VDPP, LLC v. VOLKSWAGEN GROUP OF AMERICA, INC.
Before Moore, Lourie, and Cunningham. Appeal from the United States District Court for the Southern District of Texas.
Summary: To recover pre-suit damages, a non-practicing patentee must plead that it has made reasonable efforts to ensure that its licensees comply with the marking requirements of 35 U.S.C. § 287. Additionally, a sanctioned attorney seeking to challenge the sanctions award must be identified as an appellant in the notice of appeal for the appellate court to have jurisdiction over the challenge.
VDPP sued Volkswagen for patent infringement in the United States District Court for the Southern District of Texas. Volkswagen moved to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. The court granted the motion and denied VDPP’s request for leave to amend its complaint, finding that any amendment would be futile.
Because VDPP’s complaint sought pre-suit damages, VDPP had the burden to plead compliance with the notice provision of 35 U.S.C. § 287(a). That statutory provision states that a patentee cannot begin collecting damages for infringement of a patented article until it provides sufficient notice. One way to do so is for the patentee to mark the patented articles in a manner consistent with the statute.
VDPP asserted that it is a non-practicing entity with no products to mark. But VDPP’s complaint mentioned nothing about the eleven settlement agreements in which it had licensed the patent-in-suit to various parties. The Federal Circuit explained that, for VDPP to seek pre-suit damages, it was required to make reasonable efforts to ensure its licensees complied with the marking requirement of 35 U.S.C. § 287. Under the facts of the case, the Federal Circuit found that there was no way for VDPP to plausibly allege that it made reasonable efforts to ensure the licensees’ compliance with Section 287. In fact, the court found that one of the licenses went as far as specifying that the licensee had no obligation to mark its products.
VDPP raised two arguments, each of which the court rejected. First, VDPP argued that the licenses did not trigger § 287’s marking requirement because they were entered into to settle litigation. The court stated that there is no difference between a license executed as part of a settlement agreement and any other patent license. Second, VDPP argued that none of the licensees admitted infringement. The court stated that the subjective view of the accused infringer does not matter; the relevant consideration was that VDPP continued to maintain that all of the products licensed in the settlement agreements practiced the patent.
In dismissing the case, the district court awarded attorney fees under 35 U.S.C. § 285 because it determined the case was exceptional. The district court also sanctioned VDPP’s attorney for his conduct in the case and held that VDPP and the attorney were jointly and severally liable for the awarded fees. The Federal Circuit rejected VDPP’s timely appeal of the attorney-fee award, finding that the district court did not abuse its discretion in awarding attorney fees.
The Federal Circuit then found that it lacked jurisdiction to hear the attorney’s appeal of the court’s sanctions determination. The court explained that the notices of appeal filed in the case identified only VDPP as the appellant. Because the notices of appeal did not also identify the attorney as an appellant, they failed to satisfy the requirement in Fed. R. App. P. 3(c)(1)(A) that a notice of appeal “specify the party or parties taking the appeal.” The court found that VDPP had no standing to challenge the attorney’s sanction because VDPP suffered no injury from that sanction; VDPP actually benefitted from the sanction to the extent that it made the attorney jointly and severally liable for the attorney-fee award.
The Federal Circuit therefore affirmed the dismissal of the complaint and the award of attorney fees, and dismissed the attorney’s challenge of the sanctions award for lack of jurisdiction.
Editor: Sean Murray
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