VDPP v. Volkswagen: Patent Owners Must Plead Licensees’ Compliance with Marking Requirements to Seek Pre-Suit Damages

In VDPP, LLC v. Volkswagen Group of America, Inc., the Federal Circuit held that the district court did not abuse its discretion in dismissing VDPP’s complaint without leave to amend because VDPP did not, and could not, plead compliance with the notice provision of § 287(a) that included compliance by VDPP’s licensees.

The Marking Requirement

Under § 287, a patentee cannot recover damages for infringement that occurred before it placed the defendant on notice of its infringement. Such notice may be provided by marking patented articles with the patent number or by filing an action for infringement. In Arctic Cat Inc. v. Bombardier Recreational Products Inc., 950 F.3d 860, 863–64 (Fed. Cir. 2020), the Federal Circuit held that a patentee who never makes or sells a patented article may recover pre-suit damages even without giving notice, but any licensees must also comply with the statute and mark their articles, and their failure to do so bars pre-suit damages for the patentee.

Under Arctic Cat, the court held that even though the burden of compliance falls on the patentee, the defendant must first “articulate the products it believes are unmarked.” Defendants often seek information on compliance with § 287 during discovery and then serve an “Arctic Cat letter” identifying unmarked licensed products. The Federal Circuit’s ruling in VDPP v. Volkswagen now effectively shifts that burden to the patentee because the failure to allege compliance with § 287 in the complaint may result in the dismissal of pre-suit damages before the case reaches discovery.

The Federal Circuit Opinion

In VDPP v. Volkswagen, the patentee had entered into 11 prior settlement agreements that granted licenses to the patent. But the proposed amended complaint did not include specific facts showing that any of those licensees had marked their products as required by § 287.

VDPP made two arguments for why that compliance was not required, and the Federal Circuit rejected both:

1. VDPP argued that its licenses did not trigger § 287’s marking provision because they arose from litigation settlements. The court disagreed, holding that, in this context, there is no meaningful difference between a license in a litigation settlement and any other patent license agreement.
2. VDPP argued that its licenses did not trigger § 287’s marking provision because none of its licensees admitted infringement. The court again disagreed, explaining that the statute focuses on the patentee’s actions, not the actual state of mind of the accused infringer.

The court further noted that accepting either of VDPP’s arguments would frustrate the statutory purpose of the marking requirement, which is to ensure the public has notice that articles are patented.

Applying these holdings to the proposed amended complaint at issue, the court held that allegations claiming “all statutory requirements to obtain pre-suit damages” and “all conditions precedent to recovery are met” did not suffice because they are bare legal conclusions which the court need not accept as true given the lack of any supporting factual allegations.

Remaining Questions

The Federal Circuit left open the possibility that a licensor could show that it made reasonable efforts to ensure its licensees complied with § 287, even without requiring marking in the license agreement itself. However, it remains unclear what type of efforts would suffice as reasonable in the absence of the patentee imposing a marking obligation. For example, would a patentee requiring a listing of patent numbers and practicing products on the licensee’s website suffice? Similarly, would imposing a marking obligation on substantially all but not all licensees suffice? Since the court left questions like this unanswered, future cases will need to develop a framework for what would constitute reasonable efforts to ensure licensee compliance with § 287 without a marking obligation.

VDPP has petitioned for rehearing and, as of this update, that petition remains pending.

Key Takeaways

• Patentees should make reasonable efforts to ensure that licensees comply with 287’s marking requirements and plead those specific facts in their complaints.
• Conversely, defendants in patent litigation may have a good basis to seek dismissal of pre-suit patent damages if the patentee’s complaint does not address licensee compliance with § 287.
• Defendants in pending litigation may wish to consider a motion for judgment on the pleadings under Rule 12(c) to raise this issue in their cases if their facts align with this case.