Marking and Pre-Suit Damages: What Happens when a Failure to Mark Is Followed by a Period of Compliance with the Marking Statute?

A question that arises with some frequency in modern patent infringement cases is: Can pre-suit damages be recovered for a time period when the patentee (and any licensee) was in compliance with the marking statute when there was another period of non-compliance? This issue may arise when a non-practicing entity (NPE) purchases a patent that was previously owned by an operating company (or licensee) that practiced the patent but did not mark. The NPE does not make products, and thus has nothing to mark, and would argue that it should be able to recover damages for the period after it purchased the patent. However, the answer is likely that no such damages can be recovered. The failure to mark cuts off pre-suit (or pre-notice) damages even when the patentee and those making, offering, or selling the patented article previously complied with the statute.

Statutory Background

35 U.S.C. 287(a) ("the marking statute") provides:

Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them . . . may give notice to the public that the same is patented . . . 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.

35 U.S.C. 287(a) (emphasis added).

Case Law

Several courts have considered whether a failure to mark cuts off pre-suit damages even where the patentee previously complied with the marking statute and found that it does.

This issue was squarely addressed in Horatio Wash. Depot Techs. LLC v. Tolmar Inc., Civil Action No. 17-1086-LPA (D. Del. Nov. 1, 2018), in which court addressed a fact pattern involving an earlier period of non-compliance with the statute. Defendant Tolmar filed a Rule 12(b)(6) motion seeking inter alia to dismiss two of the three patents asserted by Plaintiff Horatio. Tolmar argued that a predecessor owner of the patents had not complied with the marking statute, and since the patents had expired before Horatio filed suit and had not provided actual notice prior to expiration, no damages could be recovered. Magistrate Judge Burke granted this part of the motion in the Report and Recommendation cited above, and that R&R was adopted by Judge Stark in Horatio Wash. Depot Techs. LLC v. Tolmar Inc., Civil Action No. 17-1086-LPA (D. Del. March 20, 2019).

Horatio was the owner by assignment of several patents, all of which had expired prior to the suit being filed. Two of the patents had claims directed to a composition of matter, while the third had only method claims. Tolmar moved on the two composition patents, which were subject to the marking statute. (Patents with only method claims are not subject to the marking statute). Horatio made several arguments as to why it was entitled to pre-suit damages. Its last argument is relevant here: Horatio admitted that a predecessor owner of the patents (ALZA) had failed to mark patented products, but because Horatio purchased the patents in good faith and was not making or selling patented products, 287(a) should not apply to Horatio. The court found otherwise.

The court rejected Horatio's argument that 287(a) should not be "read ... so broadly as to sweep within its scope good faith third party purchasers of patents [like Horatio] who never manufactured any patented product and who are not under the control of the patentee or in privity with the prior assignee." Slip op. at 9. The court rejected Horatio's policy and equity arguments because, it concluded, "in the end, the answer here depends not on the Court's view of policy or equity but instead on a question of statutory construction i.e., who counts as a '[p]atentee[]' for purposes of 287(a). The court reasoned that if Horatio counts as a "patentee" under the statute, then the inquiry is over because the statute's requirements would apply to Horatio.

The court started its statutory analysis by looking the text of 35 U.S.C. 100(d), which defines "patentee" as "not only the patentee to whom the patent was issued but also the successors in title to the patentee." Slip op. at 10. That statutory section then purports to define "patentee" for the remainder of Title 35, including 287(a). The court concluded: "if there was a failure to mark by any prior or current patentee (as there was here, by prior patentee ALZA), then 'no damages shall be recovered by the patentee [including current patentee [Horatio]] in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter[.]" Slip op. at 11. As to Horatio's equity argument, the court was persuaded by Tolmar's argument that "ALZA would have been unable to convey any greater patent rights than it held to the entity that eventually assigned the rights to [Horatio] (the "intermediate assignee"), and that this intermediate assignee could not in turn have conveyed any greater patent rights than it held to [Horatio]." Slip op. at 11 n.7.

In Team Worldwide Corp. v. Academy, Ltd., Case No. 2:19-cv-00092-RJG-RSP, 2021 WL 1854392 (E.D. Tex. May 10, 2021), the court considered whether plaintiff Trans Worldwide Corporation ("TWW") could recover damages during its period of compliance with the marking statute prior to its period of non-compliance. Id. at *1. It held that TWW could not recover any damages prior to actual notice to defendants. Id. The court reviewed pre-Arctic Cat case law including Clancy Sys, Int'l. v. Symbol Techs., Inc., and Metrologic Instruments, Inc. v. PSC, Inc., and found them to be inconsistent with Arctic Cat II. Id. at *2 (citing Clancy Sys. Int'l v. Symbol Techs. Inc., 953 F. Supp. 1170, 1174 (D. Colo. 1997) and Metrologic Instruments, Inc. v. PSC, Inc., No. 99-4876-JBS, 2004 WL 2851955 (D.N.J. Dec. 13, 2004). The court in Team Worldwide relied on language in Arctic Cat II to state, "the Federal Circuit strictly interpreted 287 to make clear that once a patentee (or its licensee) is non-compliant with 287, recovery of damages is limited to either the period after marking resumes or after the alleged infringer has been given actual notice." Id. at *2 (quoting Arctic Cat Inc. v. Bombardier Rec. Prods. ("Arctic Cat II"), 950 F.3d 860, 864 (Fed. Cir. 2020) ("a patentee who begins selling unmarked products can cure noncompliance with the notice requirement and thus begin recovering damages by beginning to mark its products in accordance with the statute."). Thus, TWW was not entitled to recover damages for any time period prior to actual notice, including the time period during which TWW and its licensees complied with the 287, as a result of failure to mark.

While the court strictly interpreted 287, it also stated that there was no evidence that TWW undertook reasonable efforts to make its licensee comply with the marking statute. This left room for a potentially different result where a patentee takes reasonable efforts to ensure its licensees comply with 287. See Arctic Cat II at 864 ("[C]ourts may consider whether the patentee made reasonable efforts to ensure third parties' compliance with the marking statute. . . .").

In Lambeth Magnetic Structures, LLC v. Seagate Tech. (US) Holdings, Inc., No. 16-538, 2019 WL 2579968 (W.D. Pa. Jun. 24, 2019), plaintiff Lambeth argued "that selling unmarked products should cut off damages only during the period in which the unmarked products were sold. . . ." Id. at *13. In that case, Lambeth's licensee sold unmarked products for a period of eight months more than four years prior to the filing of the suit. The "Court [] reject[ed] Lambeth's argument that the damages bar under 287(a) lifts during a sales interlude when unmarked products are no longer sold" and granted defendants' "motions for summary judgment as to lack of pre-suit damages beginning once Microsoft's license took effect and it began selling products practicing the '988 patent." Id.

U.S. Ethernet Innovs., LLC v. Acer, Inc., No. 10-3724-CW, 2013 WL 4456161 (N.D. Cal. Aug 16, 2013), was decided prior to Arctic Cat, and the Northern District of Illinois came to the same conclusion: that failure to mark without cure or actual notice cuts off all pre-notice damages. The court found that 287(a) applied to products made in accordance with a broad cross-license between plaintiff's predecessor and its licensee IBM. Id. at *7. Likewise, the court found that " 287's marking requirement applies to patentee's authorization of other persons to make and sell patented items in whatever form the authorization was given" including patentee's covenant not to sue with Intel. Id. at *8. Therefore, sales of unmarked products by both IBM and Intel cut off the availability of pre-notice damages.

Plaintiff USEI argued that "'[a]ny limitation on USEI's ability to recover damages for infringement of the Patents-in-Suit under 25 U.S.C. 287 should end on November 8, 2004,' the expiration of that covenant." Id. at *10. The court disagreed, noting that "this argument fails to take into account that the license agreement with IBM remained valid past that date and that IBM continued to sell unmarked products that included accused Intel components through 2009." Id. The court then clarified that plaintiff "cannot recover damages for any acts of infringement of the [patents-in-suit] against Movants . . . that took place before it filed infringement claims against each one of them." Id.

Takeaways

The cases cited above are consistent: Where the patentee (or its licensee) previously complied with the marking statute but later failed to mark patent articles, or vice versa, that failure to mark a patented article will cut off damages absent notice to the accused infringer. According to the District of Delaware, this rule applies even when a patent is sold to a successor owner who does not practice the patent because each successor is considered a "patentee" under the marking statute.

Co-Authored by: Nicole Willams