Arctic Cat gets frosty reception at Fed Circuit in $28m patent appeal
Snowmobile manufacturer Arctic Cat cannot claim patent damages of $28 million from Bombardier for the period before it filed its lawsuit, the US Court of Appeals for the Federal Circuit has ruled.
In a precedential decision issued yesterday, February 19, the Federal Circuit ruled that Arctic Cat had not met its obligation to mark its patented products with relevant patent numbers, and damages were therefore limited until after it had served Bombardier with notice of infringement.
The judgment means Arctic Cat’s original damages award of $46 million has been reduced by approximately $28 million.
Arctic Cat argued that its damages should be unaffected by licensee Honda not marking up the patented products.
The Minnesota snowmobile maker sued Bombardier for infringement of two patents (US numbers 6,793,545 and 6,568,969) in 2014. According to Arctic Cat, this was more than a full year after Honda, who licensed the patents, stopped selling unmarked watercrafts covered by the patents.
Personal watercrafts
The US Patent and Trademark Office (USPTO) issued the two Arctic Cat patents, cover thrust steering systems for personal watercrafts (PWCs), in 2003 and 2004.
Arctic Cat, in fact, stopped selling PWCs before either patent was issued by the USPTO, but in 2002 licensed the IP to Honda.
The final version of the licence agreement stated that Honda had no obligations to mark products covered by the patents with the relevant patent numbers.
A part of US patent law known as section 287 states that, in order to claim damages for infringement, patented products must be marked with the numbers. In the absence of marking, patent owners must serve notice of the infringement, including via an infringement complaint, and damages can only be claimed for after the date when this happens.
After a jury trial, the US District Court for the Southern District of Florida found that Bombardier was liable for willfully infringing the two patents, and awarded Arctic Cat a royalty from the period beginning in October 2008, six years before the suit was filed.
No notice of infringement
Bombardier appealed to the Federal Circuit, arguing that Arctic Cat could not claim royalties from this period because no notice of infringement had been given.
The Federal Circuit remanded the case back to the district court, ruling that Arctic Cat must prove that the unmarked Honda products did not practice the patented claims, which the Minnesota company conceded it couldn’t do.
Arctic Cat argued, however, that it could claim pre-complaint damages because section 287 only applies when a patent owner or licensee is actively selling patented products.
As Honda stopped selling the unmarked products in September 2013, Arctic Cat said it could claim damages from at least this period.
In response, Bombardier argued that “cessation of sales of unmarked products is not enough”—a patent owner must actively begin marking the products or serve notice of infringement.
In yesterday’s ruling, the Federal Circuit weighed in on the side of Bombardier, ruling that the “cessation of sales of unmarked products certainly did not fulfil Arctic Cat’s notice obligations under section 287”.
The Minnesota company also argued that, in any case, it could claim damages for the full period since October 2008 because the jury’s finding of willful infringement proved Bombardier had notice of its illegal activity.
The Federal Circuit was similarly unconvinced, ruling that a finding of willfulness does not serve as a substitute for notice of infringement.
“While willfulness turns on the knowledge of an infringer, section 287 is directed to the conduct of the patentee,” the judgment stated.
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