Licensee’s Failure to Mark Ruined Patent Owner’s Claim for $3.5 Million in Pre-Suit Damages

In Packet Intelligence, LLC v. NetScout Systems, Inc. [2019-2041] (July 14, 2020), the Federal Circuit reversed the district court’s award of $3.5 million in pre-suit damages, vacated the court’s enhancement of that award, but affirmed the district court’s judgment in all other respects.

The Federal Circuit noted that an alleged infringer bears an initial burden of production to articulate the products it believes are unmarked patented articles subject to the marking requirement. This initial burden is a “low bar” and that the alleged infringer needed only to put the patentee on notice that certain licensees sold specific unmarked products that the alleged infringer believes practice the pa-tent. The burden then falss on the patentee to prove that the identified products do not practice the patent-at-issue.

NetScout argued that Packet Intelligence is not entitled to pre-suit damages because it failed to prove that MeterFlow, an unmarked product of Packet Intelligence’s licensee, did not practice the patent. The Federal Circuit agreed that under the standard articulated in Arctic Cat, Packet Intelligence bore the burden of proving that MeterFlow product identifed by NetScout did not practice at least one claim of the patent. Because Packet Intelligence failed to present substantial evidence to the jury that matched the limitations in any claim of the patent to the features of the Meter-Flow product, NetScout is entitled to judgment as a matter of law that it is not liable for pre-suit damages based on infringement of the patent.

Packet Intelligence further argued that the two method patents, which are not subject to the marking requirement, would alternatively support the award of pre-suit damages. However the Federal Circuit disagreed, noting that method claims are not directly infringed by the mere sale of an apparatus capable of performing the claimed process. Thus Packet Intelligence could not simply count sales of the software accused of infringing the ’789 patent as sales of the method claimed in the ’725 and ’751 patents. Instead, Packet Intelligence was required to produce evidence that the claimed method was actually used and hence infringed. The Federal Circuit rejected Packet Intelligence’s efforts to show that NetScout’s internal use justified the entire damage award, noting that the damages base was not tailored to any alleged internal use of the claimed methods.

Patent owners should police the marking by their licensees, and remember to always completely prove their entitlement to damages when challenged by the accused infringer.

Licensee’s Failure to Mark Licensed Products Limits Patent Owner’s Recovery

In Arctic Cat inc. v. Bombardier Recreational Products Inc., [2019-1080] (February 19, 2020), the Federal Circuit affirmed the district court’s determination that the patent owner was not able to recover pre-suit damages for infringement of U.S. Patent U.S. Patent Nos. 6,793,545 and 6,568,969 because the licensee did not mark covered products with the patent number.

On a previous appeal, the Federal Circuit held that once an alleged infringer identifies products that it believes are unmarked patented articles subject to the notice requirements of § 287, the patentee bears the burden of proving that the identified products do not practice the claimed invention.

On remand, Arctic Cat conceded that it could not show that the licensee’s products did not practice the asserted claims, but nonetheless moved for summary judgment that it is entitled to presuit damages because the damages limitations §287 only apply while the patentee is active making, using, and selling unmaked products, and not to the period when its licensee has ceased selling the accused products. Arctic Cat also argued that the jury’s finding of willful infringement is sufficient to demonstrate actual notice under § 287.

As to Arctic Cat’s first argument, the Federal Circuit held that the cessation of sales of unmarked products does not excuse noncompliance with the notice requirement of § 287 such that a patentee may recover damages for the period after sales of unmarked products ceased but before the filing of a suit for infringement.

The Federal Circuit noted that in American Medical Systems, 6 F.3d at 1537, it interpreted § 287 to allow a patentee who had sold unmarked products to begin recovering damages after the patentee began marking — so that a patentee who had sold unmarked products would have an incentive to begin marking, contrary to the objective of the statute. The Court said that where a party merely stops selling unmarked products but takes no action to remedy prior noncompliance or to provide notice that the articles were actually patented, it has not complied with the notice requirement of § 287 and cannot recover damages for any period prior to the filing of its complaint.

The Federal Circuit made quick work of Arctic Cat’s second argument — that the finding of willfulness dispensed with the need to show notice — pointing out that in In Amsted Indus. Inc. v. Buckeye Steel Castings Co. it held that the determination whether a patentee provided actual notice under § 287 “must focus on the action of the patentee, not the knowledge or understanding of the infringer,” and that “[i]t is irrelevant . . . whether the defendant knew of the patent or knew of his own infringement.”

The Federal Circuit reiterated that willfulness, as an indication that an infringer knew of a patent and of its infringement, does not serve as actual notice as contemplated by § 287.

Patent marking has, including by licensees, was made considerably easier by the AIA which permits “virtual” patent marking. Rather than let a licensee negotiate out a marking provision, patent owners should require their licessees to include a URL to patent information in order to protect subsequent damage claims against infringers.