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Federal Circuit holds Actual Notice, not Constructive Notice, is Required to Collect Reasonable Royalties under 35 U. S. C. Section 154 (d)

Rosebud versus AdobeIn Rosebud LMS INC. v. Adobe Systems Incorporated (CAFC, 2015-1428, February 9, 2016) the Court of Appeals for the Federal Circuit (CAFC) affirmed the District Court’s grant of summary judgment that Adobe Systems Inc. was not liable for pre-issuance damages under 3 5 U. S. C. Section 154 (d).

Rosebud filed three suits against Adobe for patent infringement. In 2010, Rosebud first sued Adobe for infringing US patent number 7,454,760 (“the ‘760 patent”), which was dismissed. Rosebud next sued Adobe for infringing US patent number 8,046,699 (“the ‘699 patent”), which was also dismissed with prejudice. On February 14, 2014, Rosebud again brought suit against Adobe for infringing US patent number 8,578,280 (“the ‘280 patent”). The ’280 patent is a continuation of the ‘699 patent, which is a continuation of the ‘760 patent.

Adobe moved for summary judgment claiming that Rosebud was not entitled to damages prior to issuance but after the application was published under § 154(d) because Adobe had no actual notice of the published app patent application that led to the ‘280 patent.

Under 35 U. S. C. § 154 (d) a patent shall include the right to obtain a reasonable royalty from any person who, during the period beginning on the date of publication of the application for such patent under section 122 (b) makes uses, offers for sale, or sells in the United States the invention as claimed in the published patent application and had actual notice of the published patent application [emphasis added].

Adobe argued that not only was actual notice required, but an affirmative act by the applicant giving notice of the published patent application to the infringer is required. The Federal Circuit agreed with Adobe that constructive knowledge would not satisfy the actual notice requirement it rejected the assertion that an affirmative act by the patent owner is required.

Noting the legislative history of § 154 (d) the Federal Circuit quoted the following: “The requirement of actual notice is critical the mere fact that the published application is included in a commercial database where it might be found is insufficient.”

Rosebud argued first that Adobe knew of the grandparent patent to the ‘280 patent. Second, that Adobe followed Rosebud and its product and sought to emulate the products features. Third, that it is a standard practice when defending against the charge of patent infringement to search for patents and applications, related to the asserted patent, such that Adobe’s outside counsel would’ve discovered the published ‘280 patent application during the second patent infringement lawsuit brought by Rosebud against Adobe. The Federal Circuit rejected each of Rosebud’s arguments. The court found no evidence that suggested Adobe or its employees monitored Rosebud and its products, let alone to such an extent that they would’ve actively sought out rosebuds published patent applications. The court also rejected rosebuds assertion that it is standard practice during litigation to review related patents, applications and prosecution history to evaluate possible claim constructions in part because the second lawsuit filed by Rosebud never reach the claim construction stage because Rosebud missed all of its court ordered deadlines.

This case is important in that it clarifies that no affirmative act by the applicant giving notice of a published application to the infringer is required under 35 U. S. C. § 271 but as a practical matter, such an act would certainly be the most effective way to establish that the alleged infringer had actual knowledge of the published patent application.  Also, the CAFC reminded the readers that under the “marking statute” (35 U.S.C. § 287(a)), the patent owner must affirmatively provide notice to the alleged infringer.

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