United States: Defendants Caught Red-Handed In Patent Infringement Case Get Five Months Of Damages Wiped Out For Patentee's Failure To Mark Its Products

In early September of 2021, the Court of Appeals for the Federal Circuit clarified the notice requirement of 35 U.S.C. § 287. Patentee's seeking to recover damages on unmarked goods must ensure their notice to a potential infringer is an actual notice of infringement and not merely notice of a patent.

In relevant part, 35 U.S.C. § 287 (the marking and notice statute) provides that a patentee or her assignee, if she makes or sells an article patented, cannot recover damages against infringers of the patent unless she has given notice of her right, either by marking the article patented, or by informing the particular defendants of her patent and their infringement of it.¹ The purpose of the marking and notice statute is to act as a safety net against innocent infringement. The statute incentivizes patentees to mark their patented product, aids the public in identifying patented articles, and effectively places the world on notice of the existence of a patent.²

As a result, patentees are encouraged to mark their products in the marketplace, so that any potential infringers know of the rights associated with a particular product. The effect of failing to mark a patented article is a prohibition from receiving any damages in a subsequent action for infringement, rather than merely a reduced amount of damages.³ However, noncompliant patentees may begin marking their products and recover damages for the products sold thereafter.⁴ Section 287 also provides an alternative to marking products by allowing the patentee to individually provide notice of infringement to potential defendants and recover damages for any infringement after such notice. Importantly for patent owners, the notice required is actual notice such as an affirmative communication from the patent owner of a specific charge of infringement.⁵ A clear example of such notice is the filing of an action for infringement as explicitly provided for in Section 287(a). However, most patentees will want the calculation of their damages to begin well in advance of filing of an infringement action in order to capture the largest award possible.

Enter Lubby Holdings LLC v. Chung.⁶ Lubby Holdings owns U.S. Patent No. 9,750,287 (the "'284 patent") directed to personal vaporizers that resist leaking while not in use. Lubby Holdings and a non-exclusive licensee, Vaporous Technologies, (collectively "Lubby") sued Mr. Chung for infringement of the '284 patent and were awarded damages of $863,936.10 by the United States District Court for the Central District of California. Mr. Chung appealed that judgement to the Federal Circuit and argued, in pertinent part, that the damages award cannot stand, because no evidence supports Lubby's compliance with the marking and notice requirements of 35 U.S.C. § 287.

Marking

Mr. Chung's challenge began with the marking requirement where he argued that a specific line of Lubby's product listed on Lubby's website, the J-Pen Starter Kit, failed to include a patent number.⁷ Because Lubby did not provide evidence showing the J-Pen Starter Kit was properly marked, Lubby was unable to rely on the marking provision of Section 287 and, thus, could only recover damages for the period that it provided actual notice to Mr. Chung.⁸

Actual Notice

Regarding the time period for actual notice, Lubby first argued that Mr. Chung's admission in his answer "that he had notice of the issuance of the '284 patent" constitutes actual notice prior to the filing of the infringement action.⁹ However, this is not the law, and the Federal Circuit found this argument unpersuasive. "For purposes of section 287(a), notice must be of 'the infringement,' not merely notice of the patent's existence or ownership."¹⁰

Lubby also argued that Mr. Chung had knowledge of his own infringing activity before the filing of the lawsuit, and that knowledge coupled with Mr. Chung's earlier knowledge of the issued patent should entitle Lubby to damages from earlier sales.¹¹ In particular, Lubby pointed to the facts that, before the patent issued, Mr. Chung signed several non-disclosure agreements (NDAs) related to the underlying technology of the patent and that Lubby conveyed to Mr. Chung that he could not use such technology.

The Federal Circuit rejected this additional argument by reiterating that the proper approach for determining section 287 notice "must focus on the action of the patentee, not the knowledge or understanding of the infringer."¹² To satisfy the notice requirement of section 287, the Federal Circuit explained that the patent owner must (1) identify the patent, (2) identify the alleged infringing activity, and (3) accompany such notice with "a proposal to abate the infringement, whether by license or otherwise."¹³ The Federal Circuit found the evidence put forth by Lubby insufficient to rise to the level of "[an] affirmative communication of a specific charge of infringement by a specific accused product or device."¹⁴ As a result, the Federal Circuit remanded the damages calculation back to the district court to account only for the units sold after the filing of the infringement suit, because Lubby had not met the marking or earlier actual notice requirements of section 287(a).¹⁵

Note: Lubby filed a petition for rehearing currently pending before the Federal Circuit, and the Federal Circuit has invited a response to the petition. Lubby's petition raises two issues: (1) whether Lubby's warning to Chung to not use the patent pending technology that occurred at the end of their collaboration qualifies as notice sufficient for purposes of section 287(a); and (2) whether the alleged infringer's "burden of production" under Arctic Cat require it to specifically allege which of the patentee's products it believes practice the asserted patent and were sold in the United States unmarked and make a showing at trial with admissible evidence supporting the allegation.

Takeaways

If an entity has current or prospective rights in a patented article, it is important to mark the article in order to serve as constructive notice to the public. Where a patented article has not been properly marked, a patentee may still recover damages by acting quickly to cure marking defects or by providing actual notice to infringers. Importantly, this actual notice must be of specific activity constituting infringement related to specific products and must provide the infringer with an option to mitigate its infringement.

Footnotes

1 Dunlap v. Schofield, 152 U.S. 244 (1894).

2 Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1443 (Fed. Cir. 1998).

3 Arctic Cat Inc. v. Bombardier Recreational Products Inc., 950 F.3d 860, 865 (Fed. Cir. 2020).

4 Am. Med. Sys., Inc. v. Med. Eng'g Corp., 6 F.3d 1523, 1537 (Fed. Cir. 1993).

5 Amsted Industries Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 186 (Fed. Cir. 1994).

6 11 F.4th 1355 (Fed. Cir. 2021).

7 Id. at 1359-60.

8 Id. at 1360.

9 Id. (citing Appellee's Br. 57).

10 Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 187 (Fed. Cir. 1994).

11 Lubby Holdings, 11 F.4th at 1360.

12 Id. (citing Amsted, 24 F.3d at 187).

13 Id. (quoting SRI Int'l, Inc. v. Advanced Tech. Labs., Inc., 127 F.3d 1462, 1470 (Fed. Cir. 1997)).

14 Id. at 1360-61 (citing Arctic Cat, 950 F.3d at 864 (emphases added) (quoting Amsted, 24 F.3d at 187)).

15 Id. at 1361.

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