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IP Alert: Federal Circuit Issues Significant Decision on Patent Marking

February 21, 2020

Under the patent damages statute, 35 U.S.C. § 287, a patentee that sells or authorizes the sale of a patented article should ensure that the patented article is marked with the patent number. Such marking will provide what is known as “constructive notice” of the patent to any potential infringer. If the patentee does not mark the patent number, then it cannot recover infringement damages until it provides actual notice of the patent to the accused infringer. Prior case law has established that if a patentee has not made any products covered by the patent, there is no marking requirement, and consequently the infringer is liable for damages for pre-suit sales irrespective of notice.

But what happens if the patentee has previously sold unmarked products? Can this failure to mark be cured, and under what circumstances? And will a failure to provide notice of infringement be excused if the infringer knew it was infringing the patent anyway?

On February 19, the Federal Circuit answered these questions, holding (1) ceasing sale of unmarked patented articles does not excuse noncompliance with the marking statute thereafter; (2) following the sale of unmarked patented articles, a patentee or licensee cannot satisfy the marking statute until it begins selling marked products; and (3) a finding of willful infringement does not establish actual notice for purposes of the marking statute. The case, Arctic Cat Inc. v. Bombardier Recreational Products Inc., is the second Federal Circuit decision on marking in the same dispute; the first was reported here.

Arctic Cat licensed the patent at issue to Honda. The license agreement did not contain a marking obligation. Honda made and sold unmarked products (personal watercraft) until September 2013, while Arctic Cat refrained from making and selling such products. In October 2014, Arctic Cat sued Bombardier for patent infringement. The district court granted Bombardier’s motion for summary judgment of no damages prior to suit, reasoning that the failure to mark excused pre-suit damage. Ultimately, Bombardier was found to have committed willful infringement, meaning that, according to the jury, Bombardier knew of the patent and disregarded a known risk of infringement.

On appeal, Arctic Cat argued that because Honda had ceased selling unmarked products well before suit was filed, noncompliance with the marking statute thereafter should be excused. Arctic Cat also argued that the jury’s finding of willful infringement should be sufficient to establish actual notice. The Federal Circuit rejected both arguments, holding instead that once a patentee or licensee has placed unmarked articles on the market, it cannot correct the potential confusion until it acts affirmatively to place marked articles on the market. This comports with the policy of the marking statute, which is to encourage marking rather than discourage the sale of unmarked products.

The court further reasoned that the marking statute is directed to the conduct of the patentee in providing notice, whereas willfulness concerns the knowledge and conduct of an infringer. Accordingly, any jury finding regarding the knowledge and conduct of an infringer should not discharge the duty of a patentee to provide constructive or actual notice.

One other point worth noting is the Federal Circuit’s acknowledgement that courts may consider whether a patentee made reasonable efforts to ensure third parties’ compliance with the marking statute. Here the court noted that the lack of a marking requirement in Arctic Cat/Honda’s license agreement was unfavorable for Arctic Cat.

This decision is advantageous for accused infringers with a potential marking defense because it definitively broadens the defense in instances where a patentee or licensee previously sold an unmarked article. It also removes any argument that a finding of willful infringement can establish actual notice for purposes of the marking statute. Patent owners can learn from this ruling by ensuring that all current and future licenses for patented articles include a marking requirement. Patent owners should otherwise make every reasonable effort to ensure marking of patented articles.

Please contact Fitch Even attorney Andrew C. Wood, author of this alert, with any questions concerning this case.

 

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