Failure to Mark Products Eliminates Pre-Suite Infringement Damages 

October 2020

 

Packet Intelligence LLC v. NetScout Systems, Inc., No. 19-2041 (Fed. Cir. Jul.14, 2020)

In Packet Intelligence, the Federal Circuit overturned a district court award of pre-suit infringement damages based on Packet Intelligence’s failure to prove that unmarked products did not practice the claims of the patents-in-suit.  At the time the case was presented to the jury, the Federal Circuit had not articulated a standard for assigning the burdens of proof where an allegation of a failure to mark had been raised.  As a result, the jury instructions incorrectly placed the burden on the defendant to prove that unmarked products practiced the patented invention.

Packet Intelligence held several patents directed to systems and methods for monitoring packets of information exchanged over a computer network.  Packet Intelligence licensed these patents to Exar, a company not part of the present lawsuit.  And, as part of the licensing agreement, Exar was not required to mark the products with their corresponding patent numbers.  NetScout argued the sale of unmarked products by Exar violated the marking requirement set forth in the Patent Act, precluding Packet Intelligence from recovering pre-suit damages.

Section 287 of the Patent Act requires patentees to mark products covered by a patent in order to provide the public with notice that the product is patented.  Marking can be accomplished by many methods, including by placing the word “patent” followed by the patent number on the product itself.  A patentee that fails to mark is precluded from recovering damages for any period before the accused infringer had actual knowledge of the patent.

The district court required NetScout to prove that the Exar products practiced the patents-at-issue.  The jury found that NetScout failed to meet its burden, and awarded Packet Intelligence damages to compensate for pre-suit infringement.  NetScout Systems appealed.

After the case went to trial, but before the appeal, the Federal Circuit articulated a new standard for proving a failure to mark.  Under the present standard, the accused infringer bears the initial “low” burden of identifying products it believes are unmarked patented articles.  Thereafter, the patentee bears the burden of proving the identified products do not practice the patent-at-issue.

Because the district court had incorrectly placed the burden of proof on NetScout, rather than Packet Intelligence, the Federal Circuit awarded judgment as a matter of law to NetScout.  Packet Intelligence had presented evidence that a related product to that identified by NetScout did not to practice the claimed invention.  However, the Federal Circuit held this to be insufficient to satisfy its burden of proof.  The Federal Circuit also disagreed with Packet Intelligence’s argument for collecting pre-suit damages on method claims not required to be marked, because a method is not directly infringed by the sale of a product capable of performing the method.

Key Takeaway: Patentees are required to ensure their licensees are putting the public on constructive notice of a patented product by properly marking licensed products with patent numbers in order to collect pre-suit damages.  Marking is especially important for patentees that heavily license their patented inventions, as the sale of even a portion of unmarked products could jeopardize the ability to recover pre-suit damages.