Medtronic: Much ado about nothing in light of Frolow and “Marking Admission”

Here’s my Monday morning rant… Unless you’ve been under a rock (or yoga mat — see below), you know that the Supreme Court held that in a dec action for non-infringement by a licensee, the patentee still bears the burden of proof. You may not have noticed a case a while back called Frolow v. Wilson Sporting Goods, from the Federal Circuit, and available here and summarized previously by Dennis on the main page here.  Boiled down, under quite divided and unclear rationales, a divided three-judge panel held that marking by a licensee, or paying a royalty on products, is “circumstantial evidence” of infringement.  In the particular case, as to some rackets, although the licensee had marked them, there was no evidence they actually met every limitation of any asserted claim. Nonetheless, the court held there was some evidence of infringement — marking and royalties — and so a question for the jury.  It viewed marking as an admission, just as if a corporate representative admitted infringement in deposition… Ignoring the fact that, imho, that’s quite wrong analytically and as a practical matter (long story, but licensing and royalties don’t generally work like the court thinks they do, or at least not in my experience), a licensee who sues for non-infringement of a product that it has either (a) marked or (b) paid a royalty on will have to try the case, even though the patentee has the burden of proof, and even if the licensee shows that those products do not literally come within any claim. Odd.  Also odd is, although it said it was not adopting marking estoppel, in practical effect, it did…

About David

Professor of Law, Mercer University School of Law. Of Counsel, Taylor English Duma, LLP. Former judicial clerk to Chief Judge Rader; former lawyer with Baker Botts and other firms

19 thoughts on “Medtronic: Much ado about nothing in light of Frolow and “Marking Admission”

  1. 6

    I’m not disagreeing with you, I don’t think. If manufacturing tolerances are such that some products should infringe, but it turns out they don’t, then they don’t infringe. What someone “thought” about whether they infringed doesn’t matter (for infringement, it might for willfulness of course).

  2. 5

    Like I said, that works in the abstract. I can’t imagine people sitting in front of every tennis racket, testing it, and marking it if it meets the claims, or every drum of oil (not all of it will always have the exact mix of ingredients). There’s an “equivalency” that gets tossed in to avoid this — if the tennis racket “should” infringe (if made to spec), they mark and pay a royalty. That doesn’t mean it does infringe. That’s where Frolow misses the boat.

    1. 5.1

      David, marking products is no simple matter as anybody inside a company can tell you that has been responsible for marking. A licensee who obligates himself to mark new products that have not been accused of infringement had better make sure that the specific criteria for marking is specified in the obligation rather than some broader infringement standard. We do this all the time in royalty bearing license agreements where we specify the products that are subject to royalties. We don’t list the products by model number, we don’t say anything that infringes, we specify the critical features that a product must have in order to be subject to a royalty. Similarly, a marking obligation with respect to new products should be that detailed otherwise the licensee is a faced with an almost insurmountable task.

    2. 5.2

      Prof. Hrick,

      I am not sure that Frolow misses the boat.

      One way to think of this is from a consumer’s vantage point. While I recognize that the average consumer upon seeing an item marked with a patent number will not rush to the Web and read the patent, a notice function is served with marking. But (and importantly) the consumer vantage point is not the only vantage point to consider.

      The notice function has various levels:
      – to the consumer
      – to the market at large
      – to competitors (who may or may not be inclined to investigate the patent).

      Even though Marking was ‘denigrated’ with the AIA changes, one should remember that Marking is NOT (or at least was not) an absolute right of the patentee. Marking provided benefits and exacted costs. Since the powers that be (and I do not mean our elected officials directly) decided that they did not like the costs (re: AIA changes), the acknowledgement of costs – and the fact that Marking was not a free-to-use-however-one-wanted ‘right’ continues to diminish in any analysis of issues related to Marking.

      And this type of consideration is in addition to any Truth-In-Advertising consideration.

  3. 4

    Ned, in the abstract your approach may work, but, in the real world… Suppose lawyers take a license. They recognize that products that meet limitations A, B, and C fall within the patent scope, and so (a) must be marked and (b) must be the subject of a royalty payment. So, they do the right thing.

    Turns out, however, that in fact actual manufactured goods don’t meet all the limitations (or equivalents). No one did anything “bad.” This happens a lot in many art areas.

    So, now where are we? Under Medtronic, the patentee has to prove infringement. Well, under my hypo, if anyone tests the product, it does not infringe. Period.

    BUT because of Frolow, marking is an “admission” and “circumstantial evidence” of infringement, sufficient to create a fact issue for a jury.

    That’s messed up.

    1. 4.1

      David, Because everyone involved in marking has a legal obligation to make sure it is correct, it’s more than an admission in my opinion, it should be an estoppel. There is no public policy reasons I can think of that would or should allow a defense that one marked a product by mistake except in the case of a criminal prosecution where scienter might be an element of proof.

      1. 4.1.1

        I agree Ned – see my post intra that highlights the fact that Marking is not an absolute right.

        This is not a pure ‘advertising’ oops type of issue as Prof. Hricik’s position may lead one to assume.

  4. 3

    Ned, read the Frolow case. What if, as pretty much is guaranteed, a product is made that “should” fall within a claim (if made perfectly to spec), and so it’s marked. But, turns out that what is actually made doesn’t fall within the claim/mfr spec.

    Are you suggesting that there’s criminal liability? Does a mfr have to test every product to see if it’s within the claim, even if normal mfr tolerances may make it not, always or even inevitably, in the claim?

    In my experience, licenses buy peace and so if I’m the licensee I’ll err on paying a few extra pennies rather than not marking/paying royalty and getting sued…

    1. 3.1

      David, the law recently changed to require more than the previous law, but if one marks a product that is not covered and he did so knowing it was not covered, that was criminal. Thus, one had to compare the claims of the patent against the product, or have some other basis for marking, as in this product is the same as its predecessor except for some new features that are not relevant to coverage.

      I was involved just out of law school in the Milgo cases where the 1st Circuit found our client to have committed fraud on the court when products marked by the client did not have the “narrow skirts” that was the argued point of novelty in the patent. I do not recall, but I am sure we tried to show mistake in marking, but the courts turned a deaf ear.

      Thus, when one marks a product with a patent, there is a presumption that this was done with care. I think the Federal Circuit holding is consistent, but allowed the marker to show mistake. I thing the Feds were wrong in this, because the holding is not consistent with the Milgo cases.

      Thus, once again, the Federal Circuit does not follow its brethren an creates a conflict among the circuits.

      As to licensee’s, if they have an obligation to mark, I would suggest that they only mark products that were accused of infringement or successor products that are materially unchanged. After that, I would only mark products as instructed by the patent holder. I would never accuse myself of infringement.

      Also, consider portfolio licenses as settlements with an obligation to mark. The only marking that need take place is of the products accused of infringement. Other products and/or other patents? — Well that is a horse of a different color entirely. Regardless of any obligation to mark other patents or other products, I still would put the onus back onto the patentee to make the call.

      1. 3.1.1

        Slight(?) correction Ned: the law was changed recently to ‘require’ less.

        At least effectively so, given the evisceration of enforcing the Marking law in the AIA.

  5. 2

    False marking is criminal. Marking is a act that requires the marker to know that the marked item is covered — some comparison of the claims to the product is required and presumed of a marker.

    I think the presumption that the licensee did that when he or she marked is correct. The licensor should have a presumption in his favor in a breach of contract action for non payment of royalties — in state court.

    1. 2.1

      Ned,

      I am not sure that I understand your position that false marking is criminal.

      I am pretty sure that the America Invents Act went in the other direction from criminalizing false marking as may apply in a discussion of false marking under the patent laws.

  6. 1

    This is the third time in a short while that the effects of the AIA evisceration of the marking statute are implicitly on the table…

    1. 1.1

      This is the third time in a short while that the effects of the AIA evisceration of the marking statute are implicitly on the table…

      What effect did the AIA’s evisceration of the marking statute have on the issue David mentions, anon?

        1. 1.1.1.1

          Read the linked case Leopold.

          I did, anon. If you can’t answer the question, you should just say so.

          1. 1.1.1.1.1

            I can answer it Leopold.

            I prefer that you read the case well enough to answer your own question.

            (your question is answered if you read and understand the case)

            1. 1.1.1.1.1.2

              Leopold’s smarmy comment “We’ll take your word for it.” does not deserve a reply, but I feel generous today and wish Leopold well in taking the time to read the case, understand the case, and obtain the answer to his question which will come from such an effort.

              And anytime you want to reach back into the vault and find those references on the ladders of abstraction discussion, well I won’t take your word for it than you can actually those references.

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