Latest Federal Court Cases - February 2020 #4

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PATENT CASE OF THE WEEK

Arctic Cat Inc. v. Bombardier Recreational Products Inc., Appeal No. 2019-1080 (Fed. Cir. Feb. 19, 2020)

In this week’s Case of the Week, the Federal Circuit addresses issues relating to the notice requirement of the patent marking statute, 35 U.S.C. § 287. The patents relate to thrust steering systems for personal watercraft (“PWCs”). The patent owner, Arctic Cat, appealed a district court judgment that it is not entitled to pre-suit damages from Bombardier due to the failure of Arctic Cat’s licensee to mark its products in accordance with Section 287. The Court affirmed the district court’s judgment.

As background, Arctic Cat licensed its patents to Honda. The original draft license agreement included a requirement that Honda mark its products with Arctic Cat’s patent numbers; however, a later draft removed that clause. The final agreement was signed with an express statement that Honda had no obligation to mark its licensed products. Honda thus began making and selling unmarked licensed products, and Arctic Cat made no effort to mark them. At some point prior to the filing of the complaint against Bombardier for patent infringement, Honda ceased selling the unmarked licensed products.

This is the second appeal of a decision stemming from the original complaint filed against Bombardier. At the first trial, a jury found that Bombardier willfully infringed the patents-in-suit, and awarded Arctic Cat a royalty dating back to six years prior to the filing of the complaint. The district court also denied Bombardier’s post-trial motions for judgment as a matter of law and found that Bombardier did not meet its burden of showing that Honda’s PWCs practiced the asserted claims. The Court on the first appeal held that the district court erred in holding that it was Bombardier’s burden to show that Honda’s PWCs practiced the asserted claims, and further held that once an alleged infringer identifies products that should have been marked pursuant to Section 287, it is the patentee’s burden to prove that those products do not practice the asserted claims. The Court thus remanded the case so that Arctic Cat could have the opportunity to so establish.

On remand, Arctic Cat conceded it could not prove that Honda’s PWCs did not practice the asserted claims, but still moved for summary judgment that it was entitled to receive pre-suit damages. Arctic Cat argued that it is entitled to damages for the period of time after Honda allegedly stopped selling its licensed products and before suit was filed because Section 287 applies only when a patentee (or licensee) is actively making, selling, or using unmarked products. Arctic Cat also argued it is alternatively entitled to damages for the entire six-year period allowed by 35 U.S.C. § 286 because Bombardier’s willful infringement is sufficient evidence of notice of the patents under Section 287. Bombardier moved for summary judgment that Arctic Cat failed to provide the required notice and therefore cannot receive any pre-suit damages. The district court ruled in favor of Bombardier and Arctic Cat appealed.

In this appeal, Arctic Cat first argued that Section 287 limits damages only during periods when the patentee is actually making, selling, or offering for sale the patented article. The Court disagreed, explaining that the consequence of failure to mark (which was Arctic Cat’s obligation under the statute since Honda was under no such obligation pursuant to its license agreement) is not so temporally limited. Rather, the statute prohibits a patentee from receiving any damages after a failure to mark occurs, and does not allow for a reduced amount of damages dependent upon the time the patentee was actually practicing the patent. Thus, Arctic Cat’s obligation to mark its products arose when Honda began selling its licensed products, and Honda’s cessation of sales did not remove the notice requirement imposed by statute.

The Court explained that this reading is consistent with the purpose of the statute. For instance, if Arctic Cat or Honda were to cease sales of unmarked product, nothing prevents either party from resuming those sales at a later date, and in the meantime, unmarked products can remain on the market, incorrectly indicating to the public that there is no patent. This can result in confusion and uncertainty. Instead, a patentee who has sold unmarked products must provide notice in order to begin recovering damages. Arctic Cat’s view of the statute undermines that purpose because it would allow a patentee to mislead others that they are free to make and sell an article that is actually patented, but nonetheless allow the patentee to recover damages without taking corrective action. The Court explained that such a view would create a situation in which a patentee has no incentive to begin marking. Because Arctic Cat took no action to remedy Honda’s previous failure to mark, and otherwise did not provide any notice that the PWCs were actually patented, it never complied with the notice requirement and thus cannot recover damages for any time period prior to the filing of its complaint.

Arctic Cat also argued that, regardless of its failure to mark the products, it can still recover damages under Section 286 because Bombardier was found to willfully infringe the patent. In other words, Bombardier knew of the patent, which should be sufficient to establish actual notice of the patent under Section 287. The Court disagreed with Arctic Cat’s theory. First, such a theory is foreclosed by precedent, which Arctic Cat acknowledged. Further, the marking statute imposes obligations on the patentee, and only the patentee can discharge those obligations by some affirmative act of notice—either by marking the products (constructive notice) or some kind of actual notice to the alleged infringer. Knowledge by the infringer of the patent and its infringement is not enough to establish actual notice.

The Court thus affirmed the district court’s denial of pre-suit damages to Arctic Cat.

The opinion can be found here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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