Patent Damages
30Jul/21Off

Does Section 287(a) Apply to Agreements That Do Not Contain a Patent License?

When a patentee enters into an agreement with a third party that does not expressly include a patent license (e.g., a covenant not to sue between a non-practicing patentee and a third-party practicing entity), does that agreement render the third party’s products a “patented article” that requires marking?  Although it does not appear that the Federal Circuit has spoken squarely on the scope of what kinds of agreements are subject to Section 287(a), most district courts have answered this question in the affirmative.

Statutory Background

35 U.S.C. § 287(a) (“the marking statute”) provides:

Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them . . . may give notice to the public that the same is patented . . . 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.

35 U.S.C. § 287(a) (emphasis added).

Application of § 287 to settlements and licenses

Marking under the statute is permissive (“Patentees . . . may give notice to the public that the same is patented”), not mandatory.  Nevertheless, patentees may only recover damages for the period they provide notice of the “patented articles” to potential infringers.  Notice can be either constructive or actual.  Marking a patented article constitutes “constructive notice” to the public that patent protection is asserted.  Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1111 (Fed. Cir. 1996).  Actual notice is satisfied through filing a Complaint for patent infringement or by informing the infringer of the identity of the patent and the activity that is identified as an infringement. SRI Int’l, Inc. v. Advanced Tech. Labs., Inc., 127 F.3d 1462, 1470 (Fed. Cir. 1997). When patentees fail to mark their products, the damages recoverable upon infringement are limited by the date that the accused infringer received actual notice of the infringement.  Id.

To recover damages for the period prior to actual notice to the infringer, it is the burden of the patentee to demonstrate constructive notice through compliance with the marking requirements of § 287.  Arctic Cat Inc. v. Bombardier Recreational Prod. Inc., 876 F.3d 1350, 1359 (Fed. Cir. 2017).  Importantly, the marking requirement does not apply to patentees alone.  It also extends to “persons making, offering for sale, or selling within the United States any patented article for or under” the patentee.  35 U.S.C. § 287(a) (emphasis added).

As stated above, one issue that has arisen under Section 287(a) is what constitutes an article that is made “for or under” the patentee and thus must be marked (if it practices the patent).  Several courts have spoken on this issue, and most have construed the “for or under” requirement broadly.  For example, one court held that, when a patentee authorizes the making, offer for sale, and selling of a patented article, the marking requirement applies regardless of the particular form of such authorization and “regardless of whether the authorizations are settlement agreements, covenants not to sue (CNTS) or licenses.”  In re Yarn Processing Pat. Validity Litig. (No. II), 602 F. Supp. 159, 225 (W.D.N.C. 1984) (cited with approval in Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 185 (Fed. Cir. 1994)).  This holding stems in part from the fact that a covenant not to sue is generally considered equivalent to a non-exclusive license.  See, e.g., U.S. Ethernet Innovations, LLC v. Acer, Inc. United States District Court, 2013 WL 4456161 (N.D. California. August 16, 2013) (quoting TransCore, LP v. Elec. Transaction Consultants Corp., 563 F.3d 1271, 1275 (Fed. Cir. 2009)).  The U.S. Ethernet court stated:  “For this reason, the Supreme Court in De Forest Radio Telephone & Telegraph Co. v. United States, reiterated: ‘As a license passes no interest in the monopoly, it has been described as a mere waiver of the right to sue by the patentee.’ 273 U.S. 236, 242, 47 S.Ct. 366, 71 L.Ed. 625 (1927) (treating a covenant not to enjoin infringing acts as a license). To like effect, this court and its predecessors have on numerous occasions explained that a non-exclusive patent license is equivalent to a covenant not to sue.”

Similarly, in Massachusetts Inst. of Tech. v. Abacus Software, Inc., No. 501CV344, 2004 WL 5268123, at *9 (E.D. Tex. Aug. 4, 2004), the court referred to a prior Federal Circuit decision on marking, Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 185 (Fed. Cir. 1994).  The MIT court quoted Amsted’s citation with approval to In re Yarn Processing, 602 F.Supp. 159, 169, 225 USPQ 765, 771–72 (W.D.N.C.1984).  The Federal Circuit’s parenthetical for In re Yarn Processing stated: “section 287 applies to a nonmanufacturing patentee who has licensed or authorized others to produce or sell the patented article ‘regardless of the particular form [the] authorizations may take[.]’”  Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d at 185, n. 2 (quoting In re Yarn Processing, 602 F.Supp. at 169).  The MIT case also addressed the scope of the term “patented article” in Section 287(a), and rejected limiting its scope to only include the asserted claims at issue: “It is readily apparent that nothing in the language of the statute itself says that “patented article” means an article falling within the scope of the asserted claim or claims in a particular case.  Rather, several portions of the statute may be construed as running counter to such a construction.” 2004 WL 5268123 at *19.

On a related point, at least one court has held that a patentee cannot avoid the marking requirement by including a provision in the agreement stating that the licensee denies that it uses the patent.  Finjan, Inc. v. Juniper Networks, Inc. 387 F. Supp. 3d 1004 at 1017-18 (N.D. Cal. 2019).  Finjan v. Juniper held, when the licensee fails to mark the “patented articles” at issue, pre-notice damages are barred, even when licenses explicitly state that the licensee “shall have no obligation or requirement to mark its licensed products,” or when the licensee “denie[s] infringement in the license.”  Id.

Although a patentee’s licensees must also comply with § 287 in order for the patentee to recover damages prior to actual notice, Courts recognize that when the licensee is a “third part[y] unrelated to the patentee, it is often more difficult for a patentee to ensure compliance with statutory marking provisions.”  Maxwell, 86 F.3d 1098, 1111.  Under such circumstances, Courts may apply a less strict “rule of reason” to determine “whether the patentee made reasonable efforts to ensure compliance with the marking requirements.”  Id. at 1112.  For example, in Asia Vital Components v. Asetek Danmark, the Northern District of California found that a patentee made reasonable efforts to comply with § 287(a) through the use of a CNTS because there was an “active dispute whether those products were the [patentee]’s ‘patented articles’ and because “it would have been unreasonable for [patentee] to attempt to impose marking requirements” on products supplied to the recipient of the covenant not to sue while patentee was in active litigation with the supplier of the products.  Asia Vital Components Co. v. Asetek Danmark A/S, 377 F. Supp. 3d 990, 1026 (N.D. Cal. 2019) (“[T]he CNTS at most licensed the sale of products that [patentee] could not prove it had a right to mark.  Accordingly . . . the unmarked products sold under the auspices of the CNTS do not undermine [patentee]’s compliance with § 287(a)’s marking requirements.”).

Takeaways

U.S. federal courts have broadly interpreted Section 287(a) to apply to patent license agreements and covenants not to sue.  Courts appear to treat any authorization from the patentee as a license that requires marking in order to recover pre-notice damages regardless of the particular form the authorization may take.  However, when unrelated third-party licensees are involved, courts may applied a fact-intensive analysis to determine if the patentee made reasonable efforts to comply with the marking requirement.

Authors: Chris Marchese, Nicole Williams, Sara Serag

3Jun/21Off

Webinar Replay | Patent Damages Theories

Damages are one of the most important aspects of any patent infringement case. For patent owners, the potential damages they may be able to recover are a primary consideration when deciding whether to pursue an infringement claim and even take the claim to trial.  For defendants, the amount of damages sought by the patent owner can present a major risk of loss, and will often shape the defense of the case. But proving damages is complex, and the law surrounding patent damages is continually changing, posing significant challenges for litigants when developing damages theories.  Additionally, district courts continue to carefully scrutinize damages theories through the Daubert process and motions in limine.

In this webinar, Fish attorneys Chris Marchese and Nicole Williams discuss two of the most important areas in patent damages law:

  • Apportionment
  • Marking post-Arctic Cat Inc. v. Bombardier Recreational Prods. Inc.

Click the link to download a copy of the webinar slides.

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7Jan/20Off

California Law on Reverse Payment Settlements Goes into Effect

January 1, 2020, was the effective date of California’s new “Preserving Access to Affordable Drugs” Act, A.B. 824, now Sections 13,400-13402 California Health and Safety Code. The California Legislative Counsel’s digest summarizes the law’s main provision as follows:

This bill would provide that an agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a pharmaceutical product, is to be presumed to have anticompetitive effects if a nonreference drug filer receives anything of value, as defined, from another company asserting patent infringement and if the nonreference drug filer agrees to limit or forego research, development, manufacturing, marketing, or sales of the nonreference drug filer’s product for any period of time, as specified.

The bill only applies to California’s antitrust law, the Cartwright Act, and its Unfair Competition statute, California Business and Professions Code Section 17,200 et seq. The law has no effect on federal law or other states’ laws. Further, the bill only impacts the initial burden of going forward on whether a contract is a reasonable restraint on trade. The bill does not change the law on standing, antitrust injury or antitrust damages or equitable relief, nor does it likewise extend to all elements needed to prove liability under Section 17,200. So while the law shifts the burden of going forward in a “reverse payment” settlement from the plaintiff to the contracting parties (presumably the defendants) on the issue of whether the contract is a reasonable restraint on trade, it does not shift the plaintiff’s burden of going forward on the other elements of its claim. Moreover, since the bill only impacts only part of the proof of liability, it does not appear to shift the ultimate burden of proof away from the plaintiff (albeit how court’s deal with the statute in litigation is as yet unknown).

 A non-profit industry group, the Association for Accessible Medicines, filed suit against the state to declare the law unconstitutional and to enjoin it from going into effect. The Plaintiff argued, among other things, that the law violated the federal government’s right to regulate interstate commerce and the scope of U.S. patents. On December 31, 2019, the United States District Court for the Eastern District of California refused to enter a preliminary injunction against the law going into effect, holding the Plaintiff had not met its burden of proof for a preliminary injunction. Association for Accessible Medicines v. Becerra, 2019 WL 7370421 (E.D.Cal. 12/31/2019). Moreover, since the injunction was sought prior to when the law went into effect, there was uncertainty as to whether it would violate federal law “as applied”, which further complicated the injunction litigation.

How the Ninth Circuit will handle the issue, and whether courts will limit the law’s application to try to avoid conflict with federal law, remains to be seen. In the interim, given the size and reach of the California economy, settlements and licenses should be vetted by antitrust counsel in light of the AB 824.

Author: DJ Healey

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23Oct/19Off

DNJ finds award of lost profits does not preclude injunction

In Eagle View Tech., Inc. v. Xactware Solutions, Inc., Civil No. 1:15-cv-07025 (D.N.J. Oct. 18, 2019), Judge Renee Marie Bumb granted Eagle View’s motion for a permanent injunction.  Addressing an issue related to damages, the court reasoned that an award of lost profits at the trial stage—which is for past damages—does not establish that the plaintiff has an adequate remedy at law, and thereby does not preclude injunctive relief. We quote the court’s analysis (slip op. at 22-26):

23Oct/19Off

DDE excludes damages approach due to lack of comparability

In TC Tech. LLC v. Sprint Corp., Civil Action No. 1:16-cv-00153-RGA (D. Del. Oct. 18, 2019), Judge Richard Andrews granted Sprint’s motion to exclude TC Tech’s damages expert, Mr. Brett Reed, from testifying as to a damages “approach” based on Sprint’s internal documentation.  In particular, Mr. Reed opined that “Sprint had internally considered [a 5% royalty rate to be] reasonable for telecommunications patents, including the VoIP patents, and determined how that figure would relate to Sprint’s LTE-related service revenue.”  Slip op. at 4.  Sprint contended that this opinion should be excluded because Mr. Reed had “failed to establish the required comparability between Sprint’s VoIP-related demands and the hypothetical negotiation.”  Id.  The court agreed. 

21May/19Off

D. Neb. denies JMOL, finds delay in filing suit irrelevant to damages

In Exmark Mfg. Co. v. Briggs & Stratton Corp., Case No. 8:10CV187 (D. Neb. April 15, 2019), Judge Joseph F. Bataillon denied Briggs’ JMOL motion or in the alternative for new trial or remittitur. These were post-trial motions after a retrial on damages, in which the jury awarded damages to Exmark, which occurred after remand from the Federal Circuit—the appellate court had affirmed in part and reversed in part and remanded the case to the district court to retry damages. Exmark Mfg. Co. v. Briggs & Stratton, 879 F.3d 1332, 1348-54 (Fed. Cir. 2018). The Federal Circuit found error in the court’s denial of Briggs’ motion for new trial and remanded for a new trial on damages. According to the district court’s order addressed here, the Federal Circuit “found no error in the Court’s allowing Exmark to apportion the value of the patented improvement and conventional components of the multi-component product through the royalty base [sic, rate] rather than the royalty rate [sic, base] and approved Exmark’s use of the accused lawn mower sales to as the royalty base. Id. at 1348-49.” Slip op. at 1. The district court further observed that the Federal Circuit “found Exmark’s damages expert Melissa Bennis’s opinion was inadmissible ‘as it failed to adequately tie the expert’s proposed reasonable royalty rate to the facts of the case,’ stating that the expert ‘plucked the 5% royalty rate out of nowhere.’ Id. at 1350-51.” Slip op. at 1-2.

21May/19Off

EDTX denies motion to exclude expert’s patent valuation opinion

In Intellectual Ventures II v. Sprint Spectrum, Case No. 2:17-cv-00662-JRG-RSP (E.D. Tex. April 11, 2019), Judge Roy Payne denied defendants’ motion to exclude patent valuation opinions by Dr. Douglas A. Chrissan. Defendants argued that Dr. Chrissan was not sufficiently qualified to perform patent valuation “as he does not have any ‘experience with patent valuation whatsoever.’” Slip op. at 1. The basis for the denial was because Dr. Chrissan had served in a similar role in another case between some of the same parties; defendants had raised the same challenge there as they did in this motion; and the court had concluded that Dr. Chrissan was “sufficiently qualified in the [other] case to perform an analysis that is very similar to the analysis conducted here.” Id. The court noted that, because of his earlier experience in the other case, “Chrissan has even more experience than he did before.” Id. at 2. 

10May/19Off

DMN denies JMOL to apportion various features; upholds lost profits; grants injunction; awards PJI at prime rate

In Solutran, Inc. v. U.S. Bancorp and Elavon, Inc., Case No. 13-cv-02637 (SRN/BRT) (D. Minn. Dec. 11, 2018), Judge Susan Richard Nelson ruled on post-trial motions including a JMOL motion by defendant U.S. Bank relating to reasonable royalty and lost profits damages.  The jury had awarded a hybrid damages verdict of $1.29M in lost profits and $1.98M in reasonable royalty, for a total award of $3.27M.  The court denied the JMOL motion.  The court also granted Solutran’s motion for an injunction and for post-2017 damages as well as post-judgment interest in full and pre-judgment interest in part. 

17Apr/18Off

D. Del. grants a new (third) trial on damages and denies enhanced damages (before a finding of willfulness)

In the District of Delaware, Judge Leonard P. Stark presiding, in Greatbatch LTD. v. AVX Corporation,[1] case no. 13-723-LPS (March 30, 2018), granted defendants’ motion to set aside the damages verdict and ordered a new trial on damages, in part because the lump sum award could not be adjusted in light of the second jury’s verdict of noninfringement of certain claims.  The Court also denied plaintiff’s request for enhanced damages for willfulness because the Read factors weighed against enhancement.  Because the Court had already been through two trials and seen all the evidence, it made the decision on enhancement prior to a jury finding of willfulness.   

5Apr/18Off

E.D. Tex. Denies Motion to Exclude Damages Testimony of Non-Infringing Alternatives in Expert’s Reasonable Royalty Calculation

In the Eastern District of Texas, Judge Roy S. Payne presiding, in Salazar v. HTC Corporation, 2:16-CV-01096-JRG-RSP (E.D. Tex. Mar. 28, 2018) the court denied Mr. Salazar’s motion to exclude HTC’s damages expert’s opinions related to non-infringing alternatives because the expert’s opinion relates only to a reasonable-royalty calculation, which does not require assessment of non-infringing alternatives, and even if it did, Salazar lacked evidence that the products in question were not acceptable non-infringing alternatives.