INFRINGEMENT

There are two dimensions of patent infringement issues that are relevant to marketers. First, a marketer may find that its patent has been infringed by another and may want to pursue legal remedies to protect the patent. Second, a marketer may find itself defending against an infringement action brought by a competitor. 

The marketer may have unintentionally infringed upon another’s patent. Alternatively, a marketer may deliberately infringe a patent, believing that if its actions are challenged in court, the patent will be declared invalid. EXHIBIT 2.4 Patent Prosecution Procedure Examiner reviews: 1) patentable subject matter? 2) novelty? 3) utility? 4) nonobviousness? 5) full disclosure? De Novo Review Appeal on Admin. Record Inventor files Application with PTO U.S. Court of Appeals for Federal Circuit Administrative Appeal to PTO Board of Appeals U.S. 

Supreme Court U.S. District Court Patent Issues (published in Patent Gazette) Patent Denied or or 32 The Law of Marketing Types of Infringement The Patent Act provides that a person can be held liable for infringement if she: (1) directly infringes a patent; (2) induces another to infringe a patent; (3) contributorially infringes a patent; (4) manufactures or sells certain components of a patented invention to be assembled abroad; or (5) imports, sells, offers to sell, or uses a product made abroad through a process protected by a U.S. patent. 

The last provision prevents a business from avoiding a patentee’s U.S. process patent by using the process abroad to manufacture products, then importing the products into the United States to sell or use. The use of the process abroad is not infringement, because U.S. patent laws do not have extraterritorial reach; however, the subsequent importation, offer for sale, or use of the products in the United States is infringement. 

Theoretically, retailers and noncommercial users are subject to liability under this provision. However, the Patent Act provides that retailers and noncommercial users are held liable only if there is no adequate remedy against the primary manufacturers, importers, distributors, or wholesalers on the theory that the most culpable parties should be held liable first. Direct infringement is most common. 

It occurs when the defendant makes, uses, sells, or imports the patented invention in the United States during the patent term. For example, in Snuba International, Inc. v. Dolphin World, Inc., 11 Snuba International held a patent on a diving system. Snuba’s invention consisted in part of a lightweight raft that carried compressed air tanks and that was attached to the diver by a harness and towline. Dolphin World sold a competing product called the “Free Diver,” which used a “pod” and harness mechanism. 

Although Dolphin World attempted to argue that a “pod” was not a “raft” and that its system therefore did not infringe, the CAFC disagreed and found that Dolphin World had directly infringed Snuba’s patent. Inducement to infringe occurs when the defendant actively, intentionally, and knowingly solicits or assists a third party in directly infringing a patent. Direct infringement by a third party is a prerequisite to finding inducement to infringe. 

In Snuba International, for example, the CAFC found that the use of the Free Diver system by Dolphin World’s customers constituted direct infringement and that Dolphin World had induced this infringement by disseminating sales information and promotional materials that encouraged consumers to purchase its Free Diver system. Contributory infringement occurs when the defendant sells, offers to sell, or imports a material component of the patented invention that has no substantial use aside from use in the patented invention, provided that: (1) the defendant knows that the component he sold was specially made or adapted for use in the patented invention, has no other substantial use, and is likely to be used to infringe the patent; and (2) his actions contribute to another’s direct infringement. 

Direct infringement is a prerequisite to finding contributory infringement. In Snuba International, the CAFC found that Dolphin World had notice of the Snuba patent and admitted that its Free Diver pod had no noninfringing use. Because the use of the Free Diver system by Dolphin World’s customers was direct infringement, Dolphin World was liable for contributory infringement (in addition to inducement to infringement and its own direct infringement). 

Finally, managers should be aware that the courts have held corporate officers—but not non-management employees—personally liable for the infringing activities of their corporations in certain instances. While a corporate officer is not automatically held personally liable merely because of her status as an officer of the corporation, an officer may be held personally liable in instances in which she personally took part in the commission of the infringing act or specifically directed other officers, agents, or employees of the corporation to infringe the patent of another.12 Often, officers can avoid this personal liability by showing that they obtained the advice of legal counsel and relied in good faith on that advice in structuring their behavior. 

Failure to obtain such advice or to heed it may well result in personal liability. Defenses to Infringement Claims A defendant charged with patent infringement can raise four basic defenses. First, the defendant can raise patent invalidity. If the defendant can show by clear and convincing evidence that the invention was not novel, nonobvious, and useful (for a utility patent) or not novel, nonobvious, and ornamental (for a design patent), the court will find the patent invalid and the defendant will not be liable for infringement.

 Second, the defendant can raise patent misuse by the patentee. The patentee has misused his patent if he uses it to obtain more market power than Congress intended the patent to convey. Generally, this involves some sort of antitrust violation. Where patent misuse is shown, the patentee is denied enforcement of the patent until the misuse ceases; the defendant is not liable for infringement.

 Third, the defendant is relieved of liability for infringement if the defendant can show inequitable conduct on the part of the patentee. For example, if the patentee intentionally made a misrepresentation or withheld material information about the patentability of the invention during patent prosecution, the patent is unenforceable. Finally, the defendant can raise the experimental use defense.

 This is a very narrow defense that permits a person to make or use a patented invention if that person’s purpose is only to satisfy her scientific curiosity or to engage in an intellectual exercise. The experimental use defense does not apply if the defendant has any commercial motivation. Remedies for Patent Infringement Two basic forms of remedies are available for patent infringement: injunctions and monetary damages.

 In addition, patentees may recover attorney fees and treble damages under certain circumstances. Injunctions An injunction is a court order to a party requiring that party to either do something or to refrain from doing something. When infringement is found, the court usually awards the patentee both monetary damages and a permanent injunction against further infringement. The patentee often seeks a preliminary injunction as well, which is harder to obtain. 

This is a court order issued during the lawsuit that prevents the defendant from continuing its alleged infringing activities until the lawsuit is resolved. Courts traditionally have been reluctant to grant preliminary injunctions because they fear that if the defendant is ultimately found not to be infringing the plaintiff’s patent, the defendant’s market position might have been impaired or lost altogether. 

However, the CAFC has become much more liberal in recent years in granting preliminary injunctions. Generally, to receive a preliminary injunction, the patentee must show that: (1) the patentee has a reasonable likelihood of success on the merits; (2) irreparable harm to the patentee will occur if the injunction is not granted; (3) the balance of hardships tips in the patentee’s favor; and (4) the impact of the injunction is in the public interest. 

Monetary Damages The Patent Act requires the court to award monetary damages to a prevailing patentee in an amount “adequate to compensate for the infringement.”

The preferred measure of damages is the patentee’s lost profits attributable to the infringement. To recover under this measure of damages, the patentee must demonstrate a reasonable probability that, but for the defendant’s infringement, the patentee would have made the sales that the defendant made. Thus, the patentee generally must show: (1) sufficient demand for the patented invention, and (2) an absence of noninfringing substitutes. 

For example, suppose that Inventor A has a patent for a telephone answering machine. Several of Inventor A’s competitors sell comparable, noninfringing answering machines. Inventor B infringes Inventor A’s patent. Inventor A must show that, absent Inventor B’s infringement, Inventor B’s customers would have bought from Inventor A, not Inventor A’s competitors. Obviously, many patentees find it difficult to meet this standard. In such instances, the patentee may still recover damages in the form of a reasonable royalty. 


This is the amount that a prospective licensee seeking a license to make, use, sell, or import the patented invention would be willing to pay and a reasonable patentee would be willing to accept in an arm’s-length transaction at the time of the infringement. The Patent Act requires the patentee to give notice to the public of its patent. Notice is given by putting the word “patented” or the abbreviation “Pat.,” along with the patent number, on the items being marketed. If the patentee fails to provide notice, the patentee may still obtain injunctive relief against infringers. However, the patentee will receive monetary damages only if the defendant had specific notice that the defendant was being charged with infringement. 


In addition, damages will be limited to the infringement that occurred after the defendant received the notice. Thus, patentees should be careful to place the required notice on their goods. While damages for infringement traditionally have been measured from the date of patent issuance, under the American Inventors Protection Act of 1999, an inventor may collect “reasonable royalties” for infringement that occurred during the period after publication of the application but before issuance of the patent. To take advantage of this remedy, though, the patentee must bring the published application to the infringer’s attention. Attorneys Fees and Treble Damages Generally, under U.S. law, each side must bear its own legal costs in litigating a case. 

Thus, even a winning party is ordinarily required to pay for its own attorneys fees. Some statutes, such as the Patent Act, alter this rule by allowing the winning party to recover its legal fees from the losing party. The Patent Act authorizes the court to award attorneys fees to the prevailing party in exceptional cases, such as those in which: (1) the patentee has won and there was willful or deliberate infringement by the defendant, or (2) the defendant has won and there was bad faith conduct by the patentee in obtaining the patent or in suing for infringement. 

A few statutes also provide for increasing the damage award in certain circumstances. Under the Patent Act, the court may award up to treble damages to the patentee if the defendant willfully infringed or acted in bad faith. Filing for Foreign Patents No single patent protects an invention in every country around the world. Rather, the inventor must obtain a patent in each country in which the inventor wants to protect her intellectual property asset. Because of the expense and effort involved in filing for patent protection, the inventor generally must choose the countries in which patent protection makes the most commercial sense. 

To a large extent, this is determined by the inventor’s assessment of potential markets and potential competitors and depends upon the inventor’s plans for future marketing of the product. Chapter 2: Protection of Intellectual Property Assets: Patent and Copyright Law 35 The United States adheres to the Convention for the Protection of Industrial Property, more commonly known as the Paris Convention.13 This is a multilateral treaty to which over 170 countries, including most industrialized countries, belong. The key provision of the Paris Convention is that it requires each country to grant “national treatment” to foreign patent applicants. 

This means that foreign applicants must be treated the same as domestic applicants and cannot be discriminated against. However, the Paris Convention provides little in the way of substantive rights to inventors, and no enforcement mechanisms apply if a member state does not comply with its obligations. Inventors thus must look to the specific laws of the countries in which they seek patent protection. In general, all countries grant patents to new inventions and give the patentee some sort of limited monopoly in the invention. 

The length of the patent term varies from country to country, although 20 years is becoming the norm, at least in industrialized countries. Patentable subject matter also varies from country to country. As noted earlier, the United States tends to be more liberal than most countries. An inventor cannot assume that, just because a patent issues in the United States, the same invention is patentable elsewhere. 

The process of obtaining a patent varies from country to country as well. It is always important that an inventor have, in addition to whatever U.S. legal counsel the inventor may hire, a local legal representative who is familiar with the language, laws, customs, and procedures of the country in which the inventor wants to seek a patent. U.S. patent law is different from that found in most of the rest of the world in several key respects.

 First, the United States has a first-to-invent system, not a first-to-file system as exists in virtually every other country around the world. (The United States is considering legislation that would implement a first-to-file system, however.) Second, applications in the United States that are not also filed abroad may be held secret unless and until a patent issues. As we see in Chapter 3, if the PTO denies a patent application that is held secret, the inventor still has the option of treating the invention as a trade secret.

 In most countries, however, all patent applications are made public, either immediately or within 18 months after filing, making trade secret protection impossible if a patent is not issued. Third, in many countries, the inventor is required to “work” the invention within a certain time period. Some countries also impose “compulsory licensing,” in which the inventor is required to license other parties within the country to produce the item at reasonable royalty rates. 

The United States does not require either “working” or compulsory licensing of inventions. An inventor wishing to obtain patents in foreign countries can follow one of two paths. First, the inventor can file directly in each country in which the inventor wants patent protection. This process can be expensive, as the inventor must pay filing fees, translation costs, and prosecution costs in each country in which the inventor applies. However, the inventor can target specific countries. 

Depending upon the nature of the invention, such targeting may be the best business strategy. Second, the inventor can seek patent protection indirectly through a convention filing. The two most widely known conventions are the European Patent Convention and the Patent Cooperation Treaty. 

The European Patent Convention permits an inventor to file a single patent application with the European Patent Office. If the patent is granted, patent rights arise in all member countries designated by the inventor in her application.