Settling a patent dispute often looks like the end of a problem. The accused company pays money, receives permission to continue selling its products, and the parties move on.
But a settlement can also affect what the patent owner can recover years later from someone else.
That is the practical lesson from VDPP, LLC v. Volkswagen Group of America, Inc., a recent Federal Circuit decision involving eleven earlier patent settlements. The court concluded that those agreements could have consequences for VDPP’s ability to recover damages from Volkswagen for infringement occurring before VDPP filed suit.
Why Patent Marking Matters
Patent law provides a way for patent owners to give the marketplace general notice that products are protected by patents. Traditionally, this is done by marking the product with the patent number or directing users to a website identifying the relevant patents.
The distinction matters because notice can affect damages. When patented products are sold without the required marking, a patent owner generally cannot recover damages for infringement occurring before the accused infringer receives actual notice of the patent.
A company that does not manufacture anything might therefore assume that marking is someone else’s problem. VDPP shows why that assumption can be dangerous.
The Problem Created by Earlier Settlements
VDPP owned a patent that it asserted against Volkswagen’s surround-view camera technology. VDPP did not manufacture products itself, but it had previously settled patent disputes with eleven other companies. Those settlements permitted the companies to continue making, using, or selling products covered by the agreements.
When VDPP later sought damages from Volkswagen for infringement before the lawsuit was filed, Volkswagen argued that the earlier licensees’ products created a marking problem.
VDPP responded that the agreements were settlements rather than ordinary commercial licenses and that the settling companies had not admitted their products infringed the patent.
The Federal Circuit rejected those distinctions. What mattered was what the agreements allowed the companies to do, not what the contracts were called. If VDPP maintained that the licensed products practiced its patent and authorized their continued sale, it also had to address whether those products were properly marked or whether VDPP had made reasonable efforts to obtain compliance.
VDPP had not alleged either. One of its agreements even stated that the licensee had no obligation to mark. The result was that VDPP could not pursue the pre-suit damages it sought.
A Settlement Is Not Just About the Current Dispute
The decision does not mean that every patent settlement must contain a patent-marking clause. The Federal Circuit expressly stopped short of adopting such a rule. A patent owner may be able to demonstrate reasonable efforts to secure compliance in other ways.
The broader business lesson is more useful: a settlement involving continuing product sales should be evaluated for its effect on future enforcement, not merely for how well it resolves the current dispute.
Depending on the circumstances, that may mean considering how licensed products will be identified, whether marking should be required, how changes to products will be handled, and what records should be retained to document the patent owner’s efforts.
Those issues can matter long after the settlement payment has been received.
The Same Issue Can Affect Patent Transactions
The problem is also relevant when patents are bought or licensed.
A prospective purchaser may examine validity, ownership, prior litigation, and existing licenses yet still miss an important part of the asset’s value. Earlier settlement agreements and the subsequent conduct of licensees can affect the damages available in later enforcement proceedings.
That makes settlement history part of meaningful patent diligence.
For readers interested in the Federal Circuit’s legal analysis, including the decision’s separate rulings on attorney fees and sanctions, a more detailed discussion is available in the Technology & Information Law Blog analysis of VDPP v. Volkswagen.
The Practical Takeaway
Patent settlements can have consequences beyond the parties signing them. When a settlement permits continued sales of products that the patent owner considers covered by the patent, the agreement may affect damages in future cases against entirely different companies.
The useful question at settlement is therefore not simply, “Does this resolve the present lawsuit?” It is also, “What will this agreement do to the patent owner’s enforcement position later?”
About the Author: Charles Gideon Korrell is a technology-transactions attorney and strategic advisor whose practice focuses on technology licensing, commercial transactions, intellectual property strategy, and related matters. More information about his practice is available at GideonKorrell.com. He publishes the Technology & Information Law Blog at TechInfoLaw.com, where he provides more detailed analysis of judicial decisions and legal developments affecting technology and intellectual property.
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