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SCA Hygiene Products (SCA) holds a patent on "adult incontinence products" -- that is, adult diapers. The company sued First Quality Baby Products for infringing on its patent for a disposable diaper that can be taken on and off like underwear -- think Pull-Ups, but for adults.
A Long Waiting Period
Back in 2003, SCA sent a letter to First Quality saying something along the lines of, "Hey, we think one of your products infringes on our patent." First Quality responded by saying, "Hey, actually, it looks like your diaper has the same construction as our diaper, which was patented before yours was. Looks like our patent invalidates yours. Go figure."
SCA and First Quality exchanged some brief letters for the next eight months, never again mentioning SCA's patent. Then SCA asked the Patent and Trademark Office to review the patentability of its own patent. Three years later, the PTO reconfirmed the patent. Then SCA did something that's at the heart of this case: It did nothing. SCA waited until 2010 to file a complaint.
Barred by Laches
For that reason, First Quality invoked the doctrine of laches, an equitable defense that SCA had the ability to sue for three years -- six if you're counting from the original letter -- but didn't, causing prejudice to First Quality. Unfortunately for SCA, the rule is that a six-year delay, in itself, creates a presumption of prejudice that's rebutted if the other side can offer either a good reason for the delay or can prove that it wasn't prejudicial.
The Federal Circuit agreed with the district court that SCA had failed to rebut this presumption. Even though, as SCA argued, patent re-examinations like the one it made to the PTO are public, SCA wasn't exactly acting in good faith: It admittedly had "an entire department dedicated solely to competitive intelligence"; i.e., it knew exactly what products First Quality was making and whether they infringed on SCA's patents. The delay was also prejudicial to First Quality, which, in the absence of any complaint by SCA, doubled down on its investment in the products that would later turn out to probably be infringing -- something it wouldn't have done if SCA had sued them earlier.
Not Barred by Equitable Estoppel
First Quality also tried to invoke equitable estoppel, which in this case would be evidenced by SCA's claiming that First Quality was infringing on its patent, and then doing nothing, leading First Quality to believe that SCA wasn't going to sue.
The Federal Circuit found that "six terse letters over a course of eight months" didn't create anything like an affirmative statement not to sue, on which First Quality could have reasonably relied. Silence about whether SCA was going to sue wasn't the same as an affirmative statement saying, "We're not going to sue."
Because the case came to the Federal Circuit on summary judgment, the court sent the case back to district court, as there were factual issues surrounding whether First Quality really believed that SCA's patent was invalid or interpreted SCA's silence to mean the patent was invalid. Nevertheless, as the court upheld the laches defense, SCA may have lost its shot at complaining about First Quality's adult diapers.