Does Petrella’s Laches Rule Apply to Claims for Monetary Damages in Patent Cases?

The Supreme Court’s opinion in Petrella v. MGM from earlier this year left an important issue on the table: Does the Court’s rule that laches may not be invoked to bar claims for monetary damages in a copyright case apply to patent cases as well? (I wrote about the Petrella opinion in an earlier post.) In SCA Hygiene v. First Quality, a panel of the Federal Circuit was asked to decide that very question, and in an opinion issued last Wednesday, it punted:

We first turn to the issue of laches. As a preliminary matter, SCA argues that Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014), “compels a finding that [Aukerman] is no longer good law.” . . . In particular, SCA points out that the Supreme Court has never “approved the application of laches to bar a claim for damages brought within the time allowed by a federal statute of limitations.” Petrella, 134 S. Ct. at 1974.

But Petrella notably left Aukerman intact. See id. at 1974 n.15 (“We have not had occasion to review the Federal Circuit’s position.”). Because Aukerman may only be overruled by the Supreme Court or an en banc panel of this court, Aukerman remains controlling precedent.

Aukerman refers to a Federal Circuit opinion from 1992 where the en banc court held that laches could be invoked to bar claims for monetary damages within the Patent Act’s six-year limitation period. In this post, I’ll explain why I think the Federal Circuit panel in SCA Hygiene got it wrong. In my opinion, Aukerman is undoubtedly no longer good law in light of the Supreme Court’s reasoning in Petrella.

Here’s what the Supreme Court said about Aukerman in a footnote in Petrella:

The Patent Act states: “[N]o recovery shall be had for any infringement committed more than six years prior to the filing of the complaint.” 35 U.S.C. § 286. The Act also provides that “[n]oninfringement, absence of liability for infringement or unenforceability” may be raised “in any action involving the validity or infringement of a patent.” § 282(b) (2012 ed.). Based in part on § 282 and commentary thereon, legislative history, and historical practice, the Federal Circuit has held that laches can bar damages incurred prior to the commencement of suit, but not injunctive relief. A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1029–1031, 1039–1041 (1992) (en banc). We have not had occasion to review the Federal Circuit’s position.

The Petrella Court did not take a position on Aukerman, which is unsurprising considering that no patent claims were before the Court at the time. Instead, the Court expressly declined to review that particular opinion. However, the Federal Circuit panel in SCA Hygiene failed to consider whether the Petrella Court’s reasoning implicitly overruled Aukerman—at least insofar as the applicability of laches to claims for monetary damages are concerned.

In an opinion issued this past July, a different panel of the Federal Circuit explained the rule as to earlier circuit court decisions being implicitly overruled by the Supreme Court:

It is established that a later panel can recognize that the court’s earlier decision has been implicitly overruled as inconsistent with intervening Supreme Court authority. See, e.g., Miller v. Gammie, 335 F.3d 889, 899 (9th Cir. 2003) (en banc) (“[C]ircuit precedent, authoritative at the time that it has issued, can be effectively overruled by subsequent Supreme Court decisions that are closely on point, even though those decisions do not expressly overrule the prior circuit precedent.”) (internal quotation marks omitted); see also United States v. Fisher, 502 F.3d 293, 296, 306-07 (3d Cir. 2007); Dawson v. Scott, 50 F.3d 884, 892 n.20 (11th Cir. 1995) (“In view of these intervening Supreme Court precedents, [the prior panel decision] does not control and appears to be overruled.”). We have adopted and applied this principle. See, e.g., Doe v. United States, 372 F.3d 1347, 1354-57 (Fed. Cir. 2004) (concluding that prior precedent has been undermined by intervening Supreme Court decisions, and was therefore “no longer good law”) . . . .

“[T]he issues decided by the higher court need not be identical to be controlling. Rather, the relevant court of last resort must have undercut the theory or reasoning underlying the prior circuit precedent in such a way that the cases are clearly irreconcilable.” Miller, 335 F.3d at 900. Indeed, lower courts are “bound not only by the holdings of higher courts’ decisions but also by their ‘mode of analysis.’” Id. (citing Antonin Scalia, The Rule of Law as the Law of Rules, 56 U. Chi. L. Rev. 1175, 1177 (1989)); see also United States v. Lindsey, 634 F.3d 541, 550 (9th Cir. 2011) (“[W]e are an intermediate court within the federal system, and as such, we must take our cue from the Supreme Court. . . . Setting [a prior panel’s] holding aside for a moment, in our estimation the case’s reasoning has been fatally undercut by the Supreme Court.”) (emphasis in original).

Given the fact that the Supreme Court in Petrella directly spoke to the applicability of laches within a statutory limitation period to claims for monetary damages, I think the Federal Circuit panel in SCA Hygiene shirked its duty to determine whether Petrella had implicitly changed the law in the patent context. As “an intermediate court within the federal system,” the Federal Circuit panel was obligated to “take [its] cue from the Supreme Court.” Respectfully, I think the circuit panel should have determined whether Petrella “undercut the theory or reasoning underlying” Aukerman.

To explain why I think the Federal Circuit panel in SCA Hygiene got it wrong, I need to compare the Supreme Court’s reasoning in Petrella to that of the en banc Federal Circuit in Aukerman. But, first, I think it’s helpful to start with the difference between the statutory limitation period found in the Copyright Act and the one found in the Patent Act. The Copyright Act contains a broad statutory limitation. Section 507(b) provides:

No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.

The Copyright Act, therefore, bars all claims—including claims for monetary damages—that have accrued more than three years prior to when the action is initiated. The Patent Act, by contrast, contains a much narrower statutory limitation. Section 286 provides:

[N]o recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.

The Patent Act, therefore, only bars claims for monetary damages that have accrued more than six years prior to when the action is initiated. Thus, these limitations are exactly the same in one important regard: They both bar claims for monetary damages that have accrued more than a set number of years before the action is initiated. For copyright claims, it’s three years, and for patent claims, it’s six years, but with both, Congress has explicitly spoken to the timeliness of claims for monetary damages.

In Aukerman, the en banc Federal Circuit addressed the availability of the laches defense within Section 286’s six-year limitation period to claims for monetary damages. Recall that laches is an equitable defense that applies when the plaintiff unreasonably delays in filing suit to the material prejudice of the defendant. Laches reflects one of the traditional maxims of equity, namely, that equity aids the vigilant, not those who sleep on their rights. (In Latin: “Vigilantibus non dormientibus æquitas subvenit.”)

The Federal Circuit in Aukerman rejected the plaintiff’s argument that laches could not be applied to claims for monetary damages within the six-year limitation period:

Aukerman’s argument is doubly flawed. First, Aukerman is in error in its position that, where an express statute of limitations applies against a claim, laches cannot apply within the limitation period. . . .

Second, with respect to section 286 specifically, a six-year limitation on damages, virtually identical to section 286, has been in the patent statute since 1897. . . . [S]ection 286 is not a statute of limitations in the sense of barring a suit for infringement. Assuming a finding of liability, 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. . . .

We are unpersuaded that section 286 should be interpreted to preclude the defense of laches and provide, in effect, a guarantee of six years damages regardless of equitable considerations arising from delay in assertion of one’s rights. . . .

Even looked at afresh, we have no difficulty in reading section 286 harmoniously with the recognition under section 282 of the laches defense. 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. . . .

Aukerman also argues 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. Inasmuch as the patent statute was amended in 1946 to eliminate the remedy of an equitable accounting, per Aukerman, this change also eliminated the basis for a laches defense. We disagree.

For many decades, parties have generally been allowed to plead equitable defenses at law without having to resort to a separate bill in equity. In 1915, Congress enacted 38 Stat. 956, codified as 28 U.S.C. § 398, which authorized such pleadings. As of that time, laches became available to bar legal relief, including patent damage actions. . . . Section 398 was then superseded in 1937 by Fed.R.Civ.P. 2 which merged legal and equitable claims into a single civil action. . . . Section 398 was later repealed as being obsolete in light of Fed.R.Civ.P. 2. . . . The right to interpose the equitable defense of laches in patent litigation, therefore, remains as viable today as it was when section 398 was first enacted in 1915.

In any event, the right to interpose the equitable defense of laches in a civil action is specifically recognized in Fed.R.Civ.P. 8(c). . . . Hence, we are unpersuaded that the technical distinction between application of laches against legal damages and an equitable accounting which Aukerman asks us to draw should be made.

Thus, the Federal Circuit reasoned that: (1) laches can be applied within an express statutory limitation period; (2) Section 286 bars claims for damages, not suits for infringement; (3) courts should be allowed to consider the equities in awarding monetary damages; (4) Section 282 recognizes the laches defense; (5) the equitable defense of laches can be applied to a legal claim for monetary damages; and (6) Rule 8(c) guarantees that laches is available for all claims, whether legal or equitable in nature.

In my opinion, post-Petrella, every single one of these reasons is no longer viable. As to the contention that laches can be applied to a claim for monetary damages within a statutory limitation period, the Supreme Court in Petrella explicitly held:

To the extent that an infringement suit seeks relief solely for conduct occurring within the limitations period, however, courts are not at liberty to jettison Congress’ judgment on the timeliness of suit. Laches, we hold, cannot be invoked to preclude adjudication of a claim for damages brought within the three-year window.

Note that this holding is not tied to the Copyright Act’s statute of limitations; it applies to statutory limitation periods across the board. The reason is simple: Since Congress has expressly determined timeliness, it implicates separation of powers concerns when courts “jettison” that determination. The fact that Section 286 only bars claims for monetary damages, instead of barring all claims as Section 507(b) does, is irrelevant. The fact remains that Congress has established its “judgment on the timeliness” of claims for monetary damages in patent cases. And it follows that courts simply cannot “jettison” that express timeliness determination without implicating separation of powers concerns.

Of course, the fact that Congress only spoke as to timeliness with respect to claims for monetary damages in patent cases means that it did not speak to timeliness with respect to any other types of claims, and it follows that courts can weigh the equities when considering other types of claims in patent cases without implicating separation of powers concerns. However, the Court’s holding in Petrella makes clear that, contrary to the Federal Circuit’s position that courts should always be able to weigh the equities, when there is a statutory limitation period for a given claim, the equitable defense of laches can only be invoked to bar or limit equitable claims:

As to equitable relief, in extraordinary circumstances, laches may bar at the very threshold the particular relief requested by the plaintiff. And a plaintiff’s delay can always be brought to bear at the remedial stage, in determining appropriate injunctive relief, and in assessing the “profits of the infringer … attributable to the infringement.” § 504(b). . . .

[L]aches is a defense developed by courts of equity; its principal application was, and remains, to claims of an equitable cast for which the Legislature has provided no fixed time limitation. See 1 D. Dobbs, Law of Remedies § 2.4(4), p. 104 (2d ed. 1993) (hereinafter Dobbs) (“laches … may have originated in equity because no statute of limitations applied, … suggest[ing] that laches should be limited to cases in which no statute of limitations applies”). Both before and after the merger of law and equity in 1938, this Court has cautioned against invoking laches to bar legal relief. See Holmberg v. Armbrecht, 327 U.S. 392, 395, 396, 66 S.Ct. 582, 90 L.Ed. 743 (1946) (in actions at law, “[i]f Congress explicitly puts a limit upon the time for enforcing a right which it created, there is an end of the matter,” but “[t]raditionally …, statutes of limitation are not controlling measures of equitable relief”); Merck & Co. v. Reynolds, 559 U.S. 633, 652, 130 S.Ct. 1784, 176 L.Ed.2d 582 (2010) (quoting, for its current relevance, statement in United States v. Mack, 295 U.S. 480, 489, 55 S.Ct. 813, 79 L.Ed. 1559 (1935), that “[l]aches within the term of the statute of limitations is no defense [to an action] at law”); County of Oneida v. Oneida Indian Nation of N. Y., 470 U.S. 226, 244, n. 16, 105 S.Ct. 1245, 84 L.Ed.2d 169 (1985) (“[A]pplication of the equitable defense of laches in an action at law would be novel indeed.”).

Because we adhere to the position that, in face of a statute of limitations enacted by Congress, laches cannot be invoked to bar legal relief, the dissent thinks we “plac[e] insufficient weight upon the rules and practice of modern litigation.” Post, at 1985. True, there has been, since 1938, only “one form of action—the civil action.” Fed. Rule Civ. Proc. 2. But “the substantive and remedial principles [applicable] prior to the advent of the federal rules [have] not changed.” . . . Holmberg, Merck, and Oneida so illustrate. The dissent presents multiple citations, . . . many of them far afield from the issue at hand, others obscuring what the cited decisions in fact ruled. . . . Yet tellingly, the dissent has come up with no case in which this Court has approved the application of laches to bar a claim for damages brought within the time allowed by a federal statute of limitations. There is nothing at all “differen[t],” see post, at 1985, about copyright cases in this regard.

Thus, the substantive differences between law and equity remain in force, even though the procedural differences have been eradicated. The Court in Petrella even dispensed with the argument that Rule 8(c) somehow makes laches available to every type of claim:

Laches is listed among affirmative defenses, along with, but discrete from, the statute of limitations, in Federal Rule of Civil Procedure 8(c). Accordingly, MGM maintains, the plea is “available … in every civil action” to bar all forms of relief. . . . To the Court’s question, could laches apply where there is an ordinary six-year statute of limitations, MGM’s counsel responded yes, case-specific circumstances might warrant a ruling that a suit brought in year five came too late. . . .

The expansive role for laches MGM envisions careens away from understandings, past and present, of the essentially gap-filling, not legislation-overriding, office of laches. Nothing in this Court’s precedent suggests a doctrine of such sweep. Quite the contrary, we have never applied laches to bar in their entirety claims for discrete wrongs occurring within a federally prescribed limitations period. Inviting individual judges to set a time limit other than the one Congress prescribed, we note, would tug against the uniformity Congress sought to achieve when it enacted § 507(b).

The only reason invoked by the Federal Circuit in Aukerman that the Supreme Court did not look at in Petrella is the proposition that Section 282 recognizes the availability of laches to claims for monetary damages. I think this reason is easily dismissed: Nowhere does Section 282 mention laches, and the Aukerman court didn’t contend otherwise. Instead, the Federal Circuit claimed that this recognition of laches comes from the “commentary of one of the drafters of the revised patent statute.” In particular, the circuit court cited the following passage:

The defenses which may be raised in an action involving the validity or infringement of a patent are[:] …. ‘Noninfringement, absence of liability for infringement, or unenforceability’ [35 U.S.C. § 282][;] … this would include … equitable defenses such as laches, estoppel and unclean hands. P.J. Federico, Commentary on the New Patent Law, 35 U.S.C.A. 1, 55 (West 1954).

Of course, the comments of one of the drafters of the Patent Act are not statutory law, but even on its own terms, Federico’s comments merely suggested that certain equitable defenses were to remain available. He said nothing about whether those equitable defenses could be applied to claims for legal relief in all cases. Moreover, even if he had said that, the Supreme Court in Petrella explicitly rejected the notion that laches can be applied to claims for monetary damages within a statutory limitation period. Obviously, the comments of a drafter do not trump the Supreme Court’s explicit holding to the contrary.

Given the Supreme Court’s broad holding in Petrella, I don’t see how it’s possible that “Petrella notably left Aukerman intact,” as the Federal Circuit panel in SCA Hygiene contended last week. The Court’s holding that the equitable defense of laches cannot be invoked within a statutory limitation period to bar a claim for monetary damages could not be any clearer. In my opinion, this is true for the Copyright Act and the Patent Act alike.

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