Since 1999, U.S. patent law provides for pre-issuance patent damages of a reasonable royalty measured as far back as the date of the patent publication date (of the issued patent) if: (1) the published patent claims are substantially identical to the claims asserted into the issued patent, and (2) the alleged infringer had actual notice of the published patent application. Up until recently, the Federal Circuit Court of Appeals has never weighed in as to what is “actual notice” for purposes of pre-issuance patent damages provided for under section 154(d) of the Patent Act.
But last week, the Federal Circuit Court of Appeals provided guidance (or at least some guidance) as to what “actual notice” means in Rosebud LMS Inc., v. Adobe Systems Incorporated. In that case, a trial court granted summary judgment to Adobe on pre-issuance damages. Rosebud and Adobe had a long history of litigating certain related patents. With regard to pre-issuance damages under 154(d), Rosebud asserted that Adobe had an affirmative duty to search related published patent applications based on the history between the parties. The trial court disagreed and granted Adobe’s motion for summary judgment on the issue of pre-issuance damages. Rosebud appealed.

The Federal Circuit Court of Appeals affirmed the trial court in favor of Adobe (so no pre-issuance damages). However, this precedential decision was not without a couple of surprises. First, the appellate court stated that “actual notice” does not require an affirmative act by the patent applicant giving notice of the published patent application based on a strict reading the statutory language. This lack of “an affirmative act” is significantly different from interpretation of such a duty for actual notice in 287(a) where an affirmative act on the part of the patent rights owner is required for actual notice to be asserted (for the commencement of post-issuance damages to begin in the absence of constructive notice). The court reasoned that Congress could have used the same conditional language in 154(d) as in 287(a) but chose not to. Moreover, the court invited Congress to correct the language in 154(d) if an affirmative act taken by the patent applicant was intended or desired.

Second, the court stated that the “actual notice” requirement of 154(d) includes possession of actual knowledge. This becomes a factual issue. Adobe escaped pre-issuance damages by asserting in a verified interrogatory response that it had first received notice of the asserted published patent application after it had discontinued the patented technology at issue. While Rosebud asserted circumstantial evidence of Adobe’s actual knowledge of the published patent application, the appellate court did not agree and concluded, as did the trial court, that there was no genuine dispute of material fact.

Further, the appellate court determined that knowledge of one patent does not impute knowledge of a related patent –tying back the other requirement of 154(d): that the claims of the alleged patent must be substantially identical to the published patent application claims.

Rosebud argued that a reasonable jury could conclude that Adobe’s outside counsel would have discovered the published patent application when preparing for a related litigation case. The appellate court disagreed—but not refuting Rosebud’s allegation that it is standard practice to review related patents and applications to evaluate claim construction, rather because the related case never reached the claim construction stage (and noted that Rosebud missed all of its court-ordered claim construction. Hmmm.) So Rosebud’s argument was not dismissed out of hand, just that the evidence in the record did not support the conclusion.

But, in the end, it was the presented evidence in the record that saved Adobe. Actual knowledge of section 154(d) as defined in the Rosebud case is now a slippery slope.