How Long Is Too Long?

5.5.15

If you think you’ve been the victim of patent infringement, you probably shouldn’t delay filing your claim. By waiting too long, you could allow the accused infringer to build a defense called “laches” — which may lead to the dismissal of your case. That’s what happened in SCA Hygiene Products AB v. First Quality Baby Products, a decision recently handed down by the U.S. Court of Appeals for the Federal Circuit.

Years go by

SCA Hygiene Products and First Quality Baby Products compete in the market for adult incontinence products. On Oct. 31, 2003, SCA sent First Quality a letter asserting that certain First Quality products might infringe one of SCA’s patents. First Quality responded with a letter to SCA stating that SCA’s patent was invalid and, therefore, not infringed.

On July 7, 2004, SCA sought a re-examination of its patent by the U.S. Patent and Trademark Office (USPTO). Three years later, the USPTO confirmed the patentability of SCA’s patent.

In 2006, while the patent was under re-examination, First Quality expanded its line of adult incontinence products. In 2008, after SCA’s re-examination concluded, First Quality acquired another company and that company’s adult incontinence product lines. First Quality continued its expansion in 2009 at a cost of more than $10 million.

In August 2010, over three years after SCA’s re-examination concluded and nearly seven years after SCA first asserted its patent against First Quality, SCA filed a patent infringement suit against First Quality in a federal trial court. But the trial court dismissed the case based on First Quality’s defense of laches. SCA appealed the dismissal.

Surveillance vs. action

As the appellate court explained, laches is an equitable defense to patent infringement that may arise only when the accused infringer proves that the patentee unreasonably and inexcusably delayed filing the infringement suit to the “material prejudice” (meaning either evidentiary or economic harm) of the accused infringer. Laches bars retrospective relief for damages incurred before the suit was filed but not prospective relief.

Delays exceeding six years give rise to a rebuttable presumption that the delay was unreasonable, inexcusable and prejudicial. The Federal Circuit acknowledged that reasonable explanations for delay include attempts to enforce the patent, such as filing suit against another infringer. SCA argued that the re-examination period should be excluded from the total delay, and that the re-examination proceeding provided a reasonable excuse for the delay. The district court rejected these arguments.

SCA admitted that it had continuously tracked First Quality’s activity since 2003 and had an entire department dedicated to competitive intelligence. SCA continued to evaluate First Quality’s products during the re-examination period. It was also represented by patent counsel when it sent letters to First Quality and during the re-examination proceedings. Given the circumstances, the court said, SCA should have been prepared to reassert its rights against First Quality shortly after the patent emerged from re-examination.

Failure to refute

The Federal Circuit also found that SCA had failed to rebut the presumption that First Quality suffered prejudice in the form of economic harm. First Quality made a number of capital expenditures to expand its relevant product lines and increase its production capacity.

According to the court, evidence suggested that First Quality would have restructured its activities to minimize infringement liability if SCA had brought suit earlier. And SCA failed to identify any evidence that raised a genuine issue of material fact — that is, an issue that would warrant going to trial — regarding First Quality’s presumed economic prejudice.

Clear lesson

The lesson of this case is clear: When it comes to patent infringement litigation, delays can kill a patent. A patentee that waits too long to file its lawsuit risks having it dismissed for laches before it ever reaches a courtroom.