Licensee Marking Requirement

PezPatentRembrandt Wireless v. Samsung (Fed. Cir. 2017)

A jury found for Rembrandt and awarded $15.7 million in damages. On appeal, the Federal Circuit has affirmed on infringement and validity – but rejected the lower court’s finding that the patent had been properly marked.

Back-damages for patent infringement is a bit interesting. The marking statute creates a constructive notice regime for sales of ‘patented articles’ and then cuts-off damages for failure to mark those articles: 

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.

35 U.S.C. § 287.  The marking requirement does not apply only to patentees, but also to “any persons” making or selling the invention “for or under” the patentee.  The courts have interpreted this requirement then as applying to a patent licensee — “thereby limiting the patentee’s damage recovery when the patented article is not marked” by the licensee.  Quoting Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 185 (Fed. Cir. 1994).

Here, Rembrandt had previously licensed the patent at-issue (U.S. Patent No. 8,023,580) to Zhone Tech who sold unmarked products allegedly embodying claim 40 of the patent.  (Zhone was not required to mark under the license agreement).

As soon as Samsung sought to limit its potential damages to the date of actual-notice, Rembrandt dropped its allegations that Samsung infringed claim 40 and also filed a statutory disclaimer with the USPTO disclaiming claim 40.  Samsung was later found to infringe other remaining claims of the patent – and the district court ruled that the disclaimer was sufficient to cure the marking problem.

On appeal, the Federal Circuit disagrees:

Rembrandt’s position, adopted by the district court, effectively provides an end-run around the marking statute and is irreconcilable with the statute’s purpose. Allowing Rembrandt to use disclaimer to avoid the consequence of its failure to mark undermines the marking statute’s public notice function. . . .

The marking statute protects the public’s ability to exploit an unmarked product’s features without liability for damages until a patentee provides either constructive notice through marking or actual notice.

 

Disclaiming a patent claim does not later erase the fact that the claim was previously in effect and had not been properly marked.

The Court suggested a potential question of whether the focus should be claim-by-claim rather than patent-by-patent, but declined to rule on that issue because it had not been properly raised on appeal.   On remand, the district court will be asked to look into that question and – if needed – recalculated the damage award.

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The case here offers an important distinction – in my mind – between a patent license and a covenant-not-to-sue. Any reasonable license that covers an ‘article’ would include the marking requirement.   In my mind (although perhaps not the court’s) a mere covenant-not-to-sue should not fall under the marking requirement.

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Typical Marking License Language: Licensee mark all Licensed Products made or sold in the United States with an appropriate patent marking. All Licensed Products shipped to or sold in other countries must be marked in such a manner as to provide notice to potential infringers pursuant to the patent laws and practice of the country of manufacture or sale.  Licensor shall have the right to inspect Licensee’s Licensed Products to determine if Licensee is marking in accordance with this paragraph.

 

Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

36 thoughts on “Licensee Marking Requirement

  1. Why clear prior marking or non-marking determinations are important:
    A surprising number of patent suits or license assertions are on patents near their end of life, or are patent suits or license assertions against products at or near the product end of life, and with no prior actual notice [a Marking statute exception]. Both the patent owner and the defendant need to be able to calculate their potential respective recovery and exposure, especially for the roughly 95% of patent suits that end with negotiated settlements. The elimination of recoveries and exposures for all pre-suit or pre-notice infringements by violation of the marking statute can make a very large difference in these cases, and if that is not clear, impede settlements.

    1. BTW, a patent attorney doing patent suit settlements or licensing suggested that both the patent owner and the party the patent is being asserted against may be better off to settle by the patent owner granting a “covenant not to sue” instead of a normal license, accepted with no marking requirement and express non-admission of product infringement.
      I’m posting this for responses as to whether or not you agree, or not, that this can avoid Marking Statute issues?

  2. If, as in litigation, it matters that the enforcer may choose at their own discretion which claims to pursue, does it really matter that:

    Disclaiming a patent claim does not later erase the fact that the claim was previously in effect and had not been properly marked.“…?

    If a claim is being disclaimed, then that individual claim will not be involved in any litigated damages to which the question of notice would attach.

    So what then needs to be decided on remand?

  3. Typo alert:

    35 U.S.C. § 287. The marking requirement does –>not<– apply only to patentees, but also to “any persons” …

  4. Only tangentially on topic, but I’ve from time to time wondered by what authority the USPTO makes pronouncements like the one set out below, which seems more like an advertising hard sell than it is simply providing info (whether pre- or post-AIA, as I think the PTO website has said something like this for about 20 years).

    A major advantage of a provisional application is that applicants are allowed to use the term “patent pending” in conjunction with the invention (including marketing and packaging) during the 1-year period to alert the public that an application has been filed with the USPTO and as a warning to potential infringers.

    Whoa! It’s a MAJOR advantage.

    link to uspto.gov

    Any of you patent law wonks know?

    First, 287 does not (and also did not previously, IIRC) contemplate marking anything with a “pending” patented status.

    Second, a provisional app is merely a placeholder. It can never mature into patent. Isn’t it misleading to claim a thing is “patent pending” prior to filing a US utility app (or design/plant) which can mature into patent?

    1. Second, a provisional app is merely a placeholder. It can never mature into patent.

      But it can be converted into a utility application, which is sort of like “maturing.”

      Also, I think a US provisional is more than just “a placeholder” as far as Article 4 of the PCT is concerned.

      Just sayin’. I agree that it seems at least theoretically possible for marking based on serial provisional filings to be “misleading.”

      1. “Misleading” as it is, put in quotes and all, is itself misleading.

        😉

        Who knows to what extent the feelings of Malcolm are with that word in quotes?

        1. “Misleading” as it is, put in quotes and all, is itself misleading.

          The term is in quotes because (wait for it!) …. I’m quoting the language used by someone else.

          Super mysterious stuff.

          1. You are using quotes incorrectly then (in this instance).

            Single word in quotes indicates a non-standard meaning.

            If you are going to quote someone, quote more than the single term.

    2. Don’t confuse Section 287(a) the Marking statute and its consequences with Section 292, the False Marking statute, which in one of its paragraphs has covered the legally improper use of “patent applied for” and “patent pending.”
      Those expressions have been used for at least the last 100 years judging by antique products I have seen. [It could be a bit dangerous to leave that product marking on products sold after the patent application goes fully abandoned?]

      1. Thank you Paul.

        As for “It could be a bit dangerous to leave that product marking on products sold… ?”, the most egregious (to me) of CJ Rader’s “cottage industry” of false marking suits was when “Americans For Fair Patent Use” sued Orvis, claiming their trademark-like use of the tagline “The U.S. Patent 150,883 Collection” on their clothing line was an intentional attempt to deceive the public.

        U.S. 150,883 was issued in 1874 to a fishing reel invented by founder Charles F. Orvis himself.

        1. I don’t remember who deserves the most credit on the Fed. Cir. for heavily watering-down the express “intent to deceive” requirement for a False Marking Statute suit, but it certainly created a problem.

  5. “Allowing Rembrandt to use disclaimer to avoid the consequence of its failure to mark undermines the marking statute’s public notice function. . . .”

    Seems the correct result to me.

    1. Do you know what undermined the public notice function?

      The AIA.

      (But that different type of undermining was desired by corporate voice$).

      😉

  6. It’s virtually impossible to get licensees to agree to a marking provision in a license or settlement arrangement. Generally the licensee wants nothing to do with the licensor ever again. And it’s essentially malpractice for licensee’s attorney to agree to a marking provision. Generally the only time these are seen is when one party has market dominance (e.g., qualcomm) or some business transaction where the parties have some forward looking relationship and its in their mutual interest to mark.

    1. Perhaps these agreements should simply be settlements for “past damages,” with only a covenant not to sue for the future that is accompanied by an express disavowal by the defendant that any device or process infringes. That way, there would be no license “covering” a product sold by a licensee. I half recall some recent district court authority on this point.

      1. Would such an arrangement subject you to shareholder suits? (Paying some third party money for damages you say you did not incur.)

        But maybe there are other ways to structure it…

    2. Especially with some judges who want to use patent markings on a licensed product as evidence that the product actually infringes all those patents. Even if the licensor had forced the licensee to put its entire list of patents on the licensed product in order to get a license. Perhaps some kind of disclaimer is needed?
      But the non-marking on the licensed products can lose the licensor up to six years of back [pre-suit] damages for patent infringement by anyone else.

  7. BTW, one of the little-noted pro-patent-owner provisions of the AIA was amending the marking statute to allow internet patent numbers lists:
    “..either by fixing thereon the word “patent” or the abbreviation “pat.”, together with the number of the patent, OR [emphasis provided] 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.

  8. Is this Courts public policy argument against evasion of the marking statute inconsistent with the prior Fed. Cir. decision in Hanson v. Alpine Valley Ski Area, Inc. in 1983 in which [surprisingly] the marking statute was avoided by only suing on method claims even though the patent also included apparatus claims?

    1. Speaking of statutory interpretation, in one of Justice Gorsuch’s very first oral arguments, as reported today, he “used the occasion to bring up the ‘doctrine of Constitutional avoidance’ which dictates that rulings should not be based on the Constitution whenever possible.”
      I noted that doctrine before on this blog in response to numerous assertions that the AIA patent statute is going to be held unconstitutional by the Sup. Ct. [in spite of their several refusals to take cert on it]. This reminder of that doctrine is coming from the new conservative Sup. Ct. justice that was allegedly going to support those assertions.

      1. You really do glom onto a “let’s clench tight our eyes” mode, don’t you Paul?

        The assertions of unconstitutionality do not rest with any sense of “Gee, will the Supreme Court actually do their job.”

        Rather, they rest on the merits of the constitutionality questions themselves. The very questions that you – in particular – refuse to even discuss.

    2. “Hanson v. … the marking statute was avoided by only suing on method claims even though the patent also included apparatus claims?”

      Interesting question; I don’t recall reading the case. Is it different because ab-initio they filed only on method claims, and method claims do not require marking to preserve past damages?

        1. Hi Ned. Thanks for the link to the interesting case. But I don’t understand which part I should focus on as relevant to the question?

          1. Mellow, the default rule is that damages apply with only one exception, and that is when the patentee or his licensee is selling a product covered by the patent, in which case, he must mark.

            Wine Railway is controlling law; and, thank God, this time the Federal Circuit following it faithfully.

      1. The Hanson decision states up front that the patent issued with both apparatus and method claims, so they must have filed both. But in any case the marking statute only refers to patented articles, not applications. Yes, the Fed. Cir. has held that the marking statute does not apply to a patent with only method claims, but this Rembrandt decision does not support getting rid of apparatus claims after the patent is issued to avoid the marking statute restraint on pre-notice back damages recoveries.

        1. “patent issued with both apparatus and method claims, so they must have filed both”

          First, sorry for sloppy language causing confusion with the wording “filed only on method claims”. I wasn’t talking about their application filing but rather was asking if it was because in their infringement complaint filed they alleged infringement of only method claims.

          “Fed. Cir. has held that the marking statute does not apply to a patent with only method claims”

          Well, that would seem to be expressly in the statute. So… what else does (or does not) it mean to have “a process patent” in the context of 287?

          Most of my patents issue with both process and article claims – is one such of them something outside of “a patented process” or “a process patent” as intended in 287? (287 uses both phrases)

          1. That leads to an interesting question. If a patent’s method claims read fully on the operation of the apparatus the patent owner or licensee is selling whenever that apparatus is plugged in or manually used, why is that not covered by the 287 language “any patented article”? The statute itself – 287 – does not refer to or say that it only applies to apparatus claims or excludes method claims. But, as I noted, the Fed. Cir. case law seems to view it that way.

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