On September 17, 2014, the Federal Circuit decided the SCA Hygiene Products v. First Quality Baby Products case (Case No. 2013-1564). On appeal was the district court’s summary judgment grant of laches and equitable estoppel. The Federal Circuit affirmed the district court’s grant of laches and reversed its grant of equitable estoppel.
The dispute between SCA and First Quality began in October of 2003, when SCA sent First Quality a letter alleging infringement of SCA’s ’646 patent. Shortly thereafter, First Quality responded and asserted that the ’646 patent was anticipated by a specific piece of prior art, which First Quality identified in its letter. On July 7, 2004, SCA filed a request for ex-parte reexamination of the ’646 patent based on the prior art identified by First Quality. On March 27, 2007 (nearly three years after the reexamination request), the ’646 patent emerged from reexamination with the validity of the original claims confirmed and several new claims granted.
Beginning in 2006, First Quality began expanding its line of accused products. First Quality’s investment included the acquisition of a company, and with that company, additional accused products. On August 2, 2010, SCA filed suit alleging infringement of the ’646 patent. In all, almost seven years passed between the time that SCA sent its infringement letter to First Quality and the filing of suit. The following is a timeline of the relevant of events:
SCA first argued that the period of delay for a laches inquiry should exclude any time that the patent is involved in a post-grant proceeding at the USPTO. If the reexamination time is excluded, SCA’s suit would have been filed well within six years and the presumption of laches (which applies to delay periods in excess of six years) would not apply. SCA also argues that the Supreme Court’s Petrella v. Metro-Goldwyn-Mayer case (decided May 19, 2014) should apply to patent cases to bar a finding of laches as long as the relevant statute of limitations is not violated.
The Federal Circuit found that any time in which a patent is involved in a post-grant proceeding should not be excluded from the delay period. The Federal Circuit declined to extend Petrella to laches inquiries in patent cases as suggested by SCA. Thus, the district court properly found that a (rebuttable) presumption of laches applied.
SCA next argued that its delay in filing suit was reasonable and excusable. The focus of this inquiry was on SCA’s three-year delay in filing suit after the conclusion of the reexamination. In affirming the district court’s finding that this delay was unreasonable, the Federal Circuit considered the following facts:
- SCA continuously tracked First Quality’s activity;
- SCA has an entire department dedicated solely to competitive intelligence;
- SCA evaluated First Quality’s products during the reexamination period;
- SCA was represented by U.S. patent counsel when it sent letters to First Quality and during the reexamination proceedings; and
- No evidence suggests that SCA was unable to find counsel or reinitiate contact with First Quality shortly after the reexamination ended.
The Federal Circuit also affirmed the district court’s finding of economic prejudice. The Federal Circuit relied on First Quality’s expansion of accused products and investment of more than $10 million into these products. According to the Federal Circuit, the record evidence suggests that First Quality would have restructured its activities to minimize infringement liability if SCA had brought suit earlier.
In reversing the district court’s summary judgment grant of equitable estoppel, the Federal Circuit found that SCA’s verbal charge of infringement followed by silence is not sufficient affirmative conduct to induce a belief that an infringement claim has been abandoned. Distinguishing cases cited that grant equitable estoppel, the Federal Circuit found that First Quality’s responsive letter did not solicit any further comment from SCA.