In patent licensing dispute, placement of the plaintiff's patent number on the defendant's product was an admission by the marking party that the product fell within the scope of the plaintiff's golf club patent claims and was, as with other admissions under FRE 801(d)(2), subject to challenge or explanation but was not an estoppel precluding its application to the license under dispute, in Frolow v. Wilson Sporting Goods Co., _ F.3d _ (Fed. Cir. March 15, 2013) (No. 2012-1185)If a manufacturer marks its products as covered by a patent that it had licensed from another, does this preclude the manufacturer from later arguing that some of the products that it marked do not infringe the licensed patent? The Federal Circuit recently reviewed a case involving the evidentiary effect of patent mismarking. The circuit declined to give mismarking a preclusive effect, as an estoppel. Rather, the mismarking was merely evidence of an admission that the marked product was covered by the patent. This evidence can be weighed with all the other evidence in the case in order to determine patent coverage. In reviewing this issue, the Federal Circuit declined to recognize a “marking estoppel.” Frolow, _ F.3d at _.
In the case, patent owner Frolow entered a licensing agreement with defendant Wilson, allowing Wilson to affix the plaintiff's patent number to a specified list of defendant's products (tennis rackets) covered by the plaintiff's patents. In the course of monitoring this licensing agreement, the plaintiff discovered that the defendant had failed to pay royalties on many products that it had marked with the plaintiff's patent number. In the suit that followed, the plaintiff sought payments for this. In response, the "defendant sought to show that the marked products were not actually covered by the plaintiff's patent," and so no payment was due. Eventually the case was resolved pre-trial with the district court granting summary judgment to the defendant, finding that the plaintiff failed to raise a genuine issue of material fact as to whether the product was covered. The court found that having admitted by virtue of making its products with the plaintiff's patent marking it should be estopped to deny that the products were not covered by the plaintiff's patent.
The Federal Circuit found the grant of summary judgment unfounded, explaining:
Although we do not endorse Mr. Frolow's patent marking doctrine, we do agree that the fact that Wilson marked their products with his [plaintiff's] patent number is a fact which supports his [plaintiff's] allegation that Wilson's products fall within the patent claims. The practice of marking a product with a patent number is a form of extrajudicial admission that the product falls within the patent claims. Extrajudicial admissions of fact are statements made by a party outside the context of the litigation that are introduced into evidence by that party's opponent. Generally, extrajudicial admissions of facts, such as patent marking, are simply evidence that may be countered by the party that made the admission. These admissions are not “binding,” and “may be controverted or explained by the party” that made the statement. The doctrine of marking estoppel would conflict with the normal evidentiary treatment of these sorts of admissions. We decline to adopt a special equitable doctrine for the treatment of these “admissions.”Frolow, _F.3d at _ (citing Martha Graham School and Dance Foundation, Inc. v. Martha Graham Ctr. of Contemporary Dance, Inc., 380 F.3d 624, 644 (2d Cir. 2004) (holding that the defendant's list of ballets “filmed and sold” constituted an admission in copyright infringement action); Wright v. Farouk Sys., Inc., 701 F.3d 907, 910–11 (11th Cir. 2012) (holding that statement by defendants' Chairman that the defendant was “in the process of re-formulating the product” in response to defects was admissible in products liability action)).
As a result of the circuit's action, a further break has been applied to the equitable doctrine of estoppel, at least as applied in the context of a patent marking of certain products for sales of certain products. The logic of this application would suggest that an estoppel would not operate in the context of royalty payments made by one party to another. The Federal Circuit in Frolow having reversed the trial court's summary judgment grant, remanded the case back to face the evidence applicable to whether some of the defendant's tennis racket models were covered by the plaintiff's license agreement and that therefore payment was due.
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