Over the past several years, the U.S. Supreme court has been particularly active in addressing issues related to patent law. This year will be no different. Following on the heels of its Samsung v. Apple decision in late 2016 changing and complicating the standard for design patent infringement damages (see our prior article here), the Supreme Court has recently handed down two more patent related decisions–one that eliminates a defense to patent infringement and one that provides some clarity on exporting part of a patented invention.
Elimination of the Laches Defense for Patent Infringement– SCA Hygiene Products v. First Quality Baby Products – decided March 21, 2017
Laches is an equitable defense reflecting the idea that a party cannot wait too long to assert its rights because the delay can materially prejudice the defendant (for example, from loss of evidence, economic prejudice from investments that would not have been made if the suit was filed earlier). Laches has long been available as a patent infringement defense and often comes up in situations where a patent owner sends a cease-and-desist letter alleging some infringing activity but then waits for a long time before suing. If successful, laches bars pre-suit damages.
Last week, the Supreme Court held that a laches cannot be raised as a defense to patent infringement. The decision was expected because it follows from the Court’s 2014 decision in Petrella v. Metro-Goldwyn-Mayer, where it held that laches is not available as a defense for damages sought for copyright infringement because the defense was inconsistent with the intent of Congress as shown by the express three-year statute of limitations set forth in the copyright law. Although the relevant parts of the patent and copyright statutes differ somewhat, the Court applied the same general reasoning from Petrella to patent law, noting the express six-year statute of limitations on recovering patent infringement damages.
While laches defenses are not often successful, its availability does have some deterrent effect. Elimination of laches as a defense may encourage certain plaintiffs to ‘lie in wait’ for many years after learning of an infringement, filing suit only after target companies make capital investments and ‘lock in’ the accused design. This scenario was raised by Judge Breyer in the sole dissent. While a plaintiff that waits a long time to sue is still limited to six years of pre-suit damages, settlement leverage over the defendant may be increased by waiting until it is much more difficult for the defendant to change their product design to avoid infringement.
Exporting parts of a product covered by a U.S. Patent–Life Technologies Corp. v. Promega Corp.–decided February 22, 2017,
An owner of a United States patent law is primarily limited to enforcing their patent against infringement that occurs within the United States. However, U.S. law does give patent owners a few ways to address activities outside the country. One such provision allows the owner of a patent to enforce it against companies that supply from the U.S. “all or a substantial portion of the components of a patented invention” to be assembled in a way that would infringe patent if done in the U.S. The premise is companies should not be able to avoid infringement by shipping the parts to be assembled elsewhere. The question in this case considered how many parts is enough to be a “substantial portion.”
In its decision, the Court held that supplying a single component of a multicomponent invention to be manufactured outside of the country is not enough to give rise to patent infringement. In reaching its decision, the Court adopted a quantitative approach to evaluating a “substantial portion” and rejected a more complex analysis which would have considered the importance of the supplied component to the claimed invention.
(The specific invention at issue in this case was a genetic testing toolkit. Life Technologies exported a specific DNA enzyme from the U.S to the U.K, where it was combined with other components to make the test. The enzyme is a commodity item that can be used in many applications but is only made in the United States.)
Following this decision, a company that exports a single commodity item for combination use outside of the U.S. does not need to worry about patent infringement liability–even if the combination is patented in the US and even if the company knows that the foreign combination would infringe if made in U.S. This decision is consistent with the test for contributory infringement in the U.S., which finds no liability for sale of a commodity item capable of substantial non-infringing use.
Note that patent owners can still enforce their patent rights if the exported component is not a commodity but instead is something specifically made for use in the infringing manner. There is also some wiggle room for patent owners to allege infringement where more than one component is exported.
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The Supreme Court has several more patent issues it will be ruling on in the next several months. In Impression Products, Inc. v. Lexmark International, Inc. (argued March 21, 2017) the Court is considering the extent to which patent owners can impose restrictions on the downstream use and resale of patented products. In TC Heartland v. Kraft Foods (argued March 27, 2017) the Court is considering a procedural issue which may significantly limit the geographic area where companies can be sued for patent infringement. Depending on how the Court rules, its decisions in these cases may have significant impacts on patent licensing and enforcement. We will address these cases later this year in Part 2.