Earlier this month in Lubby Holdings LLC et al. v. Chung, No. 2019-2286 (Fed. Cir. Sept. 1, 2021), the Federal Circuit overturned a damages award stemming from a finding of patent infringement because the plaintiff did not show that the defendant had sufficient notice of infringement of the asserted patent under 35 U.S.C. § 287. In doing so, the Federal Circuit reiterated the importance of § 287’s marking requirement in assessing patent infringement damages, making this opinion an important read for any patent owner.
The appeal was taken from an action for patent infringement before the U.S. District Court for the Central District of California in which Lubby Holdings, the owner of the asserted ’284 patent relating to personal vaporizers, accused the defendant, a collaborator in connection with the invention claimed in the patent, of making, offering to sell, and selling personal vaporizer devices that allegedly infringed the ’284 patent. After a jury returned a verdict finding the defendant liable for direct infringement of the ’284 patent and awarding Lubby Holdings $863,936.10 in reasonable royalty damages, the defendant renewed a motion for judgment as a matter of law made during trial, arguing that Lubby Holdings did not meet its burden to prove that it complied with § 287’s marking requirement. The district court denied the defendant’s motion and he appealed.
On appeal, defendant argued that the record lacked substantial evidence to support the jury’s damages verdict because Lubby Holdings did not comply with the marking requirement. After the defendant identified a commercial product as not being marked, Lubby Holdings failed to provide any evidence of actual marking or show in the alternative that the identified commercial product did not practice the asserted patent. The defendant argued that the jury’s verdict on damages should therefore be reversed. The Federal Circuit agreed.
The Court explained that while “the patentee bears the burden of pleading and proving he complied with § 287(a)’s marking requirement,” and that “the burden of proving compliance with marking is and at all times remains on the patentee,” the “alleged infringer who challenges the patentee’s compliance with § 287 bears an initial burden of production to articulate the products it believes are unmarked ‘patent articles’ subject to § 287.” Recognizing that this is a low bar, the Federal Circuit found that defendant met the burden of production by identifying a product listed on Lubby Holdings’ website that did not include a patent number. By this identification of an unmarked product that the defendant believed practiced the asserted patent, the burden shifted to Lubby Holdings to prove the product did not practice the patent. Because Lubby Holdings “presented no evidence that the identified product did not practice the patent or that it marked the products it actually sold [it] thus failed to establish that it marked the products as required by § 287.” The Federal Circuit further found that, as a result, Lubby Holdings could “recover damages only for the period that it provided actual notice” to defendant, which was only as of the filing of the complaint in the lawsuit.
Interestingly, the Federal Circuit further explained that defendant’s “admission that he had notice that the ’284 patent issued does not equate to actual notice under § 287,” because, for “purposes of section 287(a), notice must be of ‘the infringement,’ not merely notice of the patent’s existence or ownership.” The evidence did not show that Lubby Holdings, provided defendant with “an affirmative communication of a specific charge of infringement by a specific accused product or device,” notwithstanding the fact that defendant had signed nondisclosure agreements pertaining to the technology underlying the ’284 patent and that the CEO of Lubby Holdings had previously told defendant that he could not use the technology at issue. In fact, it was “irrelevant” whether defendant knew of the patent or knew “of his own infringement,” as the “correct approach to determining notice under § 287 must focus on the action of the patentee, not the knowledge or understanding of the infringer.”
In dissent, Judge Newman argued that the majority (Judges Dyk and Wallach) should not have disturbed the jury’s damages award based on the theory that defendant did not have notice of the infringement until he was served with the complaint because the opinion ignores defendant’s admitted knowledge based on the fact that the parties had been collaborators on the very technology at issue. Judge Newman also suggested that the majority “discard[ed] the trial procedure” to “devise a new theory” whereby the infringing activity occurring before the filing of the district court complaint was excused, despite the fact that the assertion that the defendant had no knowledge of the infringement was not an issue presented at trial, no jury instruction was given on this theory, and that “[i]t is not the appellate role to act as factfinder on appeal.”
Given the majority holding in Lubby Holdings LLC, et al. v. Chung, it would be wise for any company owning patents and selling products that practice those patents to ensure they are appropriately marking their products and also to promptly inform alleged infringers of their specific unlawful activity in order to be eligible to collect the fullest extent of damages possible.