A blog about patent, copyright and trademark law in the U.S. District Court
for the Southern District of New York

Court Rules That Patent Infringement Damages May Only Be Collected From The Date of Actual Notice of Patent; Imposes Sanctions For Spoliation of Evidence.

In a December 31, 2013 ruling, Judge Jed S. Rakoff denied the parties’ cross-motions regarding infringement, granted defendants’ Microscan Systems, Inc. and the Code Corporation’s motion for partial summary judgment, and ruled that plaintiffs Cognex Corporation and Cognex Technology & Investment LLC were not entitled to damages for patent infringement prior to providing actual notice of the alleged infringement to the defendants, and further sanctioned plaintiffs for spoliating evidence.

The plaintiffs plead in the complaint that damages should run from actual notice of the patent-in-suit, and later sought to add a constructive notice theory. In considering the date from which patent infringement damages may be awarded, the Court recognized that the patent statute requires that “when a patented article has been produced by a patentee or its licensee, the amount of damages the patentee can recover in an infringement suit is statutorily limited to those acts of infringement that occurred after the patentee gave the alleged infringer notice of infringement.” While the statute permits either “constructive notice, which is accomplished by marking the article with the patent number, or actual notice,” the court nevertheless held that “when a patent owner or licensee makes or sells a product that embodies at least one claim of a patent but does not mark that product as patented as required by 35 U.S.C. § 287(a), damages are limited to the period beginning when the patentee provides actual notice of infringement.” As the plaintiffs failed to plead compliance with the marking statute, the Court ruled that allowing the plaintiffs to amend the complaint in order to comply with the marking statute at the summary judgment stage would unduly prejudice the defendants because the defendants would have been entitled to discovery on the constructive notice theory which they did not pursue. Accordingly, the plaintiffs were permitted to collect infringement damages only for the period after the date on which the actual notice of the infringement was provided to the defendants.

 Turning to the defendants’ spoliation claim, the Court sanctioned the plaintiffs for their intentional failure to preserve and produce a CD containing software sought by the defendants during discovery. The plaintiffs sent the CD to their expert without keeping a copy, and it was lost in the mail. The Court measured the plaintiffs’ spoliation against a two part test of relevance and materiality. The Court was not persuaded that the defendants showed that the content of the CD was material to their claims or defenses, yet acknowledged the seriousness of plaintiffs’ spoliation and the Court’s responsibility to impose sanctions that “serve the prophylactic, punitive, and remedial rationales underlying the spoliation doctrine.” While the Court ruled that the plaintiffs’ spoliation did not justify defendants’ motion for an adverse inference, the Court required the payment of the defendants’ costs, including their reasonable attorneys’ fees, in connection with the motion, and further imposed a fine in the amount of $25,000 payable to the Court’s clerk.

Judge Rakoff also declined to strike the defendant’s affirmative defenses of inequitable conduct, finding it to be adequately pled.
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