The United States Court of Appeals for the Federal Circuit (CAFC) recently issued a decision in VDPP, LLC v. Volkswagen Group of America, Inc., No. 2024-2226, affirming the dismissal of a patent infringement complaint because the patentee failed to plead that its licensees had complied with the patent marking statute, 35 U.S.C. § 287(a). The statute requires anyone making or selling a patented product in the US to mark the product with “patent” or the abbreviation “pat.” along with the relevant patent number or an Internet address which associates the patented article with the patent number. This decision highlights that patent marking compliance is mandatory, even for licensees which are brought about through settlement agreements.
Background Case
VDPP, LLC was the owner by assignment of US Patent No. 9,426,452 (the “‘452 patent”) which relates to an electrically controlled spectacle frame that enables viewers to see three-dimensional effects. The patent expired in January 2022. More than 18 months later in August 2023, VDPP filed a complaint against Volkswagen Group of America, Inc. in the US District Court for the Southern District of Texas, alleging that Volkswagen had infringed at least one of the claims of the ‘452 patent.
Volkswagen moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted based on VDPP’s failure to comply with the patent marking statute, 35 U.S.C. § 287(a). Volkswagen argued that VDPP failed to provide constructive or actual notice of alleged infringement before the ‘452 patent expired and cannot obtain relief for infringement of an expired patent.
The District Court agreed, stating that where a patent is directed to a physical article (such as the ‘452 patent), pre-suit damages are unavailable under 35 U.S.C. § 287(a), unless the patentee previously provided:
(a) Constructive notice of infringement by marking any patented physical articles which are made or sold by the patentee, or “for or under” the patentee by others, with the word “patent” or the abbreviation “pat.” along with the relevant patent number or Internet address; or
(b) Actual notice of infringement to the alleged infringer.
Without either of the above-mentioned communications, damages are limited to those incurred after the complaint was filed. The marking requirements do not apply where a patent is directed to a process or method; however, the requirements are applicable where a patent contains both apparatus and method claims. Here, the ‘452 patent contained one system and three apparatus claims and related to a physical product.
Importantly, a patentee’s licensees must also comply with the patent marking requirements (Arctic Cat Inc. v. Bombardier Recreational Prods. Inc., 950 F.3d 860, 863–64 (Fed. Cir. 2020)). VDPP claimed to be a non-practicing entity which did not make or sell products and therefore had no articles of its own to mark. However, the District Court found that VDPP had previously entered into several settlement agreements, licensing the ‘452 patent to entities which continued to make or sell products. VDPP failed to show that it “made reasonable efforts” to ensure that its licensees complied with the marking requirements, or that it provided Volkswagen with actual notice of infringement. The District Court concluded that VDPP could not recover damages against Volkswagen for alleged infringement before the date VDPP filed the complaint. Moreover, a patentee cannot recover damages on an expired patent.
The District Court therefore granted Volkswagen’s motion to dismiss based on VDPP’s failure to comply with § 287(a). Volkswagen was subsequently awarded around $200,000 in attorney fees and sanctions were imposed on VDPP’s counsel.
The Federal Circuit’s Decision
VDPP appealed the dismissal, award and sanctions before the CAFC, arguing that the District Court abused its discretion by dismissing the complaint without giving VDPP an opportunity to amend. The Federal Circuit rejected VDPP’s arguments on the grounds that VDPP’s proposed amended complaint failed to meet the burden of pleading compliance with 35 U.S.C. § 287(a).
In particular, the Court held that there was nothing special about VDPP’s licenses that made it exempt from pleading compliance with the patent marking requirements. § 287(a) was found to still apply, even though VDPP’s licenses were entered into to settle litigation. The Court explained that “there is no difference between a license entered into under a settlement agreement and any other patent license agreement”. The Federal Circuit therefore affirmed the District Court’s dismissal, along with the award of attorney fees and the sanctions on VDPP’s counsel.
Key Takeaways for US Patent Holders
The CAFC’s decision highlights the importance of compliance with § 287(a), particularly emphasising the responsibility of patentees to make “reasonable efforts” to ensure their licensees also comply with the patent marking requirements. This decision demonstrates that, under the patent marking statute, a license entered into through a settlement agreement is no different to any other patent license agreement.
Patentees, whether or not they themselves make or sell a patented product, must ensure that their licensees appropriately mark patented products. Failure to comply may significantly reduce damages that could be recovered should litigation arise. It remains to be seen exactly what actions by a patentee constitute “reasonable efforts” to ensure compliance, but addressing marking obligations at the time of entering into licensing or settlement agreements may prove beneficial in minimising the risks associated with any future litigation.