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Understanding Limitations on Damages in Patent Infringement
Monday, February 13 2012 @ 08:00 AM EST

A number of comments to a recent article on the Microsoft v. Barnes & Noble reveal some confusion on the issues of damages in patent infringement actions and the role that patent marking and notice play in determining when damages begin to accrue. This is not really a hard issue to understand, so let's start at the beginning. What do the U.S. statutes covering patents say:

35 U.S.C. 286 Time limitation on damages

Except as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.

In the case of claims against the United States Government for use of a patented invention, the period before bringing suit, up to six years, between the date of receipt of a written claim for compensation by the department or agency of the Government having authority to settle such claim, and the date of mailing by the Government of a notice to the claimant that his claim has been denied shall not be counted as a part of the period referred to in the preceding paragraph.


35 U.S.C. 287 Limitation on damages and other remedies; marking and notice

(a) Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them, or importing any patented article into the United States, [additional subsections of 287 not included]

So what do we learn from these two sections. First, that a patent holder cannot recover damages from a time more than six years prior to the date of bringing suit for infringement. This is not a time limit on bringing the infringement suit; it is a time limit on recovering damages. The public policy idea behind this limitation is to discourage patent holders from sitting on their rights while damages accrue.

To some extent this limitation of damages concept as expressed in 286 mirrors the equitable doctrine of laches. Laches refers to "neglect or delay in bringing suit ... which ... causes prejudice to the adverse party." A.C. Auckerman Co. v. R. L. Chaides Construction Co., 22 USPQ2d 1321, 1325 (Fed. Cir. 1992). The defense of laches rests on the fact that the patent holder knew of the infringement and sat on his/her rights while damages accrued. As a general rule the limitation increases with the passage of time such that, once the patent holder has delayed suit for six or more years from the date of knowledge of infringement, past damages are barred, i.e., there is no recovery for any past damages not just those damages that preceded the suit by six years. As noted, this is a sliding scale, and the burden is on the alleged infringer to show that the patent holder sat on his/her rights. As an equitable doctrine, a defense of laches may be overcome by the patent holder showing reasonableness in the delay in bringing suit or that the alleged infringer was not prejudiced by such delay.

The second limitation on damages arises from the need to provide either actual or constructive notice of the infringement. This is addressed by 287. Physical products incorporating patent claims may be marked, either on the product or the product packaging, to provide constructive notice of the patent to potential infringers who may attempt to replicate the product. A failure to mark will bar recovery of damages until the date the patent holder gives actual notice to the alleged infringer of the infringing activity.

Method or process patents are not covered by the marking requirement, which is not to say that products incorporating such method or process claims cannot be marked. Anyone who has used Adobe products over the years will recall the litany of Adobe patents listed when the product boots up. Of course, such constructive notice by marking would likely be limited to the product in its entirety and would not constitute constructive notice of infringement of any one claim practiced independently of the patented product.

Where constructive notice through marking is not provided, actual notice must be given. Actual notice is correspondence directed to the alleged infringer that identifies the patent(s) infringed a the likely source of that infringement, although it may also be given by filing suit for infringement. It is not enough for the patent holder to simply send a letter listing out the patents it holds and suggesting that the recipient may infringe the patents. Nor would it likely be enough to suggest that failed discussions of a patent license was enough to put the potential licensee/alleged infringer on notice unless the discussions were so focused on specific patents and products that it was obvious to the licensee/alleged infringer that producing the product was clearly going to infringe one or more of the patents being offered for license.

As noted, these timing factors do not serve as a statute of limitations, i.e., they do not bar a patent holder from bringing suit. Nor do these timing factors limit a recovery for continuing infringement beyond the date of notice or suit. They only serve as a limitation on damages for past infringement. As such, these timing factors can become critical in determining when the clock for damages begins to run, and they will also factor in determining when willful infringement first occurred, although we will save a discussion of willfulness for another time. If you would like to learn more about the operation of 286 and 287, the preeminent treatise on patent law in the U.S. is Chisum on Patents (LexisNexis Matthew Bender, 2011).


  


Understanding Limitations on Damages in Patent Infringement | 127 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Thank you.
Authored by: Anonymous on Monday, February 13 2012 @ 08:19 AM EST
..

[ Reply to This | # ]

Corrections Thread
Authored by: artp on Monday, February 13 2012 @ 08:26 AM EST
Errrorr -> Error in Title block, please.

---
Userfriendly on WGA server outage:
When you're chained to an oar you don't think you should go down when the galley
sinks ?

[ Reply to This | # ]

Off Topic Thread
Authored by: artp on Monday, February 13 2012 @ 08:28 AM EST
On Topic posters will be asked to calculate damages for each
permutation of Oracle's claims. Oops! Was that On Topic??!?

---
Userfriendly on WGA server outage:
When you're chained to an oar you don't think you should go down when the galley
sinks ?

[ Reply to This | # ]

News Picks Thread
Authored by: artp on Monday, February 13 2012 @ 08:30 AM EST
URLs are mighty appreciated, neighbor!

---
Userfriendly on WGA server outage:
When you're chained to an oar you don't think you should go down when the galley
sinks ?

[ Reply to This | # ]

Comes Thread Goes Here
Authored by: artp on Monday, February 13 2012 @ 08:31 AM EST
For transcriptions of documents from the Comes v MS trial.

---
Userfriendly on WGA server outage:
When you're chained to an oar you don't think you should go down when the galley
sinks ?

[ Reply to This | # ]

Understanding Limitations on Damages in Patent Infringement
Authored by: Oliver on Monday, February 13 2012 @ 09:37 AM EST
Now this is why I keep coming back to Groklaw, so I learn
something new. Many thanks for this article.

Lets check that I (as a bear of little brain) understand
this:
- If there is a similar product that has been marked then
damages are limited to 6 years prior to filing of suit (more
in exceptional circumstances).
- If there is no marking then all damages start from the
point that the patents and likely reason for infringement
are identified, either by direct communication or by filing
a suit.

So in the situation where a company holding patents is
refusing to be specific, and there is no marking, then
damages are not yet recoverable. Now that does make it
easier to defend against a blustering company saying "You
are definitely infringing one of these many patents, I
demand you tell me which ones!"

[ Reply to This | # ]

For Completeness
Authored by: Anonymous on Monday, February 13 2012 @ 12:13 PM EST
I think you do not address the question of what happens under 287(a) when
neither the patentee nor any licensee produces a product that includes the
invention. In that case there is no product to mark so there is no notice
requirement and the limitation of 287(a) does not apply. This is important in
Oracle v. Google.

[ Reply to This | # ]

Where's Cockburn report?
Authored by: Anonymous on Monday, February 13 2012 @ 02:15 PM EST

Or was the Feb. 3 filing just a release candidate?

[ Reply to This | # ]

Limiting Damages
Authored by: sproggit on Monday, February 13 2012 @ 07:04 PM EST
In the context of the instant case, this is an insightful article and I'm sure I
write on behalf of many readers by expressing my thanks for this clarification.


Sadly, however, there is an entirely different [but ultimately much more
important] damage limitation consideration we should think about.

How about the limitation of damage to the patent system. We often discuss the
phrase "non-obvious to one skilled in the art" but it seems that this,
along with diligence, duty of care and constructive negotiations in good faith
have all become a casualty of the weaponsation of patents. If a company is
suspected of mis-using FOSS intellectual property, the FSF and others will go to
a great deal of trouble to help a company understand the issue and work to a
resolution. If a proprietary company accuses another party of patent
infringement [as we see in OracleUSA vs Google] the plaintiff seems largely
unwilling to divulge the nature of the alleged infringement before a trial.
Where's the good faith there?

The first thing that suffers is the patent system itself.


And what about the damage to the economies of countries all around the world? In
a recent interview at Davos, the Chief Executive of Ernst & Young was asked
what he thought would help lift the world out of the current financial mess in
which we're mired. His answer? To kick-start economies we need entrepreneurs and
innovation. It doesn't get much more entrepreneurial or innovative than the FOSS
community. But threaten that creative genius with expensive lawsuits and
hundreds or thousands or millions of ideas - that could create hundreds or
thousands or millions of jobs - will never come to fruition.

The second thing that suffers is the economic outlook of those countries who
accept the misguided view of the eligibility of software patents - because their
lawmakers were paid to vote that way. Countries struggling to get out of
recession - for example across Europe - would stand a much greater chance if
they would walk away from software patents and change their laws to encourage
true innovation.

The third thing that suffers is humanity. The reason that people use software is
because it improves their lives. In some cases they may be willing to pay for
that improvement. In other cases they may contribute in different ways. But when
we see just how much of the Internet depends upon Free Software, it's safe to
say that literally billions of lives would be diminished if software patents
prevented the innovation of Free Software.



Everything you have written in this article is true, valid and good explanation
of how damages are calculated, in a court of law [of the United States] in
patent litigation.

Sadly, the damage that you've written about is scarcely the tiniest fraction of
the true harm visited upon us.


[ Reply to This | # ]

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