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Failure to mark reduces patentee’s infringement recovery

February / March 2022 IP Newsletter

You may think that your patent means you can recover reasonable royalty damages on all an infringer’s sales of its infringing product. But this isn’t necessarily the case. As shown in Lubby Holdings LLC v. Chung, if you haven’t complied with the marking requirement of the federal Patent Act, your damages may be significantly limited — even if the defendant admits it was aware of your patent.

An appeal ignited

Lubby Holdings owns a patent on a “personal vaporizer” that resists leaking, particularly when it’s not in use. Vaporizers are handheld devices that vaporize substances.

Lubby hired a consultant to help manufacture the vaporizer. But after they parted ways, the consultant later testified, he was aware of the patent. When he began selling a competing product, Lubby sued him for infringement. A jury found him liable for direct infringement of the patent and awarded Lubby $864,000 in reasonable royalty damages. The defendant appealed.

Arguments extinguished

On appeal, the defendant contended that Lubby hadn’t complied with the marking and notice requirements. A patentee who makes or sells a patented product must mark those products or notify infringers of the patent as a prerequisite to recover damages. If a patentee hasn’t given notice of its patent rights by properly marking the product, it can’t recover damages for the period before the actual notice.

At trial, the defendant pointed to a product on Lubby’s website that didn’t include a patent number. By doing so, the U.S. Court of Appeals for the Federal Circuit held that he cleared his “low bar” to put Lubby on notice that it sold specific unmarked products that he believed used the patented invention. The burden then shifted to Lubby to prove the identified products don’t use the invention.

The court found that Lubby presented no evidence to that effect or that showed it had marked the products it sold — so it failed to establish that it had marked the products. The result? Lubby could recover damages only for the period after it provided actual notice to the consultant, which was the date the lawsuit was filed.

Lubby argued that the consultant had earlier actual notice, citing his admission that he was aware of the patent. But, the court explained, for purposes of the marking requirement, the defendant must have notice of the infringement — not just the patent’s existence or ownership.

Alternatively, Lubby argued that, because the defendant knew of the patent and his own infringing activity before the lawsuit was filed, it was entitled to damages from earlier sales. The court, however, explained that the actual notice requirement is satisfied when the recipient is informed of the identity of the patent and the activity believed to be infringing, accompanied by a proposal to abate the infringement (for example, a license). The correct approach when determining notice looks to the patentee’s action, rather than the infringer’s knowledge or understanding.

No smoking gun

Lubby neither marked its product nor affirmatively communicated to the consultant specific charges of infringement by a specific product. These failures led the Federal Circuit to order a new trial to determine the number of sales that occurred after the lawsuit was filed.

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