The Academy Award winning director Franklin James Schaffner, whose 1970 film ''Patton'' won seven Oscars including best picture, died of cancer yesterday at his home in Santa Monica, Calif. He was 69 years old.

Mr. Schaffner, a past president of the Directors Guild of America, had a film career that spanned more than four decades with movies that were nominated for Academy Awards 28 times. He directed ''Papillon,'' ''Planet of the Apes,'' ''Nicholas and Alexandra,'' ''Islands in the Stream,'' and ''The Boys from Brazil.'' He had recently completed his last film, ''Welcome Home,'' for Columbia Pictures. His first film was ''The Stripper'' from the play ''A Loss of Roses'' by William Inge.

During his acceptance speech at the 1971 Academy Awards ceremonies, Mr. Schaffner said he hoped the audience would understand ''Patton'' ''not only as a war picture but as a peace picture.'' The film also earned him a Directors Guild award.

But Mr. Schaffner's many talents were not limited to motion pictures. He directed more than 150 live television plays in New York for CBS for programs like ''Studio One,'' ''Ford Theater'' and ''Playhouse 90.'' He won Emmy Awards for his directing on television in 1954, 1955 and 1962. Peabody Award Winner