Settlement licences and US patent marking

A European patent owner with a US patent in its portfolio rarely licenses that patent through a negotiated programme. More often the licences exist because someone was sued and the matter settled. Those settlement agreements are usually drafted by litigation counsel, closed quickly, and filed away. A precedential Federal Circuit decision issued on 19 August 2026 is a reason to take them out again.

What did the Federal Circuit actually decide?

In VDPP, LLC v. Volkswagen Group of America, Inc., No. 2024-2226, an opinion authored by Chief Judge Moore, the Federal Circuit held that a patentee’s licensees must also comply with 35 U.S.C. § 287.

The underlying dispute was unremarkable in its shape. VDPP asserted U.S. Patent No. 9,426,452, which relates to electrically controlled spectacles, against Volkswagen Group of America in the U.S. District Court for the Southern District of Texas. The district court dismissed VDPP’s complaint with prejudice under Federal Rule of Civil Procedure 12(b)(6) and denied VDPP’s motion for leave to amend as futile. VDPP had entered into eleven settlement agreements with licensees of the asserted patent.

The proposition that a patentee’s own marking obligations extend to its licensees is not new in itself. What matters for portfolio managers is where in the case it bit: at the pleading stage, on a Rule 12(b)(6) motion, with the amendment door then closed as futile. This is not a damages question deferred to expert discovery. It is a question that can end a complaint before claim construction.

Why does a settlement agreement count as a licence for marking purposes?

Because the Federal Circuit stated that its precedent suggests there is no difference between a licence entered into under a settlement agreement and any other patent licence agreement for marking purposes.

This is the sentence that should change drafting practice. In-house counsel tend to treat settlement instruments as a separate species: their commercial purpose is to end a dispute, not to build a licensing programme, and the licence grant inside them is often a short covenant tacked on at the end of a release. The court’s framing removes that distinction. If the settlement grants a licence, and the licensee then sells articles covered by the patent, the marking analysis engages in the same way it would under a freely negotiated agreement.

For a patentee whose only US licences arose out of litigation, that means the entire licensed base — eleven agreements in VDPP’s case — becomes relevant to whether pre-suit damages are recoverable from the next defendant. Each settlement counterparty is a potential point of failure, and the patentee did not necessarily obtain, at the time of signing, any visibility into whether that counterparty marks.

What does a licensor have to do about its licensees?

Under Arctic Cat Inc. v. Bombardier Recreational Products Inc., 950 F.3d 860 (Fed. Cir. 2020), a patentee must make reasonable efforts to ensure its licensees comply with the marking statute.

That standard is the operative one, and it is a standard of conduct rather than of outcome. A licensor is not automatically defeated by a licensee’s failure to mark; the question is what the licensor did about it. But “reasonable efforts” is only meaningful if there is a record of effort — an obligation the licensor imposed, a report it asked for, a response it acted on. Where the settlement agreement is silent on marking and the patentee has had no contact with the licensee since closing, there is nothing in the file to point to.

The practical drafting implication runs in two parts. The first is an express marking obligation in the licence grant itself, tied to the specific patent number rather than to a generic reference to “the Patents”. The second, and the part most often omitted, is a mechanism: a periodic reporting duty, an audit or inspection right, or at minimum an annual confirmation from the licensee that marking is in place on covered products. An obligation without a reporting channel produces no evidence of effort at the moment the patentee needs it.

What is at stake if licensees did not mark?

Without marking, damages run only from the date the accused infringer received actual notice of the infringement.

For a patent with substantial remaining life, that is a serious but survivable outcome: the patentee loses the back period and litigates for the forward period, with an injunction analysis and ongoing royalty still available. For a patent close to expiry, or already expired, back damages are the whole case. There is no forward period to preserve. A marking failure in that posture is not a reduction in the claim; it is the end of it.

This makes expiry date the first sorting criterion in any audit. The agreements attached to patents in their final years, or to patents already expired but still within the limitation period for past infringement, are the ones where a missing marking clause converts directly into lost recovery.

What did this cost the patentee beyond dismissal?

The district court awarded Volkswagen $207,543.60 in attorney’s fees and sanctioned VDPP’s counsel, William Peterson Ramey III, under 28 U.S.C. § 1927.

The Federal Circuit dismissed the portion of the appeal contesting the sanctions against Ramey for lack of appellate jurisdiction, holding that VDPP lacked standing to contest sanctions imposed on its counsel. That jurisdictional point is a reminder that a client cannot cure, on appeal, a sanctions order directed at its representative; the two are procedurally separate, and a party’s appeal does not carry counsel’s grievance with it.

The fee award is the number to put in front of a board when arguing for the cost of an agreement audit. A defective marking position does not merely fail to produce damages. Where a complaint is dismissed with prejudice and amendment refused as futile, the fee exposure follows.

What does the decision not settle?

It does not tell a licensor how much oversight is enough.

The Federal Circuit did not foreclose the possibility that a licensor can establish it made reasonable efforts to ensure licensee compliance with § 287 in the absence of a marking obligation. So a patentee holding legacy agreements without marking clauses is not automatically without a case — but it is now arguing from an open question rather than from a settled rule, at the pleading stage, in front of a district court that may treat amendment as futile. That is an expensive position to occupy by choice.

The decision is also narrower than its practical reach suggests in two further respects. It is US law, and it has no direct effect on Swiss, EU or Ukrainian marking or damages rules; the obligation being enforced here is a creature of 35 U.S.C. § 287 and does not travel. And the opinion does not work through virtual marking or dated actual-notice letters as substitute strategies in any depth. Those remain available as tactical responses, but readers should not expect this decision to validate either approach.

What should an IP manager do this quarter?

Audit every US settlement and licence agreement in the portfolio for two things: an express marking obligation, and a reporting or audit mechanism that allows the licensor to check compliance.

Sort the results by patent expiry date first. For live agreements attached to patents with years of term remaining, an amendment adding a marking clause and an annual certification is usually achievable, particularly where the counterparty has an ongoing commercial relationship or a further payment falling due. For agreements that cannot practically be reopened, the alternative is to build the notice record deliberately: dated actual-notice correspondence to any target before suit, on the understanding that damages will run from the date of receipt rather than from first infringement.

For patents already expired, or expiring within the enforcement horizon, treat the marking position as a gating question before any assertion decision is taken. Where back damages are the only remedy left, the state of the licensee marking record is the case, and it should be assessed before litigation counsel is instructed rather than after a Rule 12 motion is filed.

Finally, change the template. Any new US settlement that grants a licence should carry a marking obligation and a reporting duty as standard clauses, drafted in the same pass as the release. The cost of adding them at signature is negligible; the cost of their absence is now documented.