Richard Lloyd

We’re currently seeing a flurry of patent activity from the Supreme Court. Earlier this week it heard oral arguments in Impression Products Inc v Lexmark International while it also released its opinion in SCA Hygiene Products Aktiebolag v First Quality Baby Products. Then on Monday the eight justices will hear arguments in the eagerly anticipated TC Heartland LLC v Kraft Food Group Brands LLC, - a case focused on venue selection in patent suits, which could undermine the Eastern District of Texas’s position as the plaintiffs’ forum of choice.   

The SCOTUS ruling in SCA Hygiene does not carry that same significance, but in an era of patent scepticism from the US’s highest court, it does at least register as a rare opinion on to come down on the pro-patent side.

At issue was the use of laches as a defence against allegations of patent infringement. SCA accused First Quality of this and in 2003 and First Quality responded that one of its own patents pre-dated SCA’s grant, thus invalidating it. SCA turned to the USPTO for a re-examination of its patent which the Office found to be valid even in light of First Quality’s own right.

In 2010 SCA sued First Quality in district court but was defeated as the result of a summary dismissal on the grounds of equitable estoppel and laches. The case went to the Court of Appeals for the Federal Circuit which also ruled that laches could be used as a defence against a damages claim incurred within the Patent Act’s six year limitation period. While that appeal was pending, however, the Supreme Court decided Petrella v Metro-Goldwyn-Mayer, concerning the use of a laches defence in a copyright case. As in that decision, a clear majority of the SCOTUS justices in SCA ruled that laches could not be invoked as a defence against a claim for damages within the limitation period.

The decision therefore gives patent owners a longer window in which to assert, potentially increasing the amount of damages they’re entitled to. So, a victory for beleaguered US rights holders – but not one that will have them dancing in the streets. It is, as one observer pointed out, not exactly a monumental decision. According to Kent Richardson of Richardson Oliver Law Group it was largely expected, meaning the impact should be limited. “Other business decisions will drive licensing activity to a much greater degree than this laches issue (or no laches issue),” he wrote in an email to IAM. Mintz Levin’s Michael Renaud concurred: “It doesn't hurt but I personally don't see it as a big boost because I don't think laches was driving too many settlement or licensing decisions.”

But patent owners can take some comfort from the decision in that it adds to what are generally seen to be improving market conditions. “This case is part of a continuing move to more certainty in patent law,” commented Steve Steger, managing partner of Global IP Law Group. “It’s not going to cause an Alice-level shift in the marketplace but it has taken an area of the law that was kind of murky and put some certainty around it.”

IP Nav founder Erich Spangenberg - now director of acquisitions, licensing and strategy at Marathon Patent Group - also offered some cause for optimism. “SCA is a good decision for patent owners but, there are still other equitable defences and these may become more popular and more likely to be granted if the judge does not like the case for equitable reasons,” he commented. “SCA should help on valuation - particularly late in life patent assets - but it will not make up for what is likely coming in the TC Heartland venue case, which will make what is now a slow drawn out adjudication process a much longer and slower adjudication process.”

Of course, this being the Supreme Court there’s always scope for some patent scepticism, and, as is often the case, in the SCA decision that came from Justice Breyer. In his lone dissent he sketched out the harm that might be done to manufacturers by weakening the laches defence with patent owners lurking in the shadows before bringing a claim. “A patentee might wait for a decade or more while the infringer (who perhaps does not know or believe he is an infringer) invests heavily in the development of the infringing product (of which the patentee’s invention could be only a small component), while evidence that the infringer might use to, say, show the patent is invalid, disappears with time,” he wrote. “Then if the product is a success, the patentee can bring his lawsuit hoping to collect a significant recovery.”

Breyer also wrote the dissent (in which he was joined by Justice Kennedy) in the other big IP decision of this week: Star Athletica, LLC v Varsity Brands, which involved copyright. It’s fair to say that his ongoing scepticism has not endeared him to large parts of the patent community. One critic, former USPTO Director Todd Dickinson, now a partner at Polsinelli, pointed out what he sees as the hypocrisy in Breyer’s comments in SCA and Star Athletica, and the court’s recent mangling of the law around patent eligible subject matter. It’s worth publishing what Dickinson had to say in full:

Twice in just two days, Justice Breyer has dissented from his colleagues’ modest expansion of IP owners’ rights in patents and copyrights.  Astonishingly, he bases his conclusion on a concern that the majority’s views would “disrupt the expectations of the inventing community” (SCA Hygiene) and “risk …unforeseeable disruption in the in the clothing industry”.  

Why astonishing?  Because when the exact same argument was made in 101 cases, where the Court narrowed patent eligibility for several important technologies; ie, software (Alice, Bilski), genetics (Myriad), and medical diagnostics (Prometheus), technologies where patents had issued for over 25 years and great businesses built and investments made based on their being patentable, he has joined opinions that suddenly called those patents into question.   Why is it only when expanding IP rights that Breyer’s opposition is based on market interruption, but when new technologies beg for protection, he won’t cover them?  

It seems that rarely has a Justice of the Supreme Court been so antagonistic towards IP rights as has Justice Breyer, and apparently any rationale, even internally inconsistent ones, is sufficient for reaching that conclusion.