Federal Circuit says no liability prior to infringement notification

Anthoula Pomrening Aug. 25, 2010, 1:17pm

In a recent case from the Southern District of Texas, Tesco Corp. v. Weatherford International Inc., National Oilwell Varco L.P., Offshore Energy Services Inc., and Frank's Casing Crew & Rental Tools Inc., the U.S. Court of Appeals for the Federal Circuit found that continued use of accused products sold prior to notice of infringement did not constitute direct infringement upon which a claim of indirect infringement could be based.

Tesco filed the suit for the alleged infringement of two Tesco patents, U.S. Patent Nos. 7,140,443 and 7,377,324, directed towards a pipe handling device, method and system.

Specifically, Tesco alleged that National Oilwell Varco L.P. ("NOV") directly and indirectly infringed upon Tesco's patents by NOV's manufacture, use, offer for sale, sale, and importation of CRT-350 tools.

Most notable among the various motions pending before the court was NOV's Motion for Partial Summary Judgment Limiting Liability Due to Plaintiff Tesco's Failure to Mark Pursuant to �287(a) of the Patent Act.

NOV sought an award of summary judgment as to the following three issues: 1) accused products sold by NOV prior to the notice date were not subject to direct liability or damages; 2) further use or sale of such products did not give rise to liability or damages; and 3) injunctive relief was unavailable for the accused products sold by NOV prior to the notice date. Prior to the filing date of the suit, NOV had sold 86 of the CRT-350 tools.

As to the first issue, the court found that, since 68 of the accused devices were ordered and delivered before NOV received actual notice of infringement, NOV was immune from direct infringement liability for the sale of these 68 devices. With respect to the remaining accused devices, delivery of the products had occurred after the suit was filed.

The court was persuaded that the delivery of the devices "constitute[d] a critical part of the infringing activity of which NOV is accused."

Because NOV had actual notice of the asserted patents when the remaining devices were delivered, "or at the time that at least a portion of the alleged infringing sale occurred," the court concluded that NOV was not entitled to summary judgment as to direct infringement with respect to these remaining products.

The court then turned to the issues of whether NOV could be liable for indirect infringement with respect to the 68 devices that were sold to purchasers before the notice date, and whether the post-notice use of these devices would subject the buyers to liability for direct infringement.

Applying Fonar Corp. v. General Elec. Co., the court held that "the continued use of the sixty-eight CRT-350s that were clearly sold prior to notice does not give rise to direct infringement." Without direct infringement, NOV could not be held liable for indirect infringement as to these products.

This holding, however, troubled the court in what Tesco characterized in its briefing as the marking statute trumping the infringement statute.

"It seems to defy logic that the Defendants would be completely absolved of their continuing infringing activity after receiving notice of such infringement, simply because the product was sold to them before the seller had such notice . . . . Continuing acts of infringement should carry with them independent consequences, particularly if these acts occur with notice of the infringement."

In the end, the court was bound by Federal Circuit precedent to hold as it did.

As for whether Tesco would be entitled to seek injunctive relief for any of the products sold by NOV prior to the notice date, the court declined to hold that Tesco was precluded from doing so, but did not rule out that it might do so once discovery was complete and the factual record was more developed.

As a result, NOV's Motion for Partial Summary Judgment was granted in part and denied in part.

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