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
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.
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]
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).