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Attorneys

Pre-Issuance Damages for Patent Infringement – A Very Rare Remedy

March 18 2016

By: Audrey A. Millemann

The Federal Circuit Court of Appeals recently addressed an issue of first impression: what is the “actual notice” required under 35 U.S.C. §154(d) for a patent owner to recover damages for a defendant’s infringing conduct that occurred before the patent issued?

Most people assume that a plaintiff cannot recover damages for patent infringement for infringing actions that took place before the patent issued (pre-issuance damages). However, the American Inventors Protection Act of 1999 does for just that. Section §154(d) provides that a patent owner can recover damages from the defendant infringer for infringement that occurred after the patent application was published if the defendant had actual notice of the published patent application and if the invention claimed in the published patent application is substantially identical to the invention claimed in the issued patent. For patent litigators, the situation rarely exists because the published claims are almost always amended during prosecution, resulting in different claims in the issued patent.

Rosebud LMS, Inc. sued Adobe Systems, Inc. for infringement of three different patents, from 2010 through 2014 in the district court of Delaware. The first and second cases were dismissed. The third case, filed in 2014, alleged that Adobe infringed Rosebud’s U.S. patent no. 8,578,280. The ‘280 patent and was a continuation of the second patent, which was a continuation of the first patent. All three of the patents covered methods for allowing collaborative work on a computer network.

Adobe moved for summary judgment on the grounds that Rosebud had no remedy. Adobe contended that Rosebud was not entitled to damages after the patent had issued because Adobe had ceased using the technology in 2013, ten months before the ‘280 patent issued. Adobe also argued that Rosebud was not entitled to pre-issuance damages under §154(d) because Adobe had not received actual notice of the published ‘280 patent application.

The trial court granted the summary judgment for Adobe, and Rosebud appealed.
The Federal Circuit affirmed the decision, noting that this was a case of first impression.

On appeal, Adobe showed that there was no disputed question of fact as to whether it had actual acknowledge of the ‘280 patent. Adobe also argued that the court should interpret §154(d) to require that a patent applicant actively provide notice of the published patent application to a potential infringer in order to recover pre-issuance damages.

The appellate court agreed with Adobe and held that §154(d) requires actual notice, not constructive notice, as Rosebud had argued. However, the court disagreed with Adobe that §154(d) requires an affirmative act by the patent applicant to notify the potential infringer. The court held that “actual notice” should be interpreted according to its ordinary meaning – knowledge – and is not limited to an affirmative act of notice by the plaintiff. (Id. at *5.)

The court explained, at id., that there are good policy reasons to support Adobe’s proposed interpretation of §154(d), but that Congress must amend the statute:

“Requiring the applicant to affirmatively provide notice to potential infringers is in line with the extraordinary nature of statutory pre-issuance damages. Moreover, a strict rule requiring notification by the applicant is simpler to implement and does not leave the accused infringer in the difficult situation of having to rebut allegations that it knew of the published application. If Congress wishes, it can amend the statute to require an affirmative act by the patentee. We cannot.”

The Federal Circuit quickly disposed of Rosebud’s three arguments that Adobe had actual knowledge of the published ‘280 patent application. First, the court held that Adobe’s knowledge of the grandparent patent to the ‘280 patent is irrelevant, as §154(d) requires that the invention claimed in the published patent application be substantially identical to the invention claimed in the issued patent. Adobe’s knowledge of the grandparent patent did not give it knowledge of the claims of the issued ‘280 patent.

As to Rosebud’s second argument, the appellate court found it “border[ing] on the frivolous” to suggest that a few emails in Adobe’s possession referring to Rosebud more than two years before the ‘280 patent application was published were sufficient evidence to show that Adobe monitored Rosebud’s patent applications and would have found the published ‘280 application.

As to Rosebud’s third argument, the Federal Circuit held that it was not reasonable to expect that Adobe’s counsel would have searched for related patent applications in the second litigation when the second litigation had not even reached claim construction.

Thus, while it is important in any patent infringement case to consider whether pre-issuance damages are possible, they are still a highly unusual remedy and may become even more so in the future. Patent applicants who have published applications that may lead to infringement actions should evaluate the need to notify potential infringers pre-issuance and the consequences of such notification.