(as published in IP Law360)
A U.S. manufacturing company purchases a particular part from an overseas supplier. Unbeknownst to the U.S. company, importation and resale of the part in the U.S. infringes a U.S. patent because the part happened to be made using a patented process, and the U.S. company does not realize this until it is sued for patent infringement. The U.S. company may be able to defend itself using a little-known subsection of what is commonly referred to as the “marking statute,” 35 U.S.C. § 287.
Most practitioners are familiar with the portion of § 287 that punishes patentees who fail to adequately mark their products or control the marking of patent numbers on products sold by their licensees. Section 287 is less known for its later subsections, which have nothing to do with marking, but otherwise limit a patentee’s ability to recover damages and other remedies.
The second subsection, § 287(b), is a potentially valuable shield for those who have overseas suppliers for their goods. It places limitations on remedies available against entities accused of infringement under 35 U.S.C. § 271(g) — i.e., sellers or importers of products allegedly made by a patented process outside the United States.
Section 287(b) was enacted together with § 271(g) and is designed to protect entities who innocently infringe under that statute. For accused § 271(g) infringers who do not themselves practice (or control the practice) of a patented method — and who do not otherwise know a patented process is being used to make a product — § 287(b) bars all remedies under § 271(g) for any acts that occur before the accused infringer has been given “notice of infringement.”
It is important to recognize that “notice of infringement” under the statute is broadly defined and limits the amount of exposure that § 287(b) can successfully block. The statute defines “notice of infringement” to be “actual knowledge … of information sufficient to persuade a reasonable person that it is likely that a product was made by a process patented in the United States,” or a detailed, written accusation of infringement — or both.
As the Southern District of New York has held, notice need not come from a patent holder. In Infosint SA v. H. Lundbeck A/S, the accused infringer moved for partial summary judgment, arguing it was entitled to a limitation of damages accrued prior to the patent owner’s first communication of infringement allegations, which in this case was the complaint itself. The court denied summary judgment, reasoning that lack of notice from the patent owner prior to filing the complaint “does not establish the absence of a genuine issue of material fact as to whether [the defendant] knew it was likely that products in its possession were made by a process patented here.” While this set of facts was relatively straightforward — indeed, the defendant did not even argue it lacked notice prior to the lawsuit — the court took a close look at the statute’s legislative history.
The court quoted Senate Report 100-83, stating that notice “occurs” when an accused infringer “has a combination of information sufficient to persuade a reasonable person that it is likely that a product was made by a patented process.” The court gave special weight to the report’s explanation that the “combination of information” includes not only information from the patent owner but also “any other information known to the accused relevant to the issue of infringement.”
Interestingly, the court also focused on the rationale articulated for § 287(b) in the report: “to shelter only purchasers who are remote from the manufacturer and not in the position to protect themselves in contracts with the party who is actually using the process.” The court concluded that § 287(b) “was not intended to protect retailers with the ‘resources to send agents to other countries to seek suppliers,’ who ‘should be able and willing to exercise more vigilance’ in avoiding infringement.” Per the court, the defendant — which had negotiated an international supply and license agreement with a “strategic partner” — did not qualify as a “remote” seller with “little bargaining power.”
This restrictive view on the applicability of § 287(b) has not as yet been adopted by other courts, so it is still worthwhile to carefully consider the defense even as a well-to-do, sophisticated retailer accused of infringing under § 271(g).
Additionally, even if adopted, such a broad notice definition would not render Section 287(b) useless. This is because even an accused § 271(g) infringer who has directly received an adequate written accusation from a patent holder can potentially avoid liability by requesting and receiving “a written statement from the manufacturer or supplier which on its face sets forth a well grounded factual basis for a belief that the identified patents are not infringed.”
The Federal Circuit has recognized that “[b]y sending a request for information to the [manufacturer] to determine the process used, an alleged infringer can limit potential damages under section 271(g),” but the issue of what constitutes a “well grounded factual basis” has not been squarely addressed by the courts.
One court has made clear that the written assurance permitted by subsection (b)(5)(C)(ii) must be from the manufacturer, unless the manufacturer is unknown or there are other mitigating circumstances. In Eli Lilly & Co. v. Zenith Labs. Inc., the Southern District of Indiana declined to apply subsection (b)(5) because “[Defendants] received the [written statement] from its supplier … not from the manufacturer … while 35 U.S.C. § 287(b)(5)(C) clearly requires the ‘written assurance’ to come from the manufacturer.” The Eli Lilly court noted that a letter from a supplier might satisfy 35 U.S.C. § 287(b)(5)(C)(ii) “[i]f, for example, [the supplier] had received a specific, well-grounded written assurance of non-infringement from [the manufacturer] which [the manufacturer] clearly intended for [the supplier] to transmit to [the defendant].” The court acknowledged such a scenario “would likely be a mitigating circumstance which would excuse the fact that [the defendant] did not receive it from [the manufacturer] directly.”
In sum, § 287(b) provides potentially valuable remedy limitations to accused § 271(g) infringers. Such entities should study carefully the various provisions of § 287(b), and take steps necessary to take full advantage of the limitations.