On April 17, 2017, the United States Court of Appeals for the Federal Circuit vacated an award of more than $15 million in damages because a plaintiff's licensee failed to mark patented articles. Rembrandt Wireless Technologies, LP v. Samsung Electronics Co., No. 2016-1729 (Fed. Cir. Apr. 17, 2017). The decision underscores the importance of not only marking patented articles, but also requiring licensees to mark licensed articles. However, this decision left unanswered whether patent-marking applies on a claim-by-claim rather than a patent-by-patent basis.
In March 2013, Rembrandt sued Samsung for patent infringement in the United States District Court for the Eastern District of Texas. A jury found that Samsung had infringed Rembrandt's asserted patents and awarded Rembrandt $15.7 million in damages. Samsung appealed, inter alia, the denial of its motion for judgment as a matter of law to limit Rembrandt's damages for failure to mark patented articles. The Federal Circuit affirmed the liability rulings but vacated and remanded the district court's denial of Samsung's motion to limit damages for failure to mark.
Samsung moved the district court to limit Rembrandt's potential damages award because Rembrandt licensed its patent to Zhone Technologies, Inc., which sold unmarked products embodying asserted claim 40, the only claim Samsung alleged the unmarked products embodied. Rembrandt should have, but did not, require Zhone to mark its products. Nevertheless, the district court denied Samsung's JMOL motion because Rembrandt withdrew claim 40 from its infringement allegations and filed a statutory disclaimer disclaiming claim 40 pursuant to 35 U.S.C. § 253(a) and 37 C.F.R. § 1.321(a). The district court, citing Genetics Inst., LLC v. Novartis Vaccines & Diagnostics, Inc., 655 F.3d 1291 (Fed. Cir. 2011), reasoned that since a disclaimed patent claim is treated as though it had never previously existed, any prior obligation to mark products embodying claim 40 ceased to exist upon disclaimer.
The Federal Circuit noted that 35 U.S.C. § 287(a) is permissive, not mandatory, because it provides that patentees and their licensees "may give notice to the public that [any patented article] is patented" (emphasis added) by appropriately marking the article. The court further noted, however, that although the statute does not require marking, it further provides, "In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice." The Federal Circuit explained that the statute "protects the public's ability to exploit an unmarked product's features without liability for damages until a patentee provides either constructive notice through marking or actual notice." Slip op. at 20 (citing Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 162 (1989)). According to the Federal Circuit, "Allowing Rembrandt to use disclaimer to avoid the consequence of its failure to mark undermines the marking statute's public notice function." Id. at 21.
The Federal Circuit further reasoned that although a disclaimer relinquishes the rights of the patent holder, it does not retroactively relinquish the rights of the public, including its right to receive notice under the marking statute or avoid pre-notice damages. Consequently, the court vacated Rembrandt's damages award and remanded to the district court.
Before doing so, however, the Federal Circuit addressed, but did not decide, Rembrandt's argument, made to only the district court and not on appeal, that marking requirements should attach to individual claims rather than entire patents. In other words, Rembrandt argued that it should recover pre-notice damages for Samsung's infringement of claims other than disclaimed claim 40. The district court had held that issue moot in view of its ruling on the effect of the disclaimer. Although Rembrandt did not raise the issue on appeal, the Federal Circuit held that Rembrandt did not waive it because the district court did not decide it and it was moot until the Federal Circuit vacated the district court's ruling on disclaimer. Id at 22-23 (citing WesternGeco L.L.C. v. ION Geophysical Corp., 837 F.3d 1358, 1364 n.3 (Fed. Cir. 2016)). Acknowledging that whether the marking statute applies on a claim-by-claim or a patent-by-patent basis is an issue of first impression, the court remanded the issue to the district court to address in the first instance because the parties did not raise the issue on appeal.
This ruling serves as a reminder to patent owners of the importance of the patent marking requirements, and of requiring licensees to mark products embodying licensed patents. It remains to be seen whether Rembrandt will prevail on its claim-by-claim marking argument, which has some logic. As noted above, the Federal Circuit explained that the marking statute protects the public's right to exploit an unmarked product's features without liability until receipt of actual notice. Suppose a patent has claims to mutually exclusive embodiments and the patent owner or its licensee marks one embodiment and not the other. Why should the public have a right to exploit the features of the marked product rather than only the unmarked product? On the other hand, the statute provides that patentees and licensees selling "any patented article" may give notice by marking, and if they fail to do so, "no damages shall be recovered" until actual notice, without express limitation to products with the features of the unmarked products. With millions of dollars at stake, the parties are likely to fully explore the issue, which may well return to the Federal Circuit.
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