Case Cite

U.S. Ethernet Innovations, LLC v. Acer, Inc., No.  C 10-3724 CW, 2013 WL 4456161 (N.D. Cal. Aug. 16, 2013).

IPDQ Commentary

A license and a covenant-not-to-sue proved to be Plaintiff’s undoing when the U.S. Ethernet Innovations court decided sales by two large companies were attributable to Plaintiff under Section 287. Plaintiff’s efforts to preserve its right to damages did not prevail.

Case Summary

Defendants, the accused infringers, moved for partial summary judgment that Plaintiff could not recover pre-suit damages based on its failure to mark under 35 U.S.C. § 287(a).  Id. at *1.  The district court granted the motion after it attributed sales by two large companies to Plaintiff and its predecessor.

Background

The original patent owner licensed IBM and entered into a covenant not to sue Intel for practicing the patents.  Id. at *2-*3.   Plaintiff’s Rule 30(b)(6) witness testified he did not know if anyone ever marked products with the patent-in-suit.  Id. at *3.  Sales by the two licensees dwarfed sales by Plaintiff’s predecessor.  Id. at *4.

Reasoning

Applying a “rule of reason” analysis in determining whether Plaintiff substantially complied with the statute, the district court concluded IBM’s unmarked products were attributable to Plaintiff.  Id. at *6.  There was no authority to support Plaintiff’s argument that sales of products under a broad portfolio letter could not be imputed to the patent holder.  Id. at *7.  Doing so would be inconsistent with the purpose of the marking statute.  Id.

Moreover, Plaintiff did not undertake reasonable efforts to ensure IBM’s compliance with contractual marking requirements.  Id. at *7.

Intel’s sales were also attributable to the patent owner.  Id. at *8 – *9.  Section 278’s marking requirements apply to a covenant not to sue.  Id.  The covenant not to sue between the patent owner and Intel was equivalent to a license because it unambiguously authorized Intel to manufacture and sell products.  Id.

The court also rejected Plaintiff’s argument that Defendants had not offered evidence that Intel’s products infringed the patents-in-suit.  Id. at *9.  Merely arguing that the products might not infringe was insufficient to create an issue of fact when Plaintiff had consistently taken the opposite position throughout the litigation.  Id.