Arctic Cat Inc. v. Bombardier Recreational

950 F.3d 860

• Court: Court of Appeals for the Federal Circuit
• Decided: February 19, 2020
• Docket: 19-1080
• Status: Published

Opinion

Case: 19-1080 Document: 62 Page: 1 Filed: 02/19/2020

United States Court of Appeals for the Federal Circuit ______________________

ARCTIC CAT INC., Plaintiff-Appellant

v.

BOMBARDIER RECREATIONAL PRODUCTS INC., BRP U.S. INC., Defendants-Appellees ______________________

2019-1080 ______________________

Appeal from the United States District Court for the Southern District of Florida in No. 0:14-cv-62369-BB, Judge Beth Bloom. ______________________

Decided: February 19, 2020 ______________________

GREGG LOCASCIO, Kirkland & Ellis LLP, Washington, DC, argued for plaintiff-appellant. Also represented by NATHAN S. MAMMEN, JOHN C. O'QUINN, CALVIN ALEXANDER SHANK; NICHOLAS STEPHAN BOEBEL, Hansen Reynolds LLC, Minneapolis, MN; NIALL ANDREW MACLEOD, AARON MYERS, DIANE PETERSON, Kutak Rock LLP, Minneapolis, MN.

LOUIS W. TOMPROS, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA, argued for defendants-appellees. Case: 19-1080 Document: 62 Page: 2 Filed: 02/19/2020

Also represented by JENNIFER JASMINE JOHN, MICHELLE LISZT SANDALS. ______________________

Before LOURIE, MOORE, and STOLL, Circuit Judges. LOURIE, Circuit Judge. Arctic Cat Inc. (“Arctic Cat”) appeals from a judgment of the United States District Court for the Southern Dis- trict of Florida that Arctic Cat is not entitled to recover pre- complaint damages from Bombardier Recreational Prod- ucts Inc. (“Bombardier”) due to the failure of Arctic Cat’s licensee to mark products in accordance with 35 U.S.C. § 287. Arctic Cat Inc. v. Bombardier Recreational Prods., 334 F. Supp. 3d 1238, 1240 (S.D. Fla. 2018). Because we agree with the district court that § 287 continues to limit damages after a patentee or licensee ceases sales of un- marked products, and that willful infringement does not establish actual notice under § 287, we affirm. BACKGROUND Arctic Cat owns U.S. Patents 6,793,545 (“the ’545 pa- tent”) and 6,568,969 (“the ’969 patent”), which are directed to thrust steering systems for personal watercraft (“PWCs”). The ’545 and ’969 patents issued in 2004 and 2003 respectively, but Arctic Cat had stopped selling PWCs before either patent issued. In 2002, Arctic Cat entered into a license agreement with Honda for several Arctic Cat patents and patent applications, as well as any later pa- tents “that patentably cover Arctic Cat’s Controlled Thrust Steering methods, systems, and developments,” which in- cludes the ’545 and ’969 patents. J.A. 256 ¶ GG; see J.A. 4078. The initial draft of the license agreement included a provision requiring Honda, as licensee, to mark all licensed products with the applicable patent numbers. However, that provision was deleted during negotiations, and the fi- nal version of the license agreement expressly stated that Honda had no marking obligations. Case: 19-1080 Document: 62 Page: 3 Filed: 02/19/2020

ARCTIC CAT INC. v. BOMBARDIER RECREATIONAL 3

Thereafter, Honda began making and selling un- marked PWCs, and Arctic Cat made no effort to ensure that PWCs sold by Honda were marked. The parties dis- pute when Honda stopped selling unmarked products un- der its license with Arctic Cat, but Arctic Cat asserts that Honda stopped selling unmarked products no later than September 6, 2013, approximately one year before Arctic Cat sued Bombardier. Bombardier contends that Honda continued to sell PWCs under the Arctic Cat license as late as 2018. On October 16, 2014, Arctic Cat sued Bombardier for infringement of various claims of the ’545 and ’969 patents. Before trial, Bombardier moved to limit Arctic Cat’s poten- tial damages because of Honda’s sales of unmarked prod- ucts. The district court held that Bombardier, as defendant, bore the burden of proving that Honda’s PWCs practiced the asserted claims and, because that proof was lacking, denied Bombardier’s motion. At trial, the jury found Arctic Cat’s patents not invalid, awarded Arctic Cat a royalty to begin on October 16, 2008—six years before Arctic Cat filed suit—and found that Bombardier had willfully infringed the asserted claims. After post-trial briefing, as relevant here, the dis- trict court denied Bombardier’s renewed motion for judg- ment as a matter of law on marking and willfulness. As to marking, the district court held that Bombardier had failed to meet its burden of proving that Honda’s PWCs practiced the asserted claims. Bombardier appealed to this court. See Arctic Cat Inc. v. Bombardier Recreational Prods. Inc., 876 F.3d 1350 (Fed. Cir. 2017) (“Arctic Cat I”). On appeal, we affirmed as to willfulness but vacated and remanded as to marking. Id. at 1369. Specifically, we determined that the district court erred in placing the bur- den on Bombardier to prove that the Honda PWCs prac- ticed the claimed invention. We held that once an alleged infringer identifies products that it believes are unmarked Case: 19-1080 Document: 62 Page: 4 Filed: 02/19/2020

patented articles subject to the notice requirements of § 287, the patentee bears the burden of proving that the identified products do not practice the claimed invention. Id. at 1368. Accordingly, we vacated the district court’s judgment as to marking and remanded to allow Arctic Cat an opportunity to establish that the Honda PWCs do not fall within the asserted claims. On remand, Arctic Cat conceded that it could not show that the Honda PWCs do not practice the asserted claims, J.A. 5065 ¶ K; J.A. 589, but nonetheless moved for sum- mary judgment that it is entitled to receive pre-complaint damages. First, Arctic Cat argued that the damages limi- tation of 35 U.S.C. § 287 applies only while a patentee is actively making, using, or selling unmarked products. Thus, Arctic Cat argued, § 287 did not apply after the time that it alleges Honda stopped selling unmarked products, and Arctic Cat is therefore entitled to damages during the period after the cessation of Honda’s sales but before the filing of its suit against Bombardier. More ambitiously, Arctic Cat also argued that it is entitled to damages for the full six-year period prior to suit allowed under 35 U.S.C. § 286—including for the period during which Honda was undisputedly selling unmarked products—because the jury’s finding of willful infringement is sufficient to demon- strate actual notice under § 287. In its own motion for summary judgment, Bombardier argued that Honda’s PWCs were unmarked patented arti- cles and Arctic Cat failed to provide constructive or actual notice under § 287, and Arctic Cat therefore cannot receive any pre-complaint damages. Bombardier argued that non- compliance with § 287 can be cured only by either begin- ning to mark or providing actual notice to an alleged infringer. The district court granted summary judgment in favor of Bombardier, and Arctic Cat appealed. We have jurisdic- tion under 28 U.S.C. § 1295(a)(1). Case: 19-1080 Document: 62 Page: 5 Filed: 02/19/2020

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DISCUSSION We review a district court’s grant of summary judg- ment according to the law of the regional circuit. Kaneka Corp. v. Xiamen Kingdomway Grp. Co., 790 F.3d 1298, 1303 (Fed. Cir. 2015) (citing Halo Elecs., Inc. v. Pulse El- ecs., Inc., 769 F.3d 1371, 1377 (Fed. Cir. 2014)). The Elev- enth Circuit reviews grants of summary judgment de novo. Myers v. Bowman, 713 F.3d 1319, 1326 (11th Cir. 2013). Summary judgment is appropriate when “there is no genu- ine dispute as to any material fact and the movant is enti- tled to judgment as a matter of law.” Fed. R. Civ. P. 56. In this appeal, we are tasked with interpreting the marking statute, 35 U.S.C. § 287. Statutory interpretation is a question of law that we review de novo. Wyeth v. Kap- pos, 591 F.3d 1364, 1369 (Fed. Cir. 2010) (quoting Glaxo Operations UK Ltd. v. Quigg, 894 F.2d 392, 395 (Fed. Cir. 1990)). I Section 287(a) provides in pertinent part: Patentees, and persons making, offering for sale, or selling within the United States any patented arti- cle for or under them, or importing any patented article into the United States, may give notice to the public that the same is patented . . . by fixing thereon the word “patent” . . . . In the event of fail- ure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the in- fringement and continued to infringe thereafter, in which event damages may be recovered only for in- fringement occurring after such notice. Filing of an action for infringement shall constitute such no- tice. The notice provisions of § 287 do not apply to patents directed to processes or methods. See Wine Ry. Appliance Case: 19-1080 Document: 62 Page: 6 Filed: 02/19/2020

Co. v. Enterprise Ry. Equip. Co., 297 U.S. 387, 395 (1936). Nor do they apply when a patentee never makes or sells a patented article. Id. at 398. Thus, a patentee who never makes or sells a patented article may recover damages even absent notice to an alleged infringer. If, however, a patentee makes or sells a patented article and fails to mark in accordance with § 287, the patentee cannot collect dam- ages until it either begins providing notice or sues the al- leged infringer—the ultimate form of notice—and then only for the period after notification or suit has occurred. Thus, a patentee who begins selling unmarked products can cure noncompliance with the notice requirement—and thus begin recovering damages—by beginning to mark its products in accordance with the statute. See Am. Med. Sys., Inc. v. Med. Eng’g Corp., 6 F.3d 1523, 1537 (Fed. Cir. 1993). A patentee’s licensees must also comply with § 287. See Arctic Cat I, 876 F.3d at 1366 (citing Maxwell v. J. Baker, Inc., 86 F.3d 198, 1111 (Fed. Cir. 1996)). While courts may consider whether the patentee made reasona- ble efforts to ensure third parties’ compliance with the marking statute, id., here Arctic Cat’s license agreement with Honda expressly states that Honda had no obligation to mark. J.A. 4081 ¶ 6.01; J.A. 259 ¶ JJ. Thus, it is does not excuse Arctic Cat’s lack of marking that it is Arctic Cat’s licensee, rather than Arctic Cat itself, who sold un- marked products. A patentee who makes or sells patented articles can satisfy the notice requirement of § 287 either by providing constructive notice—i.e., marking its products—or by providing actual notice to an alleged infringer. Gart v. Logitech, Inc., 254 F.3d 1334, 1345 (Fed. Cir. 2001). “Ac- tual notice requires the affirmative communication of a specific charge of infringement by a specific accused prod- uct or device.” Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 187 (Fed. Cir. 1994). Case: 19-1080 Document: 62 Page: 7 Filed: 02/19/2020

ARCTIC CAT INC. v. BOMBARDIER RECREATIONAL 7

This case presents a discontinuous situation in which unmarked products were sold, such that Arctic Cat could not receive damages before providing notice, but the sales of unmarked products allegedly stopped for a period of time prior to the filing of Arctic Cat’s complaint. Thus, the issue presented is whether the cessation of sales of unmarked products excuses noncompliance with the notice require- ment of § 287 such that a patentee may recover damages for the period after sales of unmarked products ceased but before the filing of a suit for infringement. We hold that it does not. Arctic Cat argues that, because § 287 is written in the present tense, the statute by its terms only applies while a patentee is “making, offering for sale, or selling” its prod- ucts. Thus, according to Arctic Cat, the statute limits dam- ages only during periods when the patentee is actually making, offering for sale, or selling the patented article. Bombardier responds that, to begin recovering damages af- ter sales of unmarked products have begun, § 287 requires that a patentee either begin marking its products or pro- vide actual notice to an alleged infringer; cessation of sales of unmarked products is not enough. We agree with Bom- bardier. We begin with the language of the statute. Duncan v. Walker, 533 U.S. 167, 172 (2001). While § 287 describes the conduct of the patentee in the present tense, the conse- quence of a failure to mark is not so temporally limited. Section 287 provides that “in the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the in- fringer was notified of the infringement and continued to infringe thereafter” (emphasis added). The statute thus prohibits a patentee from receiving any damages in a sub- sequent action for infringement after a failure to mark, ra- ther than merely a reduced amount of damages in proportion to the amount of time the patentee was actually practicing the asserted patent. Case: 19-1080 Document: 62 Page: 8 Filed: 02/19/2020

Arctic Cat’s obligation to mark arose when its licensee began selling patented articles. The cessation of sales of unmarked products certainly did not fulfill Arctic Cat’s no- tice obligations under § 287, nor did it remove the notice requirement imposed by the statute. The notice require- ment to which a patentee is subjected cannot be switched on and off as the patentee or licensee starts and stops mak- ing or selling its product. After all, even after a patentee ceases sales of unmarked products, nothing precludes the patentee from resuming sales or authorizing a licensee to do so. In the meantime, unmarked products remain on the market, incorrectly indicating to the public that there is no patent, while no corrective action has been taken by the patentee. Confusion and uncertainty may result. Thus, once a patentee begins making or selling a patented article, the notice requirement attaches, and the obligation im- posed by § 287 is discharged only by providing actual or constructive notice. This reading of § 287 comports with the purpose of the marking statute. The policy of § 287 is to encourage mark- ing, not merely to discourage the sale of unmarked prod- ucts. We have explained that the notification requirement of § 287 “serves three related purposes: (1) helping to avoid innocent infringement; (2) encouraging patentees to give public notice that the article is patented; and (3) aiding the public to identify whether an article is patented.” Arctic Cat I, 876 F.3d at 1366 (citing Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1443 (Fed. Cir. 1998)). Requir- ing a patentee who has sold unmarked products to provide notice in order to begin recovering damages advances these objectives by informing the public and possible infringers that the article is patented. Arctic Cat’s proposed interpre- tation, on the other hand, would undermine these objec- tives. In Arctic Cat’s view, § 287 should be read to allow a patentee to mislead others that they are free to make and sell an article that is actually patented, but nonetheless Case: 19-1080 Document: 62 Page: 9 Filed: 02/19/2020

ARCTIC CAT INC. v. BOMBARDIER RECREATIONAL 9

allow the patentee to recover damages without undertak- ing any corrective action. We reject this view. In American Medical Systems, 6 F.3d at 1537, we inter- preted § 287 to allow a patentee who had sold unmarked products to begin recovering damages after the patentee began marking. Otherwise, a patentee who has sold un- marked products would have no incentive to begin mark- ing, contrary to the objective of the statute. Here, where Honda merely stopped selling unmarked products but Arc- tic Cat otherwise took no action to remedy prior noncom- pliance or to provide notice that the articles were actually patented, Arctic Cat never complied with the notice re- quirement of § 287 and thus cannot recover damages for any period prior to the filing of its complaint. II Arctic Cat also argues that, regardless of its failure to mark, it should nevertheless recover the maximum amount of pre-suit damages allowed by 35 U.S.C. § 286 because the jury’s finding that Bombardier willfully infringed the as- serted claims should be sufficient to establish actual notice under § 287. Arctic Cat acknowledges, as it must, that this argument is foreclosed by our precedent. In Amsted Indus. Inc. v. Buckeye Steel Castings Co. we held that the deter- mination whether a patentee provided actual notice under § 287 “must focus on the action of the patentee, not the knowledge or understanding of the infringer,” and that “[i]t is irrelevant . . . whether the defendant knew of the patent or knew of his own infringement.” 24 F.3d 178, 187 (Fed. Cir. 1994) (citing Am. Med. Sys., Inc., 6 F.3d at 1537 n.18)). Accordingly, we reject Arctic Cat’s argument. Aside from our inability to reverse the decision of an earlier panel, see Newell Cos., Inc. v. Kenney Mfg. Co., 864 F.2d 757, 765 (Fed. Cir. 1988), we reiterate the conclusion that willfulness, as an indication that an infringer knew of a patent and of its infringement, does not serve as actual notice as contemplated by § 287. While willfulness turns Case: 19-1080 Document: 62 Page: 10 Filed: 02/19/2020

on the knowledge of an infringer, § 287 is directed to the conduct of the patentee. The marking statute imposes no- tice obligations on the patentee, and only the patentee is capable of discharging those obligations. It is not directed to the infringer and does not contemplate mere knowledge of the infringer as sufficient to discharge the notice require- ments placed on the patentee. Arctic Cat bases its argument for reversing Amsted on a supposed typographical error in that opinion in a quota- tion from the Supreme Court’s decision in Dunlap v. Schofield, 152 U.S. 244 (1894). Where the Supreme Court stated that notice “is an affirmative fact,” id. at 248, our opinion in Amsted quoted Dunlap as characterizing notice as “an affirmative act,” 24 F.3d at 187. Arctic Cat argues that this discrepancy undermines the reasoning in Amsted and that, properly understood, Dunlap stands for the prop- osition that notice is a fact that can be proved by knowledge of the infringer. But the alleged mistranscription in Am- sted is inconsequential to our analysis of Dunlap because the relevant fact is the act of the patentee. The full context of Dunlap confirms this understanding: The clear meaning of this section is that the pa- tentee or his assignee, if he makes or sells the arti- cle patented, cannot recover damages against infringers of the patent, unless he has given notice of his right, either to the whole public, by marking his article ‘Patented,’ or to the particular defend- ants, by informing them of his patent, and of their infringement of it. One of these things—marking the articles, or no- tice to the infringers—is made by the statute a pre- requisite to the patentee’s right to recover damages against them. Each is an affirmative fact, and is something to be done by him. 152 U.S. at 248. Thus, the fact is the act of marking or providing notice, and both are “something to be done by” Case: 19-1080 Document: 62 Page: 11 Filed: 02/19/2020

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the patentee. Knowledge by the infringer is not enough. Actual notice under § 287 requires performance by the pa- tentee. Finally, we note that other decisions of this court pre- dating Amsted similarly interpreted actual notice under § 287 to require action by the patentee. See Am. Med. Sys., 6 F.3d at 1537 n.18 (Fed. Cir. 1993) (“The notice of infringe- ment must therefore come from the patentee, not the in- fringer.”); Devices for Med., Inc. v. Boehl, 822 F.2d 1062, 1066 (Fed. Cir. 1987) (“[The patentee] failed to carry its burden of convincing the jury that it had performed affirm- ative acts in compliance with § 287.”). CONCLUSION We have considered Arctic Cat’s remaining arguments but find them unpersuasive. Accordingly, for the reasons above, we affirm the district court’s denial of pre-complaint damages to Arctic Cat. AFFIRMED