Provisional patent rights have nothing to do with provisional patent applications, and instead refer to the rights that the owner of a published patent application has to recover a reasonable royalty for pre-issuance infringements. 35 USC §154(d) provides that a patent includes the right to obtain a reasonable royalty from any person who, after the publication of the application infringes a claim of the published application, PROVIDED THAT: (1) the infringer had actual notice of the published patent application (35 USC §154(d)(1)(B)), and (2) the invention as claimed in the patent is substantially identical to the invention as claimed in the published patent application (35 USC §154(d)(2). Provisional rights also apply to PCT applications, but if the PCT application was not published in English, the provisional rights only apply after the USPTO receives a translation of the publication in the English language.
The statute does not explain the “actual notice” requirement. Does it require that the patent applicant provide notice to the accused infringer, or is it sufficient that the accused infringer discovers the publication itself? The legislative history provides some guidance:
The requirement of actual notice is critical. The mere fact that the published application is included in a commercial database where it might be found is insufficient. The published applicant must give actual notice of the published application to the accused infringer and explain what acts are regarded as giving rise to provisional rights.”
Statements on Introduced Bills and Joint Resolution, Senate, S. 1948, Cong. Rec. S14719 (Nov. 17, 1999), available at http://thomas.loc.gov.
Stephens v. Tech Int’l, Inc., 393 F.3d 1269, 1276 (Fed. Cir. 2004) suggests that §154(d) requires notice from the applicant. The Federal Circuit determined that the patent owner “operated within its rights under section 154 when it notified Tech [the defendant] of its potential infringement. The letter represented Spectrum’s adherence to section 154’s requirement that Tech be placed on notice of Spectrum’s future right to obtain royalties if a patent issued in a form substantially identical to the published ‘222 application.”
As to the content of the notice, the legislative history indicates that the notice should “explain what acts are regarded as giving rise to provisional rights.”
It is generally assumed that this notice is similar to the notice requirement of 35 U.S.C. §287(a). Based on §287(a) cases, the actual notice must identify the patent application serial number and the activity that is within the scope of the claims, and should include a proposal to abate the activity.
35 U.S.C. §154(d)(2) conditions recovery of a reasonable royalty on the infringed claim in the published application being substantially identical to a claim in the issued patent. In Pandora Jewelry, LLC v. Chamilia, LLC, 2008 U.S. Dist. LEXIS 61064 (D. Md., August 8, 2008), the court addressed the “substantially identical” requirement of §154(d) and concluded that it was the same as that found in §252. The court said:
Under § 252, amended patent claims are “substantially identical” to the original claims “if they are without substantive change.” Laitram Corp. v. NEC Corp., 163 F.3d 1342, 1346 (Fed. Cir. 1998) (internal quotations omitted). “[I]n determining whether substantive changes have been made, [a court] must discern whether the scope of the claims are identical, not merely whether different words are used.” Id. (citing Slimfold Mfg. Co. v. Kinkead Indus., 810 F.2d 1113, 1115 (Fed. Cir. 1987)). Although not a per se rule, “it is difficult to conceive of many situations in which the scope of a rejected claim that became allowable when amended is not substantively changed by the amendment.” Id. at 1348. Where a substantive change has been made to a claim, the allegedly harmed party has no provisional rights to assert.”
Pandora’s published patent application claimed a reversibly attached band. During prosecution, however, the applicant amended that element to be a “fixedly attached band.” According to the district court in this was done “in order to overcome the PTO’s rejection based on the prior art.” This amendment caused the court to conclude that Pandora had substantively amended the scope of the claim. The court found no provisional patent rights because “Pandora substantively altered the scope of the claim when it amended the patent to require a permanently fixed band. Because the issued patent is not substantially identical to the published patent application, Pandora has no provisional rights to assert.”
In Classen Immunotherapies, Inc. v. Shinogi, Inc., Civil Action No. RWT-13-921 (D. Md, 1914) the Court found that Classen’s allegations under §154(d) must also be dismissed because the published applications for the ‘069 and ‘639 patents were not substantially identical to the patents that ultimately issued:
When a published patent application’s claims are amended such that their scope is changed, the patent is no longer “substantially identical” to its application. See Icon Outdoors, LLC v. Core Res., Inc., Civil Action No. RDB-11-2967, 2013 WL 2476392, at *14-15 (D. Md. June 7, 2013) (holding that a change from “waterproof or windproof” to “waterproof and windproof” in a claim describing the material of “the upper portion of [a] hunting garment” was a “substantive change” precluding the application of § 154(d)). “Although not a per se rule, ‘it is difficult to conceive of many situations in which the scope of a rejected claim that became allowable when amended is not substantively changed by the amendment.’” Pandora Jewelry, LLC v. Chamilia, LLC, Civil No. CCB-06-600, 2008 WL 3307156, at *9 (D. Md. Aug. 8, 2008) (quoting Laitram Corp. v. NEC Corp., 163 F.3d 1342, 1348 (Fed. Cir. 1998)).
Thus, the applications for the ‘069 and ‘639 patents are not “substantially identical” to the patents issued, and §154(d) simply does not apply.
Calculating the Reasonable Royalty
In Parker-Hannifin Corp. v. Champion Labs., 2008 U.S. Dist. LEXIS 61108 (N.D. Ohio 2008), Champion admitted that its oil filter infringed Parker’s Patent No. 6,983,851 and further admitted that it owed a “reasonable royalty” to the patentee for pre-issuance sales based on the provisional rights of 35 U.S.C. 154(d). Because of these admissions, the court was left only to consider the amount of reasonable royalty. The court found the reasonable royalty to be $2.00 per unit by applying the Georgia Pacific factors and to a hypothetical negotiation, awarding a total of $203,524 on these provisional rights. However the Court did not address how the hypothetical negotiation is altered based on the fact that the right infringed was only provisional.
35 U.S.C. §154(d) Provisional Rights.—
(1) In general.— In addition to other rights provided by this section, a patent shall include the right to obtain a reasonable royalty from any person who, during the period beginning on the date of publication of the application for such patent under section 122(b), or in the case of an international application filed under the treaty defined in section 351(a) designating the United States under Article 21(2)(a) of such treaty, the date of publication of the application, and ending on the date the patent is issued—
(A)(i) makes, uses, offers for sale, or sells in the United States the invention as claimed in the published patent application or imports such an invention into the United States; or
(ii) if the invention as claimed in the published patent application is a process, uses, offers for sale, or sells in the United States or imports into the United States products made by that process as claimed in the published patent application; and
(B) had actual notice of the published patent application and, in a case in which the right arising under this paragraph is based upon an international application designating the United States that is published in a language other than English, had a translation of the international application into the English language.
(2) Right based on substantially identical inventions.— The right under paragraph (1) to obtain a reasonable royalty shall not be available under this subsection unless the invention as claimed in the patent is substantially identical to the invention as claimed in the published patent application.
(3) Time limitation on obtaining a reasonable royalty.— The right under paragraph (1) to obtain a reasonable royalty shall be available only in an action brought not later than 6 years after the patent is issued. The right under paragraph (1) to obtain a reasonable royalty shall not be affected by the duration of the period described in paragraph (1).
(4) Requirements for international applications.—
(A) Effective date.— The right under paragraph (1) to obtain a reasonable royalty based upon the publication under the treaty defined in section 351(a) of an international application designating the United States shall commence on the date of publication under the treaty of the international application, or, if the publication under the treaty of the international application is in a language other than English, on the date on which the Patent and Trademark Office receives a translation of the publication in the English language.
(B) Copies.— The Director may require the applicant to provide a copy of the international application and a translation thereof.