Patent Management: Preserve Your Damages by Proper Marking and Infringement Notices


Has your client marked his patented product with the patent number? Required his customers to do so? If not, should he and can he start doing so now? When warning a suspected infringer of his patent has he specifically charged infringement of the particular accused item and identified the patent by number? If none of the above, then visions of recovery of one of those handsome U.S. patent infringement damages awards may be purely visionary. Since patent marking is a peculiarly U.S. practice, it is an especially important consideration for non-U.S. companies who own U.S. patents and export to the U.S. market.

Armsted v. Buckeye Steel Casting Company

In a decision of potentially far-reaching implications for patent property management, the Federal Circuit has significantly extended its interpretation of the damages limitation statute, 35 U.S.C. § 287(a), both as to what products require patent marking and as to what constitutes a sufficient notice of infringement. Amsted v. Buckeye Steel Casting Company, 30 USPQ2d 1462 (Fed. Cir. 1994). New requirements for marking products with the patent number and for the content of an infringement notice letter have been imposed.

Amsted owned a patent, granted in 1972, which covered an apparatus combination for railroad car underframe structures. One element of the combination was a particular, but itself unpatented, center plate. In 1984, after attempts to design around the patent failed, but with full knowledge of Amsted's patent and an opinion of its own counsel (as early as 1976) that if it made the center plate according to the patent it would be a contributory infringer, Buckeye Steel nonetheless proceeded to infringe.

Amsted sent a first letter in 1986 to Buckeye (as well as to other companies in the industry) advising that it owned several patents, identifying the patent in suit among them, and stating that it expected the industry to respect its patents and that Buckeye should refrain from acts of infringement. However, that letter did not contain language specifically charging Buckeye with actual infringement of Amsted's patent. In 1989, a second Amsted letter to Buckeye specifically asserted that Buckeye's center plate "infringes" the patent and demanded that Buckeye "cease and desist" from such acts. It was admitted that the 1989 letter was a clear and adequate notice of infringement under § 287(a).

This lawsuit followed in February, 1991. After trial, the jury found Buckeye guilty of willful and deliberate infringement, whereupon the court awarded treble damages dating from Amsted's first, 1986, letter.

On Buckeye's appeal the Federal Circuit made the following affirming holdings that,

  1. There was sufficient evidence to sustain the jury's verdict of willful and deliberate infringement;
  2. The trial court's award of treble damages (and attorney's fees because an "exceptional case") was not an abuse of discretion, particularly in view of Buckeye's concession that "it deliberately copied" the patent; But, the court then overturned the jury's verdict as to the date for commencing the damages calculation, because --
  3. Amsted's first, 1986, letter "did not explicitly charge Buckeye with infringement of [Amsted's patent in suit]"--therefore it was not a sufficient notice under § 287(a), even though at that time Buckeye had actual knowledge of the patent and an opinion of counsel that it was infringing if the patent was valid;
  4. Accordingly, it was not until Amsted's 1989 letter that there was an adequate notice of a charge of infringement under § 287(a) because only that letter provided what would have been an adequate basis for Buckeye to have filed a declaratory judgment lawsuit against Amsted, had it chosen to do so. On Amsted's cross-appeal, the Federal Circuit affirmed the trial court's determinations that Amsted had failed to mark the patent number on its (unpatented) center plate product, holding:
  5. Even though the center plate was itself unpatented, Amsted's failure to mark did not comport with the requirements of 35 U.S.C. § 287(a); instead, the court states, a marking such as "'for use under U.S. patent X,XXX,XXX' would have sufficed." Absent such a marking Amsted could not claim damages prior to its actual, 1989, notice to the infringer.
  6. Further, Amsted's customers, by virtue of the implied license obtained by their mere purchase of the center plate from Amsted, were in effect making the patented combination "for and under" the patent within the meaning of 35 U.S.C. § 287(a). Since Amsted had not required its customers to mark the patent number on their products, this was a second failure to comply with the marking requirement of that statute.

As a result, Amsted is now only able to recover damages for the period subsequent to the second, 1989, letter, thus losing about three million dollars (plus interest for the earlier period of infringement) of the total original award. All of Buckeye's willful and deliberate infringing acts prior to 1989 were actually free from any damages, including treble damages.

Amsted therefore instructs that:

  • patent owners who make only an unpatented component of a patented combination must now mark that component with their patent number(s), and require their customers also to so mark, and that;
  • any time a notice of infringement letter is sent that letter must sufficiently and specifically charge infringement such that the patent owner is exposed to a declaratory judgment lawsuit (most probably in that venue most convenient to and selected by the infringer).

Otherwise, the patentee's right to recover damages may be severely restricted, as in Amsted.

The Federal Circuit dismissed the 1986 letter as "merely informational, of the kind that companies often send to others without intending to charge infringement ... such letters tend not to be threats sufficient to justify a declaratory judgment action." (Amsted, at 1469). It seems unreasonable from the text of the letter itself, to overturn a jury verdict and hold that Amsted did not intend to assert contributory infringement by Buckeye if Buckeye was indeed making the center plate element of the patented combination. Such holding seems to be especially egregious in view of the unchallenged district court finding that Buckeye Steel had "actively concealed" its infringing acts. Nonetheless, Amsted says the statute requires more than letters which "tend not be threats sufficient to justify a declaratory judgment action, they also are not charges of infringement for `notice' purposes."

Notably, the Amsted opinion seems to ignore the common circumstance that determination of the infringing nature of a competitor's product is not always easy, not only in mechanical cases but especially so in chemical and electronic cases. Many times the near equivalent of industrial espionage may be necessary. Buckeye itself had "actively concealed" its infringing acts. Yet, the Federal Circuit has elsewhere condemned, as unfair competition, unfounded accusations of infringement which do not have a good faith basis in factual investigation.

On the marking issue, Amsted appears to be the first appellate opinion which has ever required the marking of an unpatented component or marking by the patent owner's mere customers fell within the scope of § 287(a). Moreover, Amsted applies these rather novel rules retroactively!

The conclusion that customers are also required to mark is reached on the (judicially-created) "implied license to use" theory, which is an element of every sale by the patent owner. Even though it could only cite legal precedents involving express licensees, the Amsted panel perceived no distinction for an implied licensee--it simply concluded that, "there is no reason why section 287 should only apply to express licensees and not to implied licensees."

Here, Amsted did not itself make the actual patented combination but only the unpatented center plate component. The plain language of 35 U.S.C. § 287(a) states that it applies to a "patented article" and a "patented article" is certainly whatever is defined by the claims of the patent. With a combination patent as in Amsted, the patented article is the combination.

There are perhaps thousands of instances where a company may have a number of patents on combinations all of which use an unpatented (perhaps very old) component made and sold by the company but where the company itself never makes the actual combination. Amsted indicates that damages may not be recovered from an infringer (absent adequate notice as discussed below) unless each of those patent numbers is somehow affixed to the unpatented component (or its package or label) using, at least, the rubric, "for use under U.S. patents X.XXX.XXX, [etc., how many patents?]." Alternatively (or perhaps in addition), the panel states that the customers purchasing the component and using it to make and sell the combination must also be caused to mark the patent number thereon. If they fail to do so, the patent owner then loses the right to collect damages (again, absent notice as defined above).

If the patent owner has not followed the marking requirements, it can now recover damages only from the date when there was an adequate express notice of infringement. This rule imposes two risks:

  1. that the patent owner is wrong and the infringer has been given a dangerous counter-attack "unfair competition" weapon that the notice was not made "in good faith", or
  2. that he will be sued for declaratory judgment for non-infringement and/or invalidity in circumstances where that might not have been his choice at all.

It is appropriate to conclude with a summary of prudent guidelines which should be followed as to when and how to apply the patent markings.

  1. Wherever the physical nature and dimensions of the product itself permits the marking of the patent number thereon, this is what should be done. Whenever the court would feel that marking the product itself would be relatively simple, it will likely require such marking on the object itself. See Rutherford v. Trim-Tex Inc., 803 F.Supp. 158, 162 (N.D.Ill. 1992).
  2. The marking should be of sufficient size and position to be easily seen and read with the naked eye. Remember, the intent of the statute is to inform the public and to avoid deception. However, a location which will result in obliteration of the mark in use is less desirable than a location which will be more permanent, even if less visible.
  3. If the product contains any other printings, such as a model number or the name of the manufacturer, the court will not likely accept a patent marking anywhere else than on the product itself. A common sense approach will probably prevail, including considerations of an excessive manufacturing cost to mark the product itself. Rutherford, supra.
  4. When marking of the product itself is not feasible, then the marking should be on the package containing, or a label affixed to, the product. Markings on invoices, brochures, or other sales materials are not in compliance with the specific language of the statute.
  5. The marking must include the patent number. Merely saying "patented" is not enough. "Patent pending" is acceptable but only so long as there is a pending application for patent; however, such marking provides no direct benefit. Once the patent is granted, the marking must be changed and the patent number applied.
  6. A general marking such as "manufactured under one or more of the following patents ..." is probably acceptable provided that the number of patents listed is not overly extensive and at least a substantial number of those patents clearly apply to the specific marked product.
  7. Even if the product is only a component of a patented combination, marking should again be employed, with the rubric approved by the Amsted opinion ("for use under U.S. Patent No. X,XXX,XXX.").
  8. Once marking has begun, it should be consistently continued, without interruption.
  9. If the patent owner sells to others who assemble the patented combination, steps should be taken to ensure that the customers so doing mark their products with the patent number. (The Amsted court left slightly open the issue of whether customer marking is required even when the patent owner manufacturer has properly marked the component--it would be prudent to avoid the issue by requiring customer marking even in these circumstances.)
  10. If the patent owner licenses others to make the patented product (or a component for use in the patented combination), the license should include provisions requiring marking and the licensor should take steps to police the licensee's practice to secure continuous and consistent marking.
  11. Coordination between the patent advisors, marketing and sales staffs, and manufacturing personnel is obviously essential to assure adherence to the above guidelines.

While marking may on occasion appear to be a burden, and perhaps even nonsensical in situations where the mark is not readily visible in final use or where the product goes only to one's own customers and not to the general trade, it is a more desirable alternative to generally policing the competition and having to give early actual infringement notice letters.