CAFC Rejects the Doctrine of “Marking Estoppel”

Darrin Auito | March 27, 2013

Frolow v. Wilson Sporting Goods Co.

March 15, 2013

Panel: Newman, Clevenger and Moore.  Opinion by Moore.  Concurrences by Clevenger and Newman.

Summary:

The CAFC specifically rejected the doctrine of “marking estoppel” – which precludes a party that marks its product with a patent number from asserting that the product is not covered by the patent.  However, the CAFC held that patent marking evidence is “circumstantial” evidence of infringement that could be used to establish infringement or to raise an issue of material fact preventing summary judgment of non-infringement.

Details:

Frolow and Wilson Sporting Goods (“Wilson”) entered into a license agreement according to which Wilson would obtain a license to Frolow’s patent (RE 33,372, “the ‘372 patent”) and Wilson would pay Frolow a royalty for “tennis rackets which are covered by one or more unexpired or otherwise valid claims” of the ‘372 patent.  Claim 20 of the ‘372 patent is representative of the claims in dispute and recites, inter alia, a tennis racket having various structural features, and additionally requires that the racket have a moment of inertia “greater than 80 ounce-inches squared” (emphasis added).

Untitled

Frolow conducted an audit and concluded that Wilson was not paying royalties on 42 licensed articles.  Frolow then filed suit alleging that Wilson breached the license agreement and infringed the ‘372 patent.  During litigation, Wilson admitted that it marked 14 racket models with the ‘372 patent number.

Wilson moved for summary judgment of non-infringement.  The trial judge granted Wilson’s motion in part, finding that 37 of the 42 rackets did not fall within the scope of the asserted claims, specifically because these models had a moment of inertia of 80 ounce-inches squared or less.  In so doing, the trial judge (1) rejected Frolow’s argument that Wilson’s marking of 14 of these rackets raised a genuine issue of material fact and (2) declined to find that Wilson’s marking prevented it from challenging whether the 14 accused models were licensed articles (“marking estoppel”).

After the final pretrial conference, Frolow alleged that 299 additional racket models were licensed articles.  Wilson moved for summary judgment, contending that it was too late in the proceeding to add these rackets and that Frolow failed to provide any evidence of infringement.  Frolow countered that Wilson had been paying royalties on the 299 racket models, to which Wilson contended that the payments were “inadvertent” and were “based on the mistaken belief” that the models fell within the ‘372 patent claims.  The trial court granted summary judgment and dismissed the 299 racket models from the case.

Later, after trial involving the five remaining racket models, the trial judge determined that Frolow had failed to submit any testimony to prove infringement of these racket models.

The trial judge denied Frolow’s motion for a new trial, and Frolow appealed.

On appeal, the CAFC expressly declined to adopt the doctrine of “marking estoppel.” The CAFC’s decision was based partially on the language of the recently enacted AIA:

Congress enacted legislation, recently amended, which provides a remedy for false marking.  False Marking Statute, 35 U.S.C. § 292. Marking estoppel cases explain that the rationale for the doctrine is to prevent harm to the public which might be caused by mismarking.  See SmithKline, 859 F.2d at 890–91 (quoting Crane Co. v. Aeroquip Corp., 364 F. Supp. 547, 560 (N.D. Ill. 1973)).  But Congress expressly addressed this exact harm and crafted a remedy which it determined was appropriate to remedy any harm to would-be competitors or innovatorsSee Leahy-Smith America Invents Act, Pub. L. No. 112-29, § 16(b)(2), 125 Stat. 284, 329 (2011) (amending 35 U.S.C. § 292(b)).  Congress sought to protect the public from false marking by providing a remedy in the form of civil damages to persons “who ha[ve] suffered a competitive injury as a result of” improper patent marking. Id.  If the mismarking was done “with the intent . . . of deceiving the public” or some similar specific intent, the statute provides for recovery under either the civil damages provision (by an injured competitor) or the penalty provision (by the United States).  35 U.S.C. § 292(a).  Equity should not rush in where an adequate remedy at law exists.  It would be inconsistent with this legislation to adopt a different and broader remedy for the same harm.

(Emphasis added)

Nonetheless, the CAFC ultimately held that the trial court erred when it held that Wilson’s marking was irrelevant and reversed the summary judgment with respect to the 14 racket models that were marked with the ‘372 patent number (e.g., the fact that Wilson marked their products with the ‘372 patent number is a fact which supports Frolow’s allegation that Wilson’s products fall within the patent claims).

The CAFC remarked that “[p]lacing a patent number on a product is an [extrajudicial admission of fact] by the marking party that the marked product falls within the scope of the patent claims” and analogized thi

s action to that of a corporate officer admitting during a deposition that the company’s product infringes a patent.  The CAFC explained that Wilson’s marking did not prevent it from denying infringing, but such marking was evidence of an admission that the 14 marked racket models were covered by the ‘372 patent, which raised an issue of material fact that would prevent summary judgment of non-infringement.

The CAFC therefore sent the case back to the trial judge to reconsider the infringement issue regarding those 14 models.

With respect to the five racket models that were considered at trial, the CAFC affirmed the judgment of non-infringement, agreeing with the trial judge that Frolow had failed to present evidence of infringement.

With respect to the 299 racket models that were not considered at trial, the CAFC held that the trial court erred in granting summary judgment.  According to the CAFC, Wilson’s history of paying royalties on the 299 racket models is circumstantial evidence that those models are licensed articles.  However, the CAFC cautioned that evidence of past royalty payments will not raise a genuine issue of material fact in every case.

Concurring Opinions:

The three-judge CAFC panel produced three separate concurring opinions.

Judge Newman, stated that “[o]n remand Wilson bears the burden of coming forward with evidence adequate to show that it should not be held to its own long-standing belief that the marked rackets were licensed articles,” e.g., holding in Medtronic v. Boston Sci entific, 695 F.3d 1266 (Fed. Cir. 2012).  Judge Newman remarked that “[o]nly when Frolow sought payment, did Wilson retreat” and that a trier of fact could certainly find that Wilson’s conduct was more than a trivial “extrajudicial admission,” but was direct evidence of obligations under the license agreement.

Judge Clevenger and Judge Moore both stated that the potential for unfair prejudice to Wilson must be properly considered before presenting evidence of the patent marking issue to the jury, citing FRE 403 (not all evidence, otherwise relevant, is admissible at trial to the jury). Judge Clevenger suggested that such evidence should probably be excluded and Judge Moore disagreed.

Practice Tips:

The AIA provides some relief with respect the risk of false patent marking lawsuits and the CAFC refused to adopt the “marking estoppel” doctrine.  Nonetheless, it remains important to properly mark, and not over-mark, patented products, because the courts will regard evidence of marking (and royalty payments) as circumstantial admissions of infringement.

Full Opinion

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