Patentees must Exercise Reasonable Efforts to ensure that Licensees are Complying with the Marking Statute

December 12, 2017 – Article

In an earlier article, we noted that the US patent marking statute (35 USC 287) applies to licensees: if a licensee fails to mark, the patent owner may be unable to collect past damages for infringing activities taking place prior to actual notice, even if the patent owner marks its own products. In order to avoid this pitfall, patent owners must exercise reasonable efforts to ensure that licensees are complying with the marking statute.

A recent case illustrates this point. In Rembrandt Wireless v. Samsung Elecs., (Fed. Cir. 2017), Samsung was found to infringe two of Rembrandt’s patents, and Rembrandt was awarded $15.7 million in damages. On appeal, Samsung argued that Rembrandt licensed its patent to a third party, but did not require the licensee to mark its products. The Federal Circuit agreed with Samsung and remanded the case for the damages award to be reduced to exclude pre-notice damages.

A related issue came up in a decision last week in Artic Cat Inc., vs. Bombardier Rec. Prod. Inc. (BRP) (Fed. Cir. 2017). At trial, the jury found BRP infringed Artic Cat’s patents and awarded Artic Cat damages that began before BRP received actual notice of infringement. BRP argued to the district court that Artic Cat’s licensee (Honda) had failed to mark its products, such that damages should be reduced by excluding pre-notice activities. Of note, the license agreement stated that Honda had no obligation to mark its products, and in fact Honda did not mark its products. As such, Artic Cat could hardly argue that it made reasonable efforts to ensure compliance with the marking requirement, and was left to argue that Honda’s products were not covered by the asserted patents. The district court found in favor of Artic Cat and held that BRP did not meet its burden of proving that Honda’s products were covered by the asserted patents. On appeal, the federal circuit vacated the district court’s judgement and held that the burden of proof that the licensee’s product do not fall within the scope of the asserted patents belongs to the patent owner, not the accused infringer. On the other hand, the federal circuit acknowledged that the alleged infringer, who challenges the patentee’s compliance with the marking statute, bears an initial burden of production to articulate the products it believes are unmarked “patented articles”.

Bottom line: patentees who license their patents should consider including a marking clause in the license agreement. While it may be difficult for a patentee to ensure the licensees’ compliance with the marking provisions, the Federal Circuit has held that where licensees are involved, courts may consider “whether the patentee made reasonable efforts to ensure compliance with the marking requirements.”