Patent Marking and Settlement Licensees

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. 

From Around the Blogs

1.  On EPLaw, Sarah Taylor and Stefan van Kolfschooten published a post titled UPC—10x Genomics v. Curio Bioscience:  10x Genomics finds new success in securing a preliminary injunction against Curio.  The post discusses, and links to, an April 30 decision of the Düsseldorf Local Division of the UPC granting a preliminary injunction against the alleged infringement of claims of EP 2 697 391 B1.  As the authors state, the decision “reiterated the standard for granting PI’s that it should be ‘more likely than not’ that the asserted patent is valid even where validity has not previously been challenged,” and also “reiterated that as soon as a patentee has knowledge of the alleged infringement, it must take the necessary measures and obtain the documents required to support its claims” and then file its application for a PI within one month.  (Florian Mueller also discusses this decision on ip fray, here.)  Meanwhile, on the Kluwer Patent Blog, Matthieu Dhenne takes issue with the Munich Local Division’s articulation of the PI standard in last fall’s 10x Genomics case against Nanostring, arguing that “preponderant likelihood” of infringement “is too close to the infringement itself.”       

2.  Spicy IP has published a two-part series by Praharsh Gour and Swaraj Paul Barooah titled Looking for Reasons in the Delhi High Court’s FRAND Determination in the Ericsson-Lava SEP Case (links here and here).  As previously noted on ip fray and on this blog, in late March the Delhi High Court ordered Lava to pay Ericsson a global FRAND royalty, covering a portfolio of FRAND-committed SEPs for the period 2011-20, plus costs, totaling approximately USD $30 million.  The authors of these two posts make some good points in their critique of the decision.  In the first post in particular, discussing the use of comparables, they ask “how does one determine ‘non-discrimination’ . . . without having any sense of what rates other are being offered? . . .  Though later rates in these comparable agreements were held as FRAND by the Court, for doing so Ericsson had to place these agreement in the record. . . . This makes use wonder if one can be a willing licensee with asymmetrical information?”  (I have made a similar point myself about the tension between the nondiscrimination requirement and the confidentiality of consummated licenses.)  They also note, however, that “regardless of Ericsson’s justified or unjustified non-disclosure, Lava also failed to make a counter proposal, which is a key ingredient to determine the willingness of the parties.  Our point here is not about the outcome, (which would likely have been the same) but the process.”     

3.  Law360 has published some interesting articles recently on patent remedies, including Andrew Karpan’s article about the Marcum Patent Litigation Study which I mentioned on Monday.  One is an article by Nicholas Nowak and Jamie Dohopolski titled Why Fed. Circ. Should Resolve District Split on Patent Statute, discussing a difference of opinion among the lower courts on what patent owners must do to comply with the patent marking statute “when such a mark cannot be placed on the patented article itself due to the character the article.”  As I have stated ad nauseam, the patent marking statute is in my opinion an absurdity that Congress should repeal altogether.)  Another is  Deepa Sundararaman and Cleve Tyler’s 10 Lessons from a Deep Dive Into IP Damages, discussing the authors’ “insights into expert admissibility based on more than 400 orders and covering about 1,300 decisions regarding specific challenges regarding IP damages expert opinions,” which is based on their recent article in the Texas Intellectual Property Law Journal, which I previously noted here.  A third is by James Donohue and Marie Sanyal, titled Patent Damages Jury Verdicts Aren't Always End of the Story, reports that about a third of patent damages jury awards are overturned post-trial (on which issue, see also the Marcum study noted above).  A fourth is Amol Parikh and Ian Howard’s article Fed. Circ. Defines Foreign IP Damages, Raises New Questions, discussing the recent decision in Brumfield v. IBG LLC, which I discussed here.  These authors note, inter alia, the proximate cause questions left open by the decision.  Professor Tim Holbrook also has a very good essay on the case on Patently-O, titled Guest post by Prof. Holbrook: Extraterritoriality and Patent Damages Under § 271(a).  He graciously acknowledges our differences of opinion on the underlying issue of whether courts may award damages for extraterritorial losses caused by domestic infringement, stating that “ The decision in Brumfield feels more like the analysis posited by Professor Cotter, although a richer engagement with the statute [§ 271(a)] would have been helpful.”

AIPLA Q.J. 50th Anniversary Issue Is Now Out

I am pleased to announce that Volume 50, Issue 4 of the American Intellectual Property Law Association (AIPLA) Quarterly Journal is now out.  The table of contents is below.  The list of authors includes, among others, two current Federal Circuit judges, the Director of the USPTO, the Register of Copyrights, . . . . and me.  Although the articles are behind a paywall, you can see my paper Fifty Years of Patent Remedies Case Law: Two Steps Forward, One Step Back, on ssrn here.