A patent owner that makes no products of its own can still lose pre-suit damages when its licensees sell unmarked patented products. In VDPP, LLC v. Volkswagen Group of America, Inc., Case No. 24-2226 (Fed. Cir. August 19, 2026), the Federal Circuit affirmed dismissal of a patent-infringement action because VDPP could not plausibly allege compliance with marking requirements in 35 U.S.C. § 287 in light of eleven prior settlement agreements licensing the asserted patent.
The decision exposes a consequence of patent settlements that can easily be overlooked. A settlement license may resolve the immediate infringement dispute while authorizing continued sales that affect constructive notice in later litigation against someone else. A patent owner that manufactures nothing therefore cannot assume that it has no marking issue.
The court also affirmed a $207,543.60 exceptional-case fee award under 35 U.S.C. § 285 and dismissed an attempted appeal from sanctions imposed personally on VDPP’s counsel. Those rulings separately address how litigation conduct can support a fee award and what counsel must do to appeal sanctions imposed personally against both lawyer and client.
Background
VDPP sued Volkswagen in 2023 for infringement of U.S. Patent No. 9,426,452. Although the patent is titled and principally described in terms of electronically controlled spectacles for viewing three-dimensional video, one of its claims more broadly covers image-processing technology that combines images from multiple video streams. VDPP accused Volkswagen’s surround-view camera system of practicing that claim. VDPP sought damages for infringement occurring before the lawsuit, but it had previously entered into eleven settlement agreements licensing the same patent to other parties.
That created the central damages issue. VDPP maintained that, as a non-practicing entity, it had no products to mark. Volkswagen responded that VDPP’s licensees were selling products under the patent, making their marking practices relevant to whether VDPP could recover pre-suit damages under § 287.
Why VDPP’s Settlement-License Argument Failed
VDPP’s principal response to the marking problem was that it had no products of its own to mark. As a non-practicing entity, VDPP argued, it should not lose pre-suit damages based on a marking requirement directed at patented products in the marketplace.
Volkswagen’s response focused on VDPP’s settlement history. VDPP had entered into eleven agreements authorizing other companies to make, use, and sell products under the ’452 patent. In Volkswagen’s view, VDPP could not characterize itself as having nothing to mark while allowing licensees to continue selling products that VDPP itself maintained were covered by the patent.
The Federal Circuit agreed with Volkswagen. The relevant question was not whether VDPP personally manufactured a product, but whether patented products were being sold with VDPP’s authorization. Under Arctic Cat Inc. v. Bombardier Recreational Products Inc., a patent owner seeking the benefit of constructive notice must account for make reasonable efforts to ensure the licensees’ compliance with § 287. VDPP’s proposed allegations addressed its own lack of manufacturing activity but did not address marking by its licensees or identify any efforts VDPP had made to obtain compliance.
VDPP therefore advanced a narrower argument: these were settlement agreements, not ordinary commercial licenses, and the settling defendants had not admitted that their products infringed the ’452 patent. The Federal Circuit found neither distinction persuasive.
The settlement label did not change what the agreements actually authorized. Relying on TransCore, LP v. Electronic Transaction Consultants Corp., the court reasoned that a patent license is fundamentally an agreement by the patent owner not to assert its exclusionary rights against specified conduct. VDPP’s agreements permitted the settling parties to continue making, using, and selling licensed products. The fact that those permissions were negotiated to resolve litigation did not remove them from the marking analysis.
Nor did the settling defendants’ refusal to admit infringement resolve the issue in VDPP’s favor. VDPP continued to maintain that the licensed products infringed its patent. Section 287 could not turn on whether the licensees agreed with that assessment. As the Federal Circuit explained through Lubby Holdings LLC v. Chung and Amsted Industries Inc. v. Buckeye Steel Castings Co., the notice inquiry focuses on the patent owner’s conduct, not on the alleged infringer’s subjective understanding of its own liability.
That left VDPP with a factual problem it could not plead around. Its agreements authorized continued sales of licensed products, VDPP maintained that those products infringed, and its proposed complaint alleged neither marking by the licensees nor reasonable efforts by VDPP to obtain compliance. One agreement went further and expressly stated that the licensee had no obligation to mark.
The Federal Circuit nevertheless stopped short of adopting the broader rule Volkswagen’s position might suggest. It did not hold that every patent settlement must include a marking provision, or that the absence of such a provision automatically defeats pre-suit damages. A patent owner may be able to demonstrate reasonable efforts to secure licensee compliance in other ways. The problem for VDPP was narrower: given its settlement agreements and its own position that the licensed products practiced the patent, it had alleged no facts from which reasonable efforts could plausibly be found.
Settlement Drafting Can Determine Later Damages
The practical significance of VDPP lies in the relationship between a settlement directed at one defendant and damages sought from another. A patent owner may view a settlement license principally as a way to monetize a dispute and authorize the settling party to continue its business. But once the agreement permits continued sales of products the patent owner considers covered by the patent, those sales may become part of the patent owner’s later constructive-notice showing.
That changes the settlement calculus. The relevant question is not simply whether a marking clause belongs in every patent license. The Federal Circuit expressly declined to impose such a rule. The more important question is whether the patent owner will be able to show, years later and in litigation against a different defendant, that it made reasonable efforts to ensure compliance with § 287.
A settlement should therefore be evaluated not only for payment, releases, licensed rights, and field-of-use restrictions, but also for what happens after the agreement is signed. Depending on the circumstances, the patent owner may need provisions addressing marking, identification of licensed products, cooperation as products change, and records sufficient to establish compliance. Even where the agreement contains no express marking requirement, the patent owner should consider how it will preserve evidence of whatever efforts it relies upon.
The problem becomes particularly acute when the patent later expires. Actual notice can ordinarily establish the beginning of a damages period when constructive notice is unavailable. But an expired patent cannot be infringed after expiration. For a suit brought after expiration, historical compliance with § 287 may therefore determine whether a meaningful period of recoverable infringement exists at all.
The same issue matters in patent transactions. A purchaser assessing an enforcement portfolio may know the patent’s prosecution history, validity risks, ownership chain, and litigation record yet still overvalue the asset if it does not examine prior licenses and settlements. Agreements entered years earlier, together with the licensees’ historical marking practices and the licensor’s efforts to secure compliance, can affect damages against defendants that had nothing to do with those earlier disputes.
VDPP therefore makes settlement history part of patent-enforcement diligence. A license is not merely a record of how a prior dispute ended. In some circumstances, it also helps determine what remedies remain available in the next one.
Litigation Conduct Creates Separate Fee and Sanctions Risks
Why the Federal Circuit Upheld the Exceptional-Case Fee Award
Volkswagen also obtained $207,543.60 in attorney fees under 35 U.S.C. § 285. VDPP challenged that award principally by arguing that the district court had relied on litigation conduct that would not independently justify sanctions under Rule 11.
The argument attempted to impose a sanctions threshold on the exceptional-case inquiry. If particular conduct was not sanctionable under Rule 11, VDPP contended, it should not be used to make the case exceptional under § 285.
The Federal Circuit rejected that premise. Section 285 and Rule 11 serve different functions and apply different standards. Under Octane Fitness LLC v. ICON Health & Fitness, Inc., the question is whether, considering the totality of the circumstances, a case stands out because of the substantive weakness of a party’s position or the unreasonable manner in which it was litigated. Conduct therefore can contribute to an exceptional-case finding even if it would not independently satisfy the requirements for a separate sanctions award.
That distinction mattered because the district court had not based its ruling on a single questionable filing. It considered VDPP’s litigation as a whole, including its request for future damages and an injunction on an expired patent, its pursuit of pre-suit damages despite the marking problem, its failure to disclose relevant settlement agreements, and repeated errors and representations that complicated the proceedings. The Federal Circuit concluded that the district court was entitled to evaluate those circumstances collectively rather than ask whether each item independently crossed the Rule 11 line.
VDPP also objected to the district court’s consideration of its broader patent-enforcement activity and settlement demands. Here, the Federal Circuit drew a more careful distinction. Filing numerous infringement actions does not itself establish improper motive, and a patent owner does not act unreasonably merely by settling cases for amounts below the cost of litigation. Thermolife International LLC v. GNC Corp. and SFA Systems, LLC v. Newegg Inc. make clear that repeat enforcement, standing alone, is not evidence of abuse.
But Volkswagen had offered more than the number of lawsuits. The district court considered evidence that VDPP had repeatedly asserted the same patent, sought settlements below anticipated defense costs, and lacked a damages theory corresponding to those demands. When viewed together with the weaknesses and litigation conduct in the Volkswagen case itself, the Federal Circuit concluded that the broader enforcement pattern could properly form part of the totality-of-the-circumstances analysis.
The Federal Circuit approved consideration of enforcement history because there was evidence connecting that history to the district court’s broader finding that this particular litigation stood out from ordinary patent cases.
That distinction is particularly useful when compared with mCom IP, LLC v. City National Bank of Florida, where the Federal Circuit found the record insufficient to support an inference of nuisance-value litigation. Read together, the decisions show that courts require evidence connecting settlement behavior and repeat enforcement to unreasonable litigation conduct rather than treating either as inherently suspect.
Why Counsel’s Sanctions Appeal Was Dismissed
The Federal Circuit never reached the merits of the sanctions imposed personally on VDPP’s counsel. The problem was appellate jurisdiction.
The notices of appeal identified VDPP as the appellant, but did not separately identify counsel as a party taking an appeal from the sanctions order. Counsel’s name appeared only in the notices’ description of the order being challenged. The question was therefore whether the notices nevertheless made it sufficiently clear that counsel intended to appeal the sanctions imposed against him personally.
The Federal Circuit concluded that they did not. Federal Rule of Appellate Procedure 3 requires the notice of appeal to identify each party taking the appeal. That requirement became dispositive because the sanctions order ran against both VDPP and its counsel. A notice identifying VDPP as the appellant could readily be understood as appealing only the company’s liability, even though the same order also imposed liability on counsel.
Counsel’s position found some support in Fifth Circuit opinion Garcia v. Wash, where the court treated a notice filed in the client’s name as sufficient to appeal sanctions imposed on the attorney. But the Federal Circuit regarded the factual distinction as critical: in Garcia, the sanctions ran solely against counsel. Because there was no sanctions liability for the client to appeal, the notice necessarily signaled that counsel was the party seeking review.
The circumstances here were closer to Fifth Circuit opinion Batiste v. Lewis. When an order imposes sanctions on both attorney and client, the client’s decision to appeal does not establish that the attorney also intends to appeal his personal liability. The Federal Circuit therefore declined to infer counsel’s participation from a notice that expressly named only VDPP.
That distinction explains why the ruling is less technical than it may initially appear. The court was not demanding a particular formula or caption. It required the notice to communicate who was invoking appellate jurisdiction. Where both lawyer and client face sanctions, identifying only the client leaves that question unresolved.
The consequence was significant. Because counsel had not independently perfected an appeal, the Federal Circuit dismissed the challenge to the sanctions imposed on him without deciding whether those sanctions were substantively justified.
For litigators, the lesson is simple but important: when an order imposes personal liability on counsel as well as the client, counsel should be expressly identified as an appellant. An appeal from the same order by the client is not enough.
Conclusion
The most important aspect of VDPP is not that settlement agreements are treated as patent licenses. It is that a patent owner’s decisions in one enforcement matter can alter the remedies available in another.
The Federal Circuit did not require every settlement license to contain a marking provision, nor did it hold that every licensed product necessarily triggers § 287. It instead required VDPP to confront the consequences of its own position: VDPP maintained that its licensees were selling products covered by the patent, yet alleged no marking by those licensees and no reasonable efforts to obtain compliance.
For patent owners, that makes marking a continuing enforcement issue rather than merely a manufacturing issue. Settlement drafting, license administration, and portfolio diligence should account for how authorized sales may affect constructive notice long after the original dispute has ended.
The opinion’s separate fee and sanctions rulings reinforce a different point. Section 285 permits courts to evaluate litigation conduct collectively without treating Rule 11 as the threshold for exceptionality, while counsel who face personal sanctions must independently preserve their appellate rights.
Key Takeaways
- A non-practicing patent owner can face § 287 consequences when licensees sell products the patent owner maintains are covered by the patent.
- Settlement status and a licensee’s denial of infringement do not, by themselves, remove licensed sales from the marking analysis.
- The Federal Circuit did not require every patent license to contain a marking clause. The relevant inquiry remains whether the patent owner made reasonable efforts to secure compliance.
- Prior licenses, settlements, and marking practices can materially affect both future enforcement strategy and the value of a patent portfolio.
- Conduct need not independently violate Rule 11 to support § 285 exceptionality, and counsel personally sanctioned alongside a client should be expressly identified as an appellant.
- An attorney who is personally sanctioned should independently perfect an appeal rather than rely on a notice identifying only the client.
Related Analysis
- mCom v. City National provides a useful counterpoint to VDPP by showing when evidence of repeat litigation and settlement behavior is insufficient to support a nuisance-litigation theory under § 285.
- AGI SureTrack v. Farmers Edge examines the related requirement that district courts explain exceptional-case determinations sufficiently to permit meaningful Federal Circuit review.
- Columbia University v. Gen Digital addresses a separate limit on sanctions imposed directly against litigation counsel, complementing VDPP’s procedural ruling on counsel’s obligation to perfect a personal appeal.