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Recent U.S. Decisions Affecting Licensing

Tuesday, May 17, 2016   (0 Comments)
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Infringers Seeking to Establish a Patent Marking Defense May Bear the Burden of Showing Unmarked Products are Covered by the Asserted Patents

By John Paul, Brian Kacedon, and Ben Saidman

Under 35 U.S.C. § 287(a) of the U.S. patent statute, patent owners must mark their patented products with the patent number to be able to collect damages for the time period prior to the filing of a complaint.  This obligation also extends to licensees or other entities authorized by the patent owner.  When such authorized parties fail to mark patented products, courts consider whether the patent owner made reasonable efforts to ensure compliance with the marking statute.

Recently, in Arctic Cat Inc. v. Bombardier Recreational Products, Inc., a California court denied Bombardier’s motion for summary judgment, refusing to conclude that plaintiff Artic Cat’s damages should be limited because of a failure of its licensee, Honda, to mark its products.  The court held that the burden lay with the defendant, Bombardier, to show a failure to comply with the marking statute, and consequently, the court found that Bombardier failed to sufficiently demonstrate that Artic Cat’s damages should be limited for a failure to mark.

Arctic Cat filed a lawsuit against Bombardier, alleging infringement of multiple patents directed to thrust mechanisms for personal watercraft.  Before the patents issued, Arctic Cat exited the personal watercraft market, but granted Honda a license to the patents.  Bombardier moved for summary judgment, arguing Arctic Cat could not recover for any pre-complaint sales because Honda, its licensee, made products practicing those patents without satisfying the marking requirements of § 287(a).

The Arctic Cat Decision
The court denied Bombardier’s motion for summary judgment, holding that it could not conclude that Artic Cat’s damages should be limited for failure to mark.  According to the court, because Arctic Cat stopped manufacturing and selling personal watercraft before the patents issued, any noncompliance with the marking statute would have resulted from the activities of Arctic Cat’s sole licensee, Honda.  If Honda’s products implicated Arctic Cat’s patents, the court could consider whether Arctic Cat undertook reasonable efforts to ensure that Honda complied with the marking statute.  Noting a split in the courts on which party bears the burden of proving compliance/non-compliance with the marking statute, the court then adopted the view that the burden of producing evidence of compliance/non-compliance fell on the accused infringer, in this case Bombardier.

Despite Bombardier’s arguments that Honda products were covered by the patents—one step in showing Arctic Cat’s noncompliance with the marking statute—the court found that Bombardier’s arguments lacked sufficient analysis to prove that Honda’s products were subject to the marking statute by implicating any claims of the patents-in-suit.  The court even noted that evidence from the drafting of the license agreement between Artic Cat and Honda supported the notion that Artic Cat believed that the patents were implicated by Honda products at the time that the licensing agreement was drafted.  Nonetheless, the court held that Bombardier failed to sufficiently demonstrate that Honda products were covered by any of the patent claims and thus subject to the marking statute.  As a result, the court was unable to determine whether Arctic Cat should have taken reasonable efforts to ensure that Honda complied with the marking requirements of the statute, and the court could not conclude that Arctic Cat’s damages should be limited for failure to mark.

Strategy and Conclusion
This case shows that infringers attempting to use the patent marking statute to limit the recovery of damages may have the burden of analyzing and presenting evidence that products of a patent owner or its licensees are covered by the asserted patents.

Further information
The Arctic Cat decision is available here.

Editors and authors
The editors and authors are attorneys at Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.

John Paul - john.paul@finnegan.com
Brian Kacedon - brian.kacedon@finnegan.com
Christopher McDavid - christopher.mcdavid@finnegan.com
Robert Wells - robert.wells@finnegan.com
Benjamin Saidman - benjamin.saidman@finnegan.com

This article is for informational purposes and does not constitute legal advice.
The views expressed do not necessarily reflect the views of LES or Finnegan.