Legal Update: The Power of LachesFebruary 2022
On January 31, 2022, Judge Reed O’Connor of the Northern District of Texas issued an order in a Lanham Act counterfeiting case that is instructive with regard to a pitfall to a trademark owner as a plaintiff – the danger presented by the laches defense. The case is Rolex Watch USA Inc v. BeckerTime LLC et al., case number 4:20-cv-01060.
In September 2020, Rolex filed a lawsuit against BeckerTime LLC, a seller of repaired and refurbished Rolex watches, and Matthew Becker, co-owner of the company, alleging trademark infringement. The court upheld infringement because BeckerTime used the Rolex trademark without authorization and, among other things, modified certain watches to resemble more expensive watches, also without authorization. And while BeckerTime disclosed certain modifications, it failed to disclose that the labeling added to the watch was incorrect.
Despite this finding, however, the court held that BeckerTime did not have to disgorge profits because of the doctrine of laches. Laches has been articulated in various ways. In the Ninth Circuit, for example, laches requires proof of (1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting the defense. Lyon v. Gila River Indian Cmty., 626 F.3d 1059 (9th Cir. 2010). In the Fifth Circuit, which Judge O’Connor followed, laches requires (1) delay in asserting one’s rights, (2) lack of excuse for the delay, and (3) undue prejudice to the alleged infringer caused by the delay. Bd. of Supervisors for La. State Univ. Agric. & Mech. Coll. v. Smack Apparel Co., 550 F.3d 465, 478 (5th Cir. 2008.) Regardless of articulation, however, the basic principle is to guard against a plaintiff sitting on information that alerts them to the conduct that gives rise to legal exposure, but inexcusably delaying taking action. So, when Rolex waited a whole decade before filing suit, it clearly stumbled upon this wall.
The Texas lesson here is not to sit on ripe evidence but to consider the timing of promptly addressing the action. That action may be filing litigation, or conducting further investigation, or responding in other appropriate ways. Not only does that protect against losing potential claims under the statute of limitations, but also, as the Rolex case underscores, losing the ability to recover disgorged profits under the defense of laches. Companies should always consider these issues when weighing options to address infringing conduct.