CAFC affirms exclusion of allegedly comparable license and addresses marking law on method claims

On August 24, 2012, the Federal Circuit in ActiveVideo Networks, Inc. v. Verizon Communications, Inc., Case Nos. 2011-1538, -1567, 2012-1129, -1201 (Fed. Cir.), ruled on two interesting issues related to damages. The first concerned an allegedly comparable license for reasonable royalty, and the second cleared up what could be perceived as ambiguity in the marking law for method claims.

Comparable License

The first issue is easy to summarize. Verizon argued that the district court had abused its discretion by refusing to allow Verizon's expert to rely on an agreement between plaintiff and a third party that post-dated the hypothetical negotiation by four years. Verizon bolstered its argument by contending that district court, in contrast, had allowed plaintiff's expert to rely on another agreement between plaintiff and a different third party that was dated two years after the hypothetical negotiation.

Interestingly, the Federal Circuit first noted in dicta that it may have decided this issue differently if had presided over the trial. But it concluded the exclusion was not an abuse of discretion. One may cite this case for the proposition that a district court has legitimate basis to exclude a license agreement on the sole ground that it post-dates the hypothetical negotiation: "The Cablevision agreement post-dated the hypothetical negotiation by four years and the district court thus had a legitimate reason to exclude it." Slip op. at 34 (emphasis added).

Marking

The Federal Circuit also addressed a marking issue and cleared-up what may be considered an ambiguity in the marking law for method claims. There has been at least one recent district court opinion suggesting that some types of method claims must be marked: Alexsam, Inc. v. Pier 1 Imports, Inc., Case No. 2:08-CV-15 (E.D. Tex. Oct. 14, 2011) (see https://patent-damages.com/2011/10/edtx-finds-duty-to-mark-gift-cards-alexsam-v-pier-1-imports/). There, the SDTX stated:

"[H]owever, to the extent that there is a tangible item to mark by which notice of the asserted method claims can be given, a party is obliged to do so if it intends to avail itself of the constructive notice provisions of section 287(a)." [Citing American Med. Sys. Inc. v. Medical Eng'g Corp., 6 F.3d 1523, 1538-39 (Fed. Cir. 1993)]

This statement is at odds with precedent, and American Medical does not support it. The Federal Circuit made this clear in its ActiveVideo case.

First, the Federal Circuit restated its precedent that the marking provisions of 35 U.S.C. Section 287 do not apply where the patent is directed to a method or process. Slip op. at 37. It then addressed American Medical: "In American Medical, we held that if a single patent contains both apparatus claims and method claims, the marking requirement applies to all the claims ...." Slip op. at 37. These were the same facts in the SDTX Alexam case the patent-in-suit there had method and system claims, but the court made its blanket proclamation about method claims, quoted above.

This was not the case in ActiveVideo the patent at issue for marking purposes had only method claims and the district court got it right. There were several patents at issue. Some had apparatus and system claims, and as noted above, one contained only method claims. The court held that plaintiff's failure to mark the patents that included apparatus and system claims precluded pre-suit damages on those patents. However, for the one remaining patent that had only method claims, the district court held that marking was not required for that patent.

On appeal, Verizon argued that marking should also apply to the method patent because the method claims it contains are simply method versions of system claims in other patents-in-suit. The Federal Circuit disagreed with Verizon. First it quoted American Medical: "'The law is clear that the notice provisions of section 287 do not apply where the patent is directed to a process or method.' Am. Med., 6 F.3d at 1538." Then it went to address Verizon's specific argument:

"Verizon asks us to extend the marking requirement to patents with nothing but method claims, if the patentee also asserts other patents with apparatus claims embodying the same invention in the same litigation. Verizon argues that in this case, the claims in the method patent are simply directed to a method of using the apparatus claimed in ActiveVideo's other asserted claims. The proposed rule would be a confusing mess for the district courts to try to apply. ... Our prior decisions that patents which contain only method claims are not subject to the section 287 marking requirements have a sound basis. And we reaffirm the bright-line easy to enforce rule: if the patent is directed only to method claims, marking is not required."

The Federal Circuit thus affirmed the district court's denial of Verizon's JMOL concerning the patent that included only method claims.