While I was away last week, the Federal Circuit handed down its decision in VDPP, LLC v. Volkswagen Group of America, Inc., precedential opinion by Chief Judge Moore joined by Judges Lourie and Cunningham. The patent at issue had expired by the time the patentee sued Volkswagen, and so the patentee could only seek damages for infringement occurring (a) prior to patent expiration and (b) within the six-year statute of limitations. The patentee nevertheless failed to plead with sufficient particularity, much less prove, that it had made reasonable efforts to ensure that other entities to whom it had licensed the patent in suit pursuant to settlement agreements complied with the patent marking requirement set forth in 35 U.S.C. § 287(a). The Federal Circuit affirms that that failure is fatal to the patentee’s ability to recover damages, and since that was the only relief to which it might have been entitled, it failed to state a claim upon which relief may be granted. In addition, the court affirms an award of attorneys’ fees, for reasons discussed below, and dismisses an appeal of an award of sanctions against the patentee’s attorney.
Readers who are not familiar with the peculiar U.S. patent marking requirement may benefit from a brief primer on what this all about, so here is a little background. First, § 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. Second, as the Federal Circuit reaffirms in VDPP, the marking/actual notice requirement is intended to “(1) help[] . . . avoid innocent infringement; (2) encourag[e] patentees to give public notice that the article is patented; and (3) aid[] the public [in] identify[ing] whether an article is patented” (opinion at 6, citation omitted). Third, according to the case law, if a patentee licenses its patents to another entity, it must make reasonable efforts to ensure that the licensee complies with the marking requirement, if it wishes to recover damages for infringing activity that pre-dates the date on which it puts the accused infringer on actual notice. (Actual notice can be accomplished by means of a cease-and-desist letter or, at the latest, by the service of the complaint.) Fourth, however, the marking requirement is riddled with so many exceptions and formalisms that, in my opinion, we would be better off without it. As I have written previously, the three policy justifications recited above
may sound reasonable, but in practice marking does not necessarily further [them], and the manner in which the statute has been interpreted produces some strange results. In particular, absent compliance with the marking requirement damages will not begin to accrue until the owner provides the infringer with actual notice, even if the infringer has acquired actual knowledge of the patent prior to that date. That seems bad enough, but now consider what happens if the owner has failed to mark but the defendant, with actual knowledge of the owner’s patent, knowingly induces a third party to infringe that patent. Under the law of induced infringement, the defendant is liable from the moment the third party takes the bait and begins infringing, precisely because the defendant had actual knowledge of the patent; and yet damages cannot accrue until the date on which the owner provides actual notice, even though common sense would suggest that such notice is superfluous. Similarly, a defendant may be adjudicated a willful infringer, and thus be on the hook for enhanced damages, based on evidence that it knowingly infringed prior to the owner’s having put the defendant on actual notice; but if the owner failed to mark its products, no damages (enhanced or otherwise) will accrue until the date of actual notice. On the other hand, if the owner successfully asserts a process patent instead of a product patent, damages accrue from the moment of infringement regardless of whether the owner provides actual notice or the defendant has actual knowledge, because there is nothing to mark. Nevertheless, if the owner asserts both a product and a process claim of a patent containing both, and sells unmarked goods covered by the product claim and made in accordance with the process claim, a defendant who infringes both product and process claims is probably not liable for damages until the owner provides actual notice. The outcome is the same if the owner asserts both claims but only prevails on the process claim. If the owner asserts only the process claim, however, it can recover damages from the date the infringement began; similarly, if the owner has two separate patents, one reciting product and the other process claims, it can recover damages for the infringement of the process patent from the date that infringement began, and it can recover damages for the damages for infringement of the product patent from the date on which it puts the infringer on actual notice.
Fifty Years of Patent Remedies Case Law: Two Steps Forward, One Step Back, 50 AIPLA Q.J. 607, 621-25 (2022) (citations omitted). Moreover, the owner of an idle patent--that is, a patentee who doesn't manufacture, sell, or license any products covered by the patent--can recover damages from the date the infringement starts, as long as it's within the statute of limitations, regardless of whether it puts the accused infringer on actual notice prior to filing suit (see opinion, p.5). And as my former student Bernard Cryan noted in his paper Not All 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), cases involving licenses entered into pursuant to settlements are particularly fraught, because the licensee may agree to settle simply to avoid the cost of litigation, and may believe in good faith that its products do not infringe. To be sure, in the present case the Federal Circuit states that “the subjective view of the accused infringer” does not matter (p.6); but 35 U.S.C. § 292(a) states that “[w]hoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word 'patent' or any word or number importing that the same is patented, for the purpose of deceiving the public,” is potentially liable for a $500 fine (or in some cases damages) for false patent marking. Should the patentee nevertheless require the settling licensee to mark its products, even if the latter doesn’t believe that the claims of the patent in suit actually read on its products?
My opinion is that, in practice, these rules are so arbitrary that we would ought to abolish the marking requirement altogether; or, alternatively, we could mimic practice in the U.K. and condition awards of damages on actual or constructive knowledge, such that infringers with actual knowledge would not be off the hook even if the patentee has not provided actual or constructive notice, while infringers of process patents who have no pre-suit knowledge or notice of those patents would not be liable for damages accruing prior to the filing of the complaint. Either option would be a rational, defensible rule, but in my view our current U.S. practice is not. (For further discussion from a comparative law perspective, see my book Remedies in Intellectual Property Law (Edward Elgar Publishing 2026), pp. 129-36.)
Coming back to the present case, as mentioned above the court also affirms an award of fees, though this is only partly related to the patent marking issue:
The district court did not abuse its discretion in determining this was an exceptional case. Specifically, the court reasonably determined that “[m]any of the positions VDPP took were frivolous and objectively unreasonable,” including seeking future damages and an injunction on an expired patent, seeking past damages despite an inability to allege patent marking, failing to disclose relevant settlement agreements, and prolonging litigation with false statements about the settlement agreements. . . . The court also noted that “VDPP made sloppy errors, over and over” ranging from obviously incorrect venue allegations to initial disclosures about an unrelated patent, which made the case “even more cumbersome and difficult to handle.” . . . Moreover, the court found a “need for meaningful deterrence” based in part on VDPP’s pattern of repeat litigation over the ’452 patent involving “settlement demands far less than the costs of defense and unrelated to any damages theory.” . . . The court further rejected VDPP’s argument that the fee award should be limited to the exceptional portion of the case because “VDPP’s misconduct infected the entire litigation” (pp. 7-8, citations omitted).
The court further notes that a case may be “exceptional” even if the losing party’s conduct is not sanctionable under Rule 11 of the Federal Rules of Civil Procedure (pp. 8-9). Further, while “‘filing a large number of suits does not, by itself, justify an inference of . . . an improper motive,’ Thermolife Int’l LLC v. GNC Corp., 922 F.3d 1347, 1363 (Fed. Cir. 2019), and ‘[t]he mere existence of these other suits does not mandate negative inferences about the merits or purpose of this suit,” SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1351 (Fed. Cir. 2015). But we have also recognized that ‘a pattern of litigation abuses characterized by the repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one’s claims, is relevant to a district court’s exceptional case determination under [35 U.S.C.] § 285,’ and ‘a district court should consider a patentee’s pattern of litigation where adequate evidence of an abusive pattern is presented.’ SFA, 793 F.3d at 1350, 1352 (emphases added)” (pp. 8-9).
Finally, the court dismisses the portion of the appeal relating to attorney sanctions, on the basis of its conclusion that the attorney “failed to timely appeal the district court’s sanctions order on his own behalf and that VDPP lacks standing to contest the sanctions for him” (p.13).
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