28 Apr 2017 in Newsletter
The Marking Statute, Disclaimers, and Impact on Damages
By: Thomas Scherer
On April 17, 2017, the U.S. Court of Appeals for the Federal Circuit (“CAFC”) rendered a decision in Rembrandt Wireless Technologies, L.P., v. Samsung Electronics Co., LTD., et al., No. 16-1729 (Fed. Cir. 2017). The appeal involved several issues, e.g., claim construction during infringement analysis, obviousness determinations made in invalidity analysis, and the appropriate calculation of damages. One aspect of the case that is particularly interesting is the Court’s consideration of the interplay between the marking statute and disclaimers of patent claims, as well as its impact on damages. Ultimately, the Court decided that a failure to properly mark a product covered by a patent must be a bar to the recovery of damages during the pre-notice period regardless of later disclaimer by the patentee. However, the case was remanded to the District Court to determine whether the patent marking statute applies on a patent-by-patent or claim-by-claim basis, which will greatly affect the outcome in this case.
Considering the case in more detail, the two patents in suit (“Rembrandt patents”) related to “a system and method of communication in which multiple modulation methods are used to facilitate communication among a plurality of modems in a network.” The technology described and claimed in the Rembrandt patents allows communication devices, such as modems, that previously could not communicate with one another to do so by using a first section of a transmitted message as a header that indicates the modulation method being employed by the remainder of the transmitted message. Samsung devices incorporating the Bluetooth enhanced data rate (“EDR”) standard were found to infringe the Rembrandt patents at the District Court and appeal to the CAFC followed.
In one aspect, Samsung argued to the CAFC that the damages awarded related to all of Samsung’s infringing sales, which included pre-notice sales, but those pre-notice sales should be barred from any calculation of damages due to a failure of Rembrandt to properly mark products covered by the Rembrandt patents. The parties agreed that actual notice was given to Samsung at the initial filing of the lawsuit and that, in the event that pre-notice sales should be excluded due to the marking failure, the re-calculation of damages is a pure accounting function that could be performed by the District Court based on the sales data already of record. Accordingly, the only issue to be analyzed is the actual effect of the marking statute on damages and, particular to this case, what effect a disclaimer of a patent claim has on the requirements of the marking statute.
The marking statute, 35 U.S.C. 287, states that “Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them, or importing any patented article into the United States, may give notice to the public that the same is patented” and, in the event that the patentee fails to so mark, the recovery of damages is limited to only acts of infringement that occur after actual notice was given. In the instant case, the Rembrandt patents included a single claim that covered a product produced by a licensee, Zhone Technologies, Inc. Further, the license agreement between Rembrandt and Zhone did not include a requirement to mark the products produced under the license with the Rembrandt patent numbers. While that single claim was initially asserted in the initial complaint, when the marking failure was raised, Rembrandt withdrew that claim from the lawsuit and statutorily disclaimed it from the patent. Accordingly, the CAFC had to decide whether the marking failure was cured by the disclaimer of the claim.
The CAFC reasoned that, while the marking statute is permissive, a clear consequence of a limitation on recoverable damages results from a patentee’s failure to mark. That clear consequence should not be rendered moot by a patentee’s later decision to disclaim any particular claim of the patent. Thus, it was clearly held: “disclaimer cannot serve to retroactively dissolve the § 287(a) marking requirement for a patentee to collect pre-notice damages.” The CAFC also separately considered whether the marking statute should attach on a patent-by-patent or claim-by-claim basis. However, as the issue was not briefed in the appeal, no decision was reached on that issue and, instead, the case was remanded to the District Court to address the same. If the District Court finds that the marking statute attaches on a patent-by-patent basis, then the damages award will be reduced by the amount of the pre-notice sales. However, because infringement was found in this case based on claims other than the claim that had not been properly marked, if the District Court finds that the marking statute attaches on a claim-by-claim basis, then the damages award will not be adjusted.