It is Irrelevant Whether Infringer Knew About the Patent; The Focus is Whether Patentee Gave Notice

In Lubby Holdings LLC v. Chung, [2019-2286] (September 1, 2021), the Federal Circuit affirmed in part, reversed in part, the district court, and remanded for a new trial to determine the number of infringing products sold after the commencement of this action and for the determination of a reasonable royalty rate for the sale of these units.

Chung was found liable for infringing U.S. Patent No. 9,750,284 and the district court awarded damages of $863,936.10.  Chung argued that the district court erred in awarding damages for the sales of infringing products prior to the commencement of this action, which is the date Chung received actual notice of the ’284 patent under 35 U.S.C. § 287.

During trial, Chung moved for judgment as a matter of law under Federal Rule of Civil Procedure 50(a) as to damages, arguing that Lubby did not meet its burden to prove that it complied with 35 U.S.C. § 287’s marking requirement. The jury ultimately returned a verdict finding Chung liable for direct infringement of the ’284 patent and awarding in reasonable royalty damages. After trial, Chung renewed his motion for judgment as a matter of law under Rule 50(b), which was denied because “there was sufficient evidence to support the jury’s verdict at the close of trial.”

On appeal the Federal Circuit noted that Chung did not properly raise the issue of his direct infringement liability in his Rule 50(a) motion and raised it only in his Rule 59(a) motion, so its review was under the substantially constrained abuse-of-discretion standard of review applicable to Rule 59(a) motions.  Because there was evidence to support the finding that Chung made, offered to sell, and sold the accused devices, the finding of infringement had to be affirmed.  Chung argued that he could not be liable for infringement based on acts that he took on behalf of his company, unless it was appropriate to pierce the corporate veil.  The Federal Circuit said that this was not the standard: “Corporate officers can be personally liable for their own acts of infringement, even if those acts were committed in their corporate capacity.”  The Federal Circuit explained that a corporate officer cannot be found derivatively liable for the corporation’s infringement without piercing the corporate veil. However, a person is personally liable for his own tortious actions, even if committed as a corporate officer.

On the issue of “notice,” the Federal Circuit said that the patentee bears the burden of pleading and proving he complied with § 287(a)’s marking requirement. The burden of proving compliance with marking is and at all times remains on the patentee, but an alleged infringer who challenges the patentee’s compliance with § 287 bears an initial burden of production to articulate the products it believes are unmarked patented articles subject to § 287.   The alleged infringer’s burden is a burden of production, not one of persuasion or proof, and once the alleged infringer meets its burden of production, the patentee bears the burden to prove the products identified do not practice the patented invention.  The Federal Circuit found that Chung cleared this low bar, and plaintiff bore the burden of provide the products Chung identified did not practice the patented invention.  Because plaintiff failed to establish that it marked the products as required by § 287, it can recover damages only for the period that it provided actual notice to Mr. Chung, i.e. the date it filed suit.  The Federal Circuit rejected the argument that Chung had actual notice of the issuance of the patent, stating that “notice that the ’284 patent issued does not equate to actual notice under § 287.  The actual notice requirement of § 287(a) is satisfied when the recipient is informed of the identity of the patent and the activity that is believed to be an infringement, accompanied by a proposal to abate the infringement, whether by license or otherwise.  It is irrelevant under § 287 whether the defendant knew of the patent or knew of his own infringement. The correct approach to determining notice under § 287 must focus on the action of the patentee, not the knowledge or understanding of the infringer.”