Contributory infringement by a supplier

[nickjames]

What is the name of your state?

Here is the situation: I have a patent on a certain product that I sell to retail stores who in turn sell to the public. I recently find out that someone else is infringing on my patent by constructing an identical product under a different name. The way I found out is by seeing this infringing product in a mail catalog. Assuming that the creation of this identical product is in fact a patent infringement, can the supplier be found liable for contributory infringment if he is put on notice by me of the infringing product? The reason I ask is that the caselaw I have found deals with a supplier of a COMPONENT that is necessary to put together a patented process. Would this also apply to a supplier of the COMPLETE product when this product is sold to the public through a catalog?

 

[divgradcurl]

What state are you in? Is this a question of U.S. patent law, of the patent law of another country?

 

[nickjames]

The supplier, infringer and patent holder are all in different states, so it is a matter of U.S. law

 

[divgradcurl]

Then the answer is yes and no. See 35 U.S.C. 271 -- whoever makes, uses, sells or offers for sale an infringing product in the U.S. is liable for patent infringement.

The seller wouldn't be a contributory infringer -- they would be a direct infringer.

Note that damages do not accrue until the seller is on notice -- so it's not like you can just drop everything, sue, and expect to recover damages from the seller. You need to put the seller on notice, then if infringement continues, you can calculate damages from the time of notice.

Also, be aware that if you do send a letter putting the other party on notice, there is a fine line between giving enough information to give legal notice, and giving enough information so that the other party could sue YOU under a declaratory judgment action.

Why not sue the other party who is actually making the infringing product?

 

[nickjames]

I am in fact going to sue the manufacturer. However, I was hoping to also put the supplier on notice because suppliers in certain situations will exert pressure on the manufacturer who sold them the product if there is in fact an infringement taking place. Could you please elaborate on the fine line language that may result in a declaratory judgment action being filed? I know what a declaratory action is but I am not sure of what kind of language to avoid. Thanks.

 

[nickjames]

One more question. I have in fact entered into a previous settlement agreement with the manufacturer and he has since breached it. In addition to a breach of contract action, should I also go after him for patent infringment? Does that mean I have to bring it in federal court?

 

[divgradcurl]

I am in fact going to sue the manufacturer. However, I was hoping to also put the supplier on notice because suppliers in certain situations will exert pressure on the manufacturer who sold them the product if there is in fact an infringement taking place. Could you please elaborate on the fine line language that may result in a declaratory judgment action being filed? I know what a declaratory action is but I am not sure of what kind of language to avoid. Thanks.

You will likely want to work with a lawyer to draft a notice letter, if you want to avoid (or limit) the possibility of getting dragged into a DJ action. There are some recent cases (I believe Toshiba is one) that shed some light on these letters -- but you will probably want to work with a lawyer to make sure you do enough to put them on notice, but not overstep.

There is more that a little art to this -- I'm not being evasive with my answer, there just isn't a simple answer to your question.

 

[divgradcurl]

One more question. I have in fact entered into a previous settlement agreement with the manufacturer and he has since breached it. In addition to a breach of contract action, should I also go after him for patent infringment? Does that mean I have to bring it in federal court?

Patent infringement goes to federal court. You can sue for breach of contract in state court.

Whether or not to sue for patent infringement will hinge on what you are trying to get out of this -- you can get an injunction in some cases, for example, with a patent suit. But patent suits tend to be very expensive. Again, this is probably something you would want to discuss with an attorney, who can review all of the facts and advise you accordingly.

If a lot of money is involved, there are some firms out their that will take patent infringement cases on contingency, so that at least minimizes your up-front costs (but reduces your rewards, if any).

 

[nickjames]

Could I not get an injunction with a state court action for breach of contract?

 

[divgradcurl]

Could I not get an injunction with a state court action for breach of contract?

Injunctive relief is essentially unheard of in a breach of contract action. I suppose it has happened somewhere, sometime, but it's not something to count on.

Injunctive relief is tough to get even in patent cases these days -- but not nearly as hard as in a contract case.

There is a 4-part test for granting injunctions -- the toughest part is "money damages are an insufficient remedy." Since a contract is all about doing something for a specified amount of money, it is pretty much impossible to show that money damages are an insufficient remedy.

 

[nickjames]

I agree with you on standard breach of contract cases. In our case we have a breach of a settlement agreement that stated in part that the Defendant would stop infringing on my patent. So this suit would technically be a breach of contract but that very contract had an injunctive element to it. Given this situation, would it still be a waste of time to ask for an injunction when coupled with this breach of settlement agreement?