In my view, Patent Act § 287(a) is—along with § 289, which requires the disgorgement of a design patent infringer’s “total profit” attributable to the infringing article of manufacture—one of the least defensible provisions of the statute. Section 287(a) establishes a general rule that patent owners cannot recover damages for any infringement of their patents occurring before the date on which they marked their products with the patent number, or provided actual notice to the accused infringer that their products are patented; but the statute, as interpreted by the courts, is so riddled with exceptions and with formalisms that it is instead largely a trap for the unwary (much like the ill-advised rule, reaffirmed in Kimble v. Marvel, that an agreement requiring the payment of post-expiration royalties is unenforceable per se). For an overview of my criticism of the statute, see my article Fifty Years of Patent Remedies Case Law: Two Steps Forward, One Step Back, 50 AIPLA Q.J. 607, 621-25 (2022). Nevertheless, one intriguing issue surrounding the statute’s interpretation, however, is what to do when a nonpracticing patent owner and an accused infringer agree to a settlement under which the accused infringer will continue engaging in the alleged use of the patented invention in the products it makes and sells, but does not admit that its products actually are infringing. Is the patent owner obligated to ensure that the accused infringer marks those products anyway, because as a general rule the licensor must take reasonable steps to ensure that its licensee comply with the marking requirement? What if the accused infringer balks because, as stated above, it continues to dispute that its products actually infringe?
It's not clear what the right answers to these questions are. In a recent article on IP Watchdog, titled NPEs Have No Obligation to Mark Under the Statute—and that Should Extend to an NPE’s Settlement Licensees, William P. Ramey III argues, well, what the title says. The author provides advice on how NPEs should respond, in cases in which a defendant discovers that the products sold by a third party who entered into a license with the NPE are not marked. One recommendation is that the NPE should plead that, while it “believes there was infringement, the defendant entity did not agree that it was infringing. Thus, each prior settlement license reflected a desire to end litigation and as such the policies of Section 287 are not violated.” That seems sensible to me. The author also advises, however, that in some instances the NPE should plead that, although it or its predecessors entered into settlements with third parties, “none of the settlement licenses were to produce a patented article, for or under the Plaintiff’s patents”; or that the “NPE should plead that all settlement licenses were to end litigation and not to produce a patented article.” That phrasing suggests to me that the NPE would be admitting that the “licenses” weren’t necessary to avoid infringement—but if not, then is the NPE entitled to continue recovering royalties from the third party? Has it engaged in some form of misuse or bad faith assertion? Maybe I’m misunderstanding this part of the proposed advice, I don’t know.
My former student Bernard Cryan published a very good paper on this very topic three years ago, which I have previously mentioned on this blog. The paper is titled Not All Patent Licensees Are the Same: 35 U.S.C. § 287 Should Not Require Marking by Licensees That Deny Infringement, 101 J. Pat. & Trademark Off. Soc'y 531 (2021), and here is the abstract:
Current patent marking law requires all licensees--even those that deny infringement--to comply with 35 U.S.C. § 287. This requirement has several undesirable consequences such as discouraging settlement agreements. Not all licensees, however, are the same. Patent marking law fails to recognize that “no-admission licensees”--patent licensees who deny infringement and do not believe they need a license but agree to a license anyway--should be treated differently. The Federal Circuit can and should correct this flaw by (1) holding that a patentee can satisfy the “reasonable efforts” requirement under the Arctic Cat rule of reason analysis by making no efforts or minimal efforts to ensure its no-admission licensees comply with the marking requirements of § 287, or (2) holding that a no-admission licensee does not act “for or under” the patentee for § 287 purposes. Both solutions allow a patentee to provide constructive notice even if its no-admission licensees did not mark. Further, the Federal Circuit can adopt the five-factor test proposed below to distinguish between no-admission and traditional licensees. The proposed solutions leave the law undisturbed with respect to traditional licensees. Although the no-admission licensee situation may arise only infrequently, addressing the issue will help the patent system.
As
you can see, both authors are of the view that the settling licensee’s
nonmarking should not preclude the licensor from recovering damages.
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