For the first time, the Federal Circuit addressed the requirement of “actual notice” of a published patent application in order for a patent holder to obtain damages before issuance of a patent.1 The case arose from the appeal of a district court’s grant of summary judgement that Adobe Systems was not liable for patent pre-issuance damages under 35 U.S.C. § 154(d), because it had no knowledge of the published U.S. Patent Application that matured into the asserted U.S. Patent No. 8,578,820.

Section 154(d) provides an exception to the general rule that damages for patent infringement can only accumulate during the term of the patent, allowing for damages to accrue beginning on the date of publication of an application that matures into an issued patent. In order to obtain these damages, a patent holder must demonstrate that 1) the asserted claims were “substantially identical” in the publication and in the ultimately issued patent and 2) that the accused infringer had “actual notice” of the published patent application.2

In addressing the meaning of “actual notice” in 35 U.S.C. § 154(d), the court concluded that this term included knowledge of the published application, but this knowledge did not have to come as a result of actions by the owner of the published application.3 Thus, the court dismissed Adobe’s argument that “an affirmative act” by the patent holder is required to give “actual notice” to the potential infringer of the published application. However, they did agree with Adobe that “constructive knowledge” is not “actual notice” of the published application.4

In an attempt to demonstrate that Adobe had “actual notice” of the publication that preceded the ‘820 patent, Rosebud presented three different rationales to the court. First, Rosebud asserted that because the parties were involved in two prior law suits over patents in the same family as the ‘820 patent, and Adobe knew of a grandparent patent to the ‘820 patent, it therefore also knew of the publication of the ‘820 patent application. Secondly, Rosebud argued that because Adobe followed Rosebud and its product, it would have become aware of publication of the ‘820 patent application. Finally, Rosebud suggested that it is standard practice when defending against a charge of patent infringement to search for patents and applications related to the asserted patent, and thus, Adobe surely would have discovered the publication of the ‘820 patent application.5

The court rejected each of Rosebud’s assertions. The court noted that even though the ‘280 patent shares a specification with the patents involved in prior lawsuits between Rosebud and Adobe, there was no evidence that Adobe had knowledge of the published application, and specifically, the claims of the published application.6 Knowledge of related patents does not equate to actual notice of the published patent application.7 With regard to Rosebud’s assertions that Adobe followed Rosebud and its products, the court found no evidence suggesting that Adobe or its employees were monitoring Rosebud and its products, and specifically there was no evidence that suggested that Adobe actively sought out Rosebud’s published patent applications.8 Finally, the court disagreed that it was standard practice during litigation to review related patents, or applications during litigation, particularly because the prior lawsuit between Rosebud and Adobe never reached the claim construction stage.9

Based on the Federal Circuit’s ruling, two potential practice tips emerge for companies prosecuting in the biotech space. The first is to consider including picture claims directed to a desired product in an application, such that claims of a published application may be in a form that meets the “substantially identical” requirement of 35 U.S.C. § 154(d) when they ultimately issue as a patent. While the requirement for similarity of the claims was not specifically addressed in Rosebud, the court did highlight the importance of a potential infringer having actual knowledge “of the claims of the published patent application and the fact that the applicant is seeking a patent covering these claims.”10

The second tip relates to whether to institute a “competitor monitoring” policy within a company, or for a client. Certainly the court in Rosebud indicated that simply being aware of related patents or applications, or even monitoring a client’s products, would probably not rise to the level of the required “actual notice” of the published application.11 The answer to this question certainly includes weighing the value of following a competitor with the risk that this process may result in “actual notice” of a competitor’s published patent application.12 Most likely each company, and potentially each technology sector in the biotech space, may have a different answer to this balance.