AMERICA INVENTS ACT - Marking, Joinder and Advice of Counsel with Regard to Willful Infringement

May 29 , 2012

This is the third article in a series of 10 relating to the Leahy-Smith America Invents Act (AIA) of 2011. The AIA went into effect on Sept. 16, 2011, and is the first major change to United States Patent Law in more than five decades.

This article discusses some of the matters the AIA affects, namely: patent marking, joinder and advice of counsel with regard to willful infringement. Further articles will follow on a monthly basis, which will discuss other changes made to the U.S. patent system by the AIA.

Under the U.S. patent laws, a patent owner may obtain damages dating back to a date on which the patent owner provided an infringer with notice of the infringement. Such notice could be actual or constructive. Actual notice typically occurs when the patent owner sends a letter to the infringer that advises the infringer of the patent and that states specifically what product it believes infringes its patent. Constructive notice occurs when the patent owner marks the patented product with the word "Patent" or the abbreviation "Pat.," followed by the patent number.

The AIA changed the patent marking statute (35 U.S.C. §287(a)) to expand constructive notice to occur when a patent owner marks the patented product with a web address where the patent number is listed. Thus, a patent owner can now post a listing of patents and products on its website rather than having to mark each individual product with a patent number. This new option, known as virtual marking, is intended to eliminate the need to make any changes to the patented product, its labels and/or its packaging, thus avoiding associated mold, part and manufacturing expenses related thereto.

The AIA also changed the false marking statute (35 U.S.C. §292). The false marking statute originally stated, in pertinent part, that

"(a) . . . .  Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word 'patent' or any word or number importing that the same is patented, for the purpose of deceiving the public . . . [s]hall be fined not more than $500 for every such offense..  (b) Any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States." Within the past few years, numerous lawsuits were filed by plaintiffs under the false marking statute, most of which were based on a company continuing to mark a product with a patent number that had expired. Under one such lawsuit filed, the Federal Circuit noted that the potential damages could amount to more than $10.8 trillion, one-half of which would go to the U.S. government – an amount that would have been enough to pay back approximately 42 percent of the country's national debt. Pequignot v. Solo Cup Co. , 608 F.3d 1356, 1359 n.1 (Fed. Cir. 2010).

The AIA amended the false marking statute to definitively state that false marking does not include marking an article with the number of a patent that has expired but that at one time covered the article. The AIA further amended the false marking statute to state that only the U.S. government can sue for up to $500 for every falsely-marked article. Individuals or companies may no longer bring an action for false marking without showing actual damages but now may only sue under the false marking statute when they are entitled to recover damages adequate to compensate them for the competitive injury they have suffered due to the false marking.

The AIA also changed the laws regarding joinder of unrelated defendants in patent infringement lawsuits. Previously, a patent owner could sue a number of defendants for infringement of a patent in the same action, even if the defendants were unrelated. Some patent owners viewed this approach as providing it with certain advantages, including the ability to control costs by having to file only a single lawsuit.

Under the AIA however, joinder of unrelated defendants is not allowed unless: (1) the right to relief is asserted against the defendants jointly, severally, or in the alternative with respect to the- or arising out of the- same transaction, occurrence, or series of transactions or occurrences, relating to the making, using, importing into the U.S., offering for sale, or selling of the same accused product or process; and (2) there are questions of fact common to all defendants. 35 U.S.C. §299 however, specifically states that "accused infringers may not be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, based solely on allegations that they each have infringed the patent or patents in suit."

The AIA will further change, as of Sept. 16, 2012, the laws regarding establishing willful infringement. Currently, in order to establish willful infringement, "a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." In re Seagate LLC , 497 F.3d 1360, 1371 (Fed. Cir. 2007). The Federal Circuit also has stated that courts cannot impose an adverse inference relating to willful infringement when a defendant fails to produce evidence that it procured an opinion of counsel that the patent was not infringed and/or was invalid. Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp. , 383 F.3d 1337, 1344-46 (Fed. Cir. 2004) (en banc).

The AIA however, will prohibit use of an accused infringer's failure to obtain or to present advice of counsel to prove willful infringement. 35 U.S.C. §298. Thus, a defendant's decision to not obtain an opinion or to present advice of counsel will not be able to be used as evidence that it willfully infringed.

For more detailed information about the changes discussed above, other changes made to the U.S. patent system by the AIA or any other intellectual property issue, please contact James O'Malley at jomalley@clarkhill.com or any other member of Clark Hill's IP practice group.

Copyright 2012 Law Bulletin Publishing Co. Reprinted with permission.