In a decision handed down last Thursday, Arctic Cat Inc. v. Bombardier Int'l, the Federal Circuit addressed several issues relating to patent damages. The opinion is authored by Judge Moore, joined by Judges Plager and Stoll.
The patents in suit "disclose a thrust steering system for personal watercraft ('PWC') propelled by jet stream" (p.2). The principal substantive issue on appeal is nonobviousness, and the Federal Circuit affirms the district court's judgment that the inventions are nonobvious. On damages, the major issue surrounds patent marking. As I explained in this post of April 19, U.S. Patent Act section 287(a) reads as follows:
Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them, or importing any patented article into the United States, may give notice to the public that the same is patented, either by fixing thereon the word “patent” or the abbreviation “pat.”, together with the number of the patent, or by fixing thereon the word “patent” or the abbreviation “pat.” together with an address of a posting on the Internet, accessible to the public without charge for accessing the address, that associates the patented article with the number of the patent, or when, from the character of the article, this cannot be done, by fixing to it, or to the package wherein one or more of them is contained, a label containing a like notice.In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice. Filing of an action for infringement shall constitute such notice.
Generally speaking, then, a patent owner can recover damages for patent infringement that occurs only after the owner has put the defendant on either actual notice (e.g., by sending an appropriately worded cease-and-desist letter, or serving a complaint for infringement) or constructive notice (by complying with the patent marking statute). By encouraging patent owners to provide public notice of the patent-protected status of their products, the statute is said to help both implementers and the general public to identify which products are subject to patent protection. The rule has many complications and exceptions, however, and for what it's worth my view is that we'd be better off if we didn't condition the availability of damages on marking. . . .
Anyway, in the present case the question was whether one of the patent owner's licensees had substantially complied with the marking statute (because if it didn't, then the damages would accrue only from the point in time at which the defendant was put on actual notice). As the court explains:
A patentee’s licensees must also comply with § 287, because the statute extends to “persons making or selling any patented article for or under [the patentee].” . . . Recognizing that it may be difficult for a patentee to ensure his licensees’ compliance with the marking provisions, we have held that where third parties are involved, courts may consider “whether the patentee made reasonable efforts to ensure compliance with the marking requirements.” . . .
There is no dispute that the patentee bears the burden of pleading and proving he complied with § 287(a). . . . There is no dispute that Arctic Cat did not require Honda to mark; in fact, it expressly authorized Honda to sell licensed products without marking. And it is likewise undisputed that Honda did not mark any of its PWCs with the patent numbers at issue. Thus, if Honda sold PWC products covered by the patents at issue, Arctic Cat has failed to satisfy the marking requirements. The only dispute between the parties is whether any of the Honda PWCs was covered by the patent claims at issue. . . (pp. 20-21).
Resolution of this issue, however, may depend on who has the burden of identifying the relevant unmarked products, and exactly what that burden entails:
There is a split among the district courts regarding which party must initially identify the products which it believes the patentee failed to mark. Some courts require the alleged infringer to initially identify products it believes practice the asserted patents. . . .
We hold an alleged infringer who challenges the patentee’s compliance with § 287 bears an initial burden of production to articulate the products it believes are unmarked “patented articles” subject to § 287. To be clear, this is a low bar. The alleged infringer need only put the patentee on notice that he or his authorized licensees sold specific unmarked products which the alleged infringer believes practice the patent. The alleged infringer’s burden is a burden of production, not one of persuasion or proof. Without some notice of what market products BRP believes required marking, Arctic Cat’s universe of products for which it would have to establish compliance would be unbounded. . . . Permitting infringers to allege failure to mark without identifying any products could lead to a large scale fishing expedition and gamesmanship. Once the alleged infringer meets its burden of production, however, the patentee bears the burden to prove the products identified do not practice the patented invention.
We do not here determine the minimum showing needed to meet the initial burden of production, but we hold in this case it was satisfied by BRP. At trial BRP introduced the licensing agreement between Honda and Arctic Cat showing Honda’s license to practice “Arctic Cat patents that patently cover Arctic Cat’s Controlled Thrust Steering methods, systems and developments.” . . . BRP identified fourteen Honda PWCs from three versions of its Aquatrax series sold between 2002 and 2009. . . . BRP’s expert testified that he “review[ed] information regarding those models” and believed if BRP’s OTAS system practiced the patents, so did Honda’s throttle reapplication system in the Aquatrax PWCs. . . . This was sufficient to satisfy BRP’s initial burden of production (pp.22-24).
The court then remands to determine if the plaintiff can prove that the Honda PWCs do not practice the patents in suit.
As for other damages issues, the court rejects the defendant's challenge to the plaintiff's expert's estimate of a reasonable royalty rate (without any extended discussion of the expert's methodology) and affirms the granting of an ongoing (future) royalty rate in lieu of an injunction at a higher rate (the actual rate awarded is not disclosed). I've argued many times in the past that sound economic analysis would result in awarding the same rate for both pre- and postjudgment infringement (see, e.g., here), but for now the Federal Circuit continues to adhere to its silly precedent on this issue.
Finally, the court affirms the jury's finding of willfulness and the judge's grant of treble damages, noting among other things that post-Halo a finding of subjective willfulness will suffice:
. . . The jury’s willfulness finding is supported by substantial evidence. In denying BRP’s motion for judgment as a matter of law on willfulness, the district court found substantial evidence demonstrated that BRP knew about the patents before they issued, conducted only a cursory analysis of the patents, waited years before seeking advice of qualified and competent counsel, and unsuccessfully tried to buy the asserted patents through a third party. . . .
Finally, the district court did not abuse its discretion by trebling damages. While the district court initially trebled damages without much explanation . . . it explained its decision in a subsequent thorough and well reasoned opinion. See J.A. 99–116 (applying the factors outlined in Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992)). Although the district court did not allow the parties to brief the issue, we will not adopt a blanket rule that a district court abuses its discretion by deciding an issue without receiving briefing from the parties. . . (pp. 29-30).