Failure to Mark Eliminates Entitlement to Pre-Suit Damages

Just lately, in Packet Intelligence LLC v. NetScout Sys., Inc., No 19-2041 (July 14, 2020), the Courtroom of Appeals for the Federal Circuit reversed a jury verdict of $3.5 million in pre-suit damages and vacated the trial court docket’s enhancement of that award as a result of licensees of the asserted patents did not correctly mark allegedly patent working towards merchandise. Below the later-decided burden-shifting framework introduced in Arctic Cat Inc. v. Bombardier Leisure Prods. Inc., 876 F.3d 1350 (Fed. Cir. 2017) (“Arctic Cat”), the Federal Circuit concluded that Packet Intelligence failed to fulfill its burden of proving that an unmarked product manufactured by its licensee didn’t observe an asserted patent. The Courtroom additional rejected Packet Intelligence’s argument that NetScout’s infringement of technique patents might function a foundation for restoration of pre-suit damages. It concluded {that a} patentee can’t circumvent 35 U.S.C. § 287 and embrace unmarked merchandise in its royalty base by merely arguing that infringement of associated technique claims drove gross sales of such unmarked merchandise.

Appellants NetScout Methods, Inc. and NetScout Methods Texas, LLC (“NetScout”) appealed from a judgment of the U.S. District Courtroom for the Jap District of Texas after a jury verdict and bench trial discovered, inter alia, that NetScout willfully infringed sure claims of U.S. Patent 6,665,725 (“the ’725 patent”), U.S. Patent 6,839,751 (“the ’751 patent”) and U.S. Patent 6,954,789 (“the ’789 patent”). The ’789 patent recites equipment claims whereas the ’725 patent and ’751 patent recite technique claims. Packet Intelligence LLC (“Packet Intelligence”) asserted claims from all three patents in opposition to NetScout’s “G10” and “GeoBlade” merchandise. The jury decided that Packet Intelligence was entitled to $3.5 million in damages for pre-suit infringement, $2.25 million in post-suit damages, $2.eight million in enhanced damages and an ongoing future royalty of 1.55%. The court docket additionally concluded that NetScout was not entitled to judgment as a matter of legislation on its failure to mark protection underneath 35 U.S.C. § 287.

After the jury verdict was introduced, the Federal Circuit in a special case introduced a change within the legislation relating to the burden of proof required to prevail with a patent marking protection underneath 35 U.S.C. § 287. In Arctic Cat, the Federal Circuit held that an alleged infringer bears the preliminary burden of manufacturing to determine the merchandise it believes are unmarked patented articles topic to § 287. The Courtroom famous that this preliminary burden of manufacturing is a “low bar” and that the alleged infringer want solely put the patentee on discover that sure licensees offered particular unmarked merchandise believed to observe the asserted patent. Below the Arctic Cat framework, the burden then falls to the patentee to show that the unmarked merchandise recognized don’t observe the patent-at-issue.

The Courtroom acknowledged that the jury cost from the Jap District of Texas was “in pressure” with that later-decided Arctic Cat choice, as a result of the cost imposed a burden on NetScout to show that the unmarked merchandise it recognized practiced the asserted patent. Citing Federal Circuit legislation, the Courtroom decided that NetScout’s failure to object to the jury cost was not dispositive on this case, because it “is sure by the legislation, not the jury cost, even when the cost was not objected to.” It additional famous that NetScout’s failure to object didn’t render the jury cost the “legislation of the case” for evaluating the sufficiency of the proof relating to compliance with § 287. As a substitute, the Courtroom utilized Artic Cat’s burden-shifting framework earlier than concluding that Packet Intelligence did not show that the unmarked product at problem, MeterFlow, didn’t observe a minimum of one declare of the ’789 patent.

On attraction, Packet Intelligence argued that it met its burden in two methods. First, Packet Intelligence argued that the truth that the patentee eliminated point out of the MeterFlow product from the provisional software from which the ’789 patent claims precedence earlier than submitting non-provisional functions was substantial proof displaying that the MeterFlow product doesn’t observe the ’789 patent. Second, Packet Intelligence argued that testimony from the named inventor stating {that a} totally different product, MeterWorks, didn’t embody his invention was substantial proof as to MeterFlow. The Federal Circuit rejected these arguments, concluding that Packet Intelligence had failed to fulfill its burden of proving that MeterFlow didn’t observe a number of claims of the ’789 patent, entitling NetScout to judgment as a matter of legislation that NetScout was not responsible for pre-suit damages from gross sales of the MeterFlow product.

The Federal Circuit additional rejected Packet Intelligence’s argument within the various that the pre-suit damages award may very well be sustained by proof of direct infringement of the ’725 and ’751 technique patents primarily based on NetScout’s personal inner use and testing. The Courtroom held that the proof failed to indicate that this inner use by NetScout drove gross sales of the accused merchandise. Reciting the adage that technique claims are “in a roundabout way infringed by the mere sale of an equipment able to performing the claimed course of,” the Courtroom defined that Packet Intelligence couldn’t merely rely gross sales of the software program accused of infringing the ’789 patent as gross sales of the tactic claimed within the ’725 and ’751 patents. Slightly, it was Packet Intelligence’s burden to show that the claimed technique was truly carried out and thus infringed. The Courtroom held that since Packet Intelligence did not mark its personal merchandise with the ’789 patent overlaying the equipment, “[i]t can’t circumvent § 287 and embrace [the accused] merchandise in its royalty base just by arguing that NetScout’s infringement of associated technique claims drove gross sales.”

Though technique patents are usually not topic to the marking necessities of § 287, the Courtroom’s holding is instructive in that claims of infringement of technique patents can’t be used to avoid compliance with the marking statute for licensed merchandise that embody equipment or system claims in different patents-at-issue. Patent house owners ought to take care to make sure that any patent-practicing licensed merchandise adjust to the marking necessities of § 287 to be able to protect claims to pre-suit damages.