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Importance of Proper Patent Marking

Tuesday, January 31, 2006

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Patents are valuable intangible assets because they grant their owner the right to stop others from making, using, selling, or importing their patented invention. Cost for obtaining this asset may be quite substantial. With cost being substantial for such a valuable asset, it is important to properly mark a patented apparatus or system in order to benefit from the rights granted by the government to patent owners.

Proper patent marking of an apparatus or system is vital to maintaining a solid intellectual property strategy. Without using proper patent marking methods, the public is not made aware of a pending patent application or an issued patent. This lack of notice to the public may result in a substantial decrease in awarded damages from a patent infringement claim or a missed opportunity to warn the public that you may soon have the right to stop them from making, using, selling, or importing your patented technology.

Patent Pending
"Patent pending" is a common label seen on products. This label has no legal effect, but instead is used to inform the public that a patent application seeking protection of an associated invention is presently pending with the United States Patent and Trademark Office (USPTO). The intension of this is to inform the public that if they attempt to make, use, sell, or import the patent pending technology, the owner of the patent application may be able to stop them when the patent application issues. Use of the patent pending label may be enough to stop others if they believe that a final apparatus or system would infringe claims of an issued patent associated with the patent application. After all, why invest time and money into an apparatus or system when it is going to infringe a patent owned by another party.

This label can be used any time after filing of a patent application with the USPTO, although it is advisable to await acknowledgment of filing a patent application from the USPTO prior to marking an apparatus or system with the label "patent pending."

Issued Patent Marking
Under Title 35 of the United States Code, Section 287(a)[1], damages awarded for infringing an issued patent are a direct result of whether the owner of the infringed patent properly marked their patented apparatus or system. Section 287(a) claims that in the failure to properly mark an apparatus or system, "no damages shall be recovered by the patentee in any action of infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for the infringement occurring after such notice."

An example of notification to the infringer, which may be relied upon if an apparatus or system was not properly marked, includes a cease and desist letter claiming patent infringement. Alternatively, with compliance to the patent marking requirements, damages for patent infringement may be calculated from the date that the public was placed on constructive notice that a marked apparatus or system was patented, namely, from the date that proper patent marking methods were used.

Proper marking of a patented apparatus or system requires fixing on the apparatus or system the word "patent" or the abbreviation "pat.", together with the number of the patent. If it is not possible to mark properly due to the character of the apparatus or system, an associated package holding the apparatus or system may be marked.

Recent Decision Involving Patent Marking and the Internet
So how do you mark a patented invention when the invention requires use of the Internet? Recently, the US District Court for the District of Delaware addressed this issue. In the case of IMX, Inc. v. Lendingtree, LLC [2], a hearing was held to determine if a motion by Lendingtree should be granted limiting damages, due to IMX not properly marking their patented invention.

A claim of the IMX patent being enforced reads, "[A] method for processing loan applications, said method including the steps of maintaining a database of pending loan applications and their statuses at a database server, wherein each party to a loan can search and modify that database consistent with their role in the transaction by requests to said server from a client device identified with their role." IMX never sent a notice letter to Lendingtree informing them of their issued patent and alleged patent infringement.

IMX provided the patented method to their clients through use of the Internet. Specifically, the patented method was embodied in IMX Exchange Software that was made available in a Web-based format where customers would interact with the software through an IMX Web site. IMX did not provide notice of the patented software on the Web site at the location where the clients would interact with the software. However, through searching other Web pages of the IMX Web site, reference to "IMX Patents," and a link to view an IMX patent, was provided. In addition, IMX had once sold the software on a CD-ROM, which also was not marked in accordance with the patent marking requirements.

The District Court decided that due to a lack of proper patent marking, and the Web site being intrinsic to the patented system and a tangible item that could have been marked, IMX failed to give the public adequate notice that its IMX Exchange system and method was protected by patent. As a result, pre-litigation damages were limited to damages incurred after IMX filed the patent infringement action against Lendingtree, since the filing of the patent infringement action constituted the notice.

This decision demonstrates that Web sites incorporating patented software must also follow the patent marking requirements to give constructive notice to potential patent infringers.

Patents are valuable intangible assets that allow its owners to obtain royalties to licenses, cross-license patented technology, and bring a patent infringement claim against a potentially infringing party. However, once an issued patent is obtained, it is vital to follow statutorily required patent marking methods to fully benefit from the rights granted by the government. Unfortunately, if proper patent marking methods are not used, damages for patent infringement, due to lack of actual or constructive notice, may be decreased significantly. Since the procedure for properly marking a patented invention can be difficult to ascertain without an understanding of patent law and recent case law, it is advisable to consult your patent attorney to ensure that proper patent marking methods are followed in a timely manner.

This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice. Your receipt of Good Company or any of its individual articles does not create an attorney-client relationship between you and Sheehan Phinney Bass + Green or the Sheehan Phinney Capitol Group. The opinions expressed in Good Company are those of the authors of the specific articles.

[1]35 USC ยง287(a) reads as follows:  "Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them, or importing any patented article into the United States, may give notice to the public that the same is patented, either by fixing thereon the word "patent" or the abbreviation "pat.", together with the number of the patent, or when, from the character of the article, this cannot be done, by fixing to it, or to the package wherein one or more of them is contained, a label containing a like notice.  In the event of failure so to mark, no damages shall be recovered by the patentee in any action for inf4ringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice.  Filing of an action for infringement shall constitute such notice." 

[2]IMX Inc. v. LendingTree LLC, D. Del., No. 03-1067, 12/14/05.