below is a short summary of the case and the Supreme Court’s decision.
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Judge Gilstrap recently entered an Order that rejected various defenses raised by Metaswitch based on the prior patent owner’s (Nortel) activities in standards organizations CableLabs, the Internet Engineering Task Force (“IETF”) and the International Telecommunication Union (“ITU”).  The decision highlights the importance of considering the specific language of the standard setting intellectual property rights (“IPR”) policy and patent owner commitment at issue as well as the importance of showing that the standard incorporates the patented technology and is implemented in the accused infringing products.

For example, under the wording of the specific CableLabs IPR Agreement at issue, Judge Gilstrap ruled that (1) an entities’ commitment only applied to intellectual property (e.g., patents or applications) it owned at the time the entity made the commitment and did not apply to intellectual property that the entity later acquired and (2) a subsidiary’s intellectual property commitment did not obligate its parent entity.  Thus, although one of Nortel’s subsidiary’s that owned no patents participated in the CableLabs standards process, Nortel could hold (and later sell) patents relevant to the CableLabs standard without those Nortel patents being subject to the royalty-free licensing obligation that CableLab’s otherwise required of participants.

Further, Judge Gilstrap ruled that the accused infringer failed to show one or more material parts of the alleged standard setting obligation, such as showing that (i) the standard setting document at issue was actually an adopted standard subject to an obligation (e.g., not an expired draft or request for comment), (ii) the patented technology was incorporated into the standard (e.g., the patent claims actually are “essential” to the standard), and (iii) the accused products actually implement the standard and patented technology.  The latter requirement — e.g., show that the accused products implement the patented technology within the standard — can be particularly problematic, because accused infringer’s generally deny infringement (usually a first line of defense) and are reluctant to undermine that defense by arguing that the claims read onto their product in order to support a lower priority defense, such as the standard essential patent defenses raised here.

The decision also provides incremental insight into common equitable defenses raised in standard essential patent cases: laches, equitable estoppel, implied waiver, and implied license.  In this case, the circumstances that lead to a failure to establish breach of an expressed standard setting commitment also doomed the equitable defenses as well.  Perhaps this is not too surprising, because equity generally does not step-in when there is an adequate remedy at law–e.g., enforcement of a contractual obligation that sets the rights, obligations and expectations of the parties.  This further bolsters the importance of the language used in the specific standard setting IPR policy and specific patent owner commitment at issue when determining rights and obligations under standard essential patents subject to a standard setting obligation.
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Today, in SCA v. First Quality, the Federal Circuit sitting en banc ruled that the equitable doctrine of laches remains a valid defense in patent infringement actions notwithstanding the Supreme Court’s recent decision in Petrella v. MGM, 134 S. Ct. 1962 (2014), that precludes laches as a defense for copyrights.  This decision