Fed. Cir. Curbs NPE Pre-Suit Damages in Marking Case
A Federal Circuit decision holds that non-practicing entities must make reasonable efforts to ensure their licensees comply with patent marking rules or risk forfeiting pre-suit damages in future enforcement actions.
The US Court of Appeals for the Federal Circuit affirmed the dismissal of infringement claims in 'VDPP, LLC v. Volkswagen Group of America, Inc.,' ruling that the non-practicing entity (NPE) plaintiff could not claim pre-suit damages because it failed to police its licensees' compliance with patent marking statutes.
This decision is important because it extends the marking obligations under 35 U.S.C. § 287 to an NPE’s licensees, limiting the traditional view that NPEs without products are exempt from marking rules. The court found that VDPP's prior settlement agreements, which licensed the patent to other companies, created a duty for VDPP to make reasonable efforts to ensure those licensees marked their products. The failure to do so—and in one case, expressly waiving the marking requirement—was fatal to its claim for damages preceding actual notice of infringement.
NPEs must now evaluate how settlement terms in one case affect damages in another, potentially requiring marking covenants in their license agreements. For defendants, this ruling provides a new and powerful defense to limit damages by investigating an NPE's full licensing history for compliance.