Chapter §20.11 Provisional Compensation Remedy

• Jurisdiction: United States

§20.11 Provisional Compensation Remedy

[A] Statutory Basis: 35 U.S.C. §154(d)

The American Inventors Protection Act of 1999 (AIPA)¹²⁴⁹ created a new remedy for violation of patent-related rights. A U.S. patentee is now entitled to retroactively seek damages for infringement of the claims that appeared in its published patent application,¹²⁵⁰ when that infringement occurred on or after the date of publication of the pending application by the USPTO but prior to patent issuance. Pursuant to 35 U.S.C. §154(d), the provisional compensation remedy is limited to a reasonable royalty.

Since passage of the AIPA, U.S. patent applicants have possessed the ability to "opt out" of automatic publication of their applications at 18 months after filing by attesting that they will not seek to patent the same invention in other countries.¹²⁵¹ Some U.S. applicants may want to exercise their option to avoid 18-month publication on the ground that there is no way to enjoin another who makes, uses, sells, offers to sell, or imports the subject matter of the published claims before the application has issued as a patent. The provisional compensation remedy creates an alternative remedy—a retroactive right to damages in the form of a reasonable royalty—that is intended to protect patent applicants from unchecked preissuance infringement and to encourage publication of their pending applications.

[B] "Substantially Identical" Inventions

In order to qualify for the provisional compensation remedy of §154(d), the invention as claimed in the issued patent must be "substantially identical" to the invention as claimed in the published patent application.¹²⁵² The statute does not define "substantially identical,"¹²⁵³ but the phrase is a term of art in reissue and reexamination practice,¹²⁵⁴ so the courts may look to such cases for guidance in interpreting 35 U.S.C. §154(d). Professor Chisum has observed that

[t]he "substantially identical" standard will undoubtedly create difficult issues. If prosecution of an application is not substantially complete by the time [of] the publication, the claims in the application may be amended by the addition of narrowing limitations. The claims may also be broadened. To take full advantage of the provisional right, an applicant must take care to include claims of adequate scope in the application as it is published. ¹²⁵⁵

[C] Actual Notice

Moreover, in order for the patentee to recover a reasonable royalty under 35 U.S.C. §154(d), the alleged infringer must have had "actual notice" of the patentee's published patent application;¹²⁵⁶ again, the statute does not define "actual notice," leaving the courts to interpret the phrase based on case law experience.¹²⁵⁷

In 2016, the Federal Circuit for the first time defined the meaning of "actual notice" as used in §154(d) in Rosebud LMS Inc. v. Adobe Sys. Inc.¹²⁵⁸ In short, the "ordinary meaning" of "actual notice" in §154(d) includes "actual knowledge" but not constructive knowledge. For example, the fact that a patent application was published on the USPTO's website and thus available to the public at large would not, by itself, be enough to qualify as "actual notice" . . . under §154(d)—the website publication would be only constructive notice. The accused infringer must have actually gained knowledge of the published application through its own actions, those of a third party, or by communication from the patent applicant. On the other hand, the Circuit in Rosebud rejected accused infringer Adobe's position that the patent applicant must necessarily have taken an affirmative act (such as sending a copy of the published application to the accused infringer's attention) in order to create "actual notice" under §154(d).¹²⁵⁹

Applying its newly announced definition of "actual notice" to the facts before it, the Federal Circuit in Rosebud affirmed a district court's grant of summary judgment to accused infringer Adobe of no liability for pre-issuance damages under §154(d). Patentee Rosebud's three arguments that Adobe had "actual notice" of Rosebud's application did not persuade the appellate court. First, Rosebud contended that Adobe actually knew of the application that issued as the patent in suit (U.S. Patent No. 8,578,280 ('280 patent)) because Adobe knew of the "grandparent" patent to '280 patent. That grandparent patent (U.S. Patent No. 7,454,760 ('760 patent)) was the subject of "Rosebud I," the first of three infringement lawsuits that Rosebud had filed against Adobe starting in 2010.¹²⁶⁰ The Circuit responded that mere knowledge of related patents (which, as in the case at bar, typically share a common written description) cannot satisfy the "actual notice"...