Rosebud LMS Inc. v. Adobe Systems Inc.

Addressing for the first time the notice requirement for pre-issuance damages under 35 USC § 154(d), the US Court of Appeals for the Federal Circuit affirmed the grant of summary judgment of no pre-issuance damages where the patent owner failed to prove that defendant had actual notice of its published application. Rosebud LMS Inc. v. Adobe Systems Inc., Case No. 15-1428 (Fed. Cir., Feb. 9, 2016) (Moore, J).

The present litigation is the third suit filed by the patent owner, Rosebud, against Adobe alleging infringement of various patents within a single patent family. In this case, the district court granted Adobe summary judgment on the issue of post-issuance damages because Adobe had stopped use of the accused technology 10 months before the patent-in-suit issued.

Adobe also moved for summary judgment on pre-issuance damages, claiming it had no notice of the published patent application. Regarding pre-issuance damages, Rosebud argued that material facts remained in dispute, that Adobe had actual knowledge of the grandparent patent to the patent-in-suit, that it had followed Rosebud’s products for years and that Adobe’s outside counsel would have searched for the published application as part of its work on Rosebud’s prior cases against Adobe.

A month before the close of discovery, the district court granted Adobe’s motion for summary judgment, finding that Rosebud had not met the § 154(d) requirement of actual knowledge and that its evidence was, at best, evidence of constructive notice. In doing so, the district court rejected Rosebud’s argument that the litigation history created an affirmative duty for Adobe to search for Rosebud’s published patents. Rosebud appealed. 

The Federal Circuit began by noting that § 154(d) provides a narrow exception to the general rule that damages may only be collected for infringement during the term of the patent, and by its plain language requires proof that the infringer “had actual notice of the published patent application.” The Court agreed with the district court that “constructive knowledge” did not suffice. The Federal Circuit further explained that, unlike the marking provision (§ 287(a)), § 154(d) requires the patentee to affirmatively notify the accused infringer to be entitled to damages. The Court agreed with Adobe’s policy argument that given the extraordinary nature of pre-issuance damages, adherence to the statutory requirement of notification by the applicant is simpler to implement and does not force an accused infringer to rebut unsubstantiated allegations that it knew of a published application. The Court concluded that any policy change would have to come from Congress, and “in the absence of such action, we interpret the actual notice requirement of § 154(d) as it is clearly written to have its ordinary meaning.”

After analyzing the evidence that Rosebud submitted in support of its actual notice argument, the Federal Circuit, like the district court, found that Rosebud’s evidence failed. The fact that Adobe knew of the grandparent patent was found to be insufficient. As the Court explained, the alleged infringer must have notice of the specific claims in the published application for the patent-in-suit; knowledge of the family’s specification does not satisfy § 154(d). Similarly, nothing in the evidence suggested that Adobe was so closely monitoring Rosebud’s products or that it would seek out Rosebud’s published applications. The Court also rejected Rosebud’s argument that Adobe’s counsel would have evaluated the application as part of earlier litigation, finding that the claim was unsupported by evidence.     

Practice Note: Patent holders should put suspected infringers on actual notice of published patent applications in order to claim pre-issuance damages under § 154(d).