The Federal Circuit’s decision in VDPP, LLC v. Volkswagen Group of America, Inc. offers a clear-eyed look at three recurring pain points in patent litigation: what it takes to plead, what is “exceptional” under 35 U.S.C. § 285, and what it takes to preserve an issue for appeal. The panel (Chief Judge Kimberly Moore, writing, joined by Judges Alan Lourie and Tiffany Cunningham) affirmed the dismissal of VDPP’s complaint without leave to amend, affirmed a six-figure attorney fees award against VDPP, and dismissed the appeal of sanctions against VDPP’s counsel for lack of jurisdiction. For an entity whose patent covers spectacles, VDPP proved remarkably shortsighted.
Link to Peering into the Background Peering into the Background
VDPP, LLC sued Volkswagen Group of America in the Southern District of Texas for infringement of U.S. Patent No. 9,426,452, which is directed to electrically controlled spectacles. Volkswagen moved to dismiss under Rules 12(b)(6) and 12(b)(3). VDPP asked for leave to amend and attached a proposed amended complaint, but the district court dismissed the case with prejudice and denied leave to amend as futile. But the court did not stop there. It later denied VDPP’s Rule 59(e) motion to change the final judgment, awarded Volkswagen $207,543.60 in attorney fees under 35 U.S.C. § 285, and sanctioned VDPP’s counsel, William Ramey, under 28 U.S.C. § 1927 and the court’s inherent authority, making VDPP and Ramey jointly and severally liable for the fee award. VDPP appealed all three rulings, and a fight over the sufficiency of the notice of appeal followed close behind.
Link to Focusing on the Federal Circuit’s Analysis Focusing on the Federal Circuit’s Analysis
The Federal Circuit’s opinion is a lens that magnifies every misstep by VDPP and its counsel.
Link to Leave to Amend: An NPE with No Vision for Its Licensees’ Marking Obligations Leave to Amend: An NPE with No Vision for Its Licensees’ Marking Obligations
Applying 5th Circuit law, the Federal Circuit reviewed the lower court’s denial of leave to amend the complaint for abuse of discretion, using the same legal-sufficiency standard that governs Rule 12(b)(6) motions. Because VDPP sought pre-suit damages, it carried the burden under 35 U.S.C. § 287(a) of pleading compliance with the patent-marking notice requirement, which applies to VDPP as well as any licensees. In this aspect, VDPP had previously entered into 11 settlement agreements licensing the ʼ452 patent, yet its proposed amended complaint asserted that it was a non-practicing entity with “no products to mark” and that “all conditions precedent to recovery are met.” The court treated those statements as bare legal conclusions, not factual allegations, and found nothing in the proposed pleading addressing whether any licensee had complied with § 287.
VDPP tried to argue that settlement-driven licenses are different in kind from ordinary licenses and therefore should not trigger the pleading obligation with respect to marking. The Federal Circuit was not persuaded, explaining that a license born of settlement is, in substance, no different from any other license, and that the accused infringer’s subjective understanding of the settlement is irrelevant to the § 287 analysis. Because every one of VDPP’s 11 agreements was framed as a standard license to make, use, and sell the licensed products, and VDPP continued to maintain that the licensed products infringed, the court saw no set of facts under which an amended complaint could plausibly allege that VDPP made reasonable efforts to ensure its licensees’ compliance. The complaint, in other words, never had the vision it needed, and no prescription was going to fix it.
Link to Attorney Fees: A Pattern of Foggy Litigation Comes into Sharp Focus Under § 285 Attorney Fees: A Pattern of Foggy Litigation Comes into Sharp Focus Under § 285
The Federal Circuit also affirmed the district court’s award of attorney fees to Volkswagen under 35 U.S.C. § 285, reviewing the exceptional-case determination for abuse of discretion. The district court had identified a laundry list of problems with how VDPP litigated the case including seeking future damages and injunctive relief on an already-expired patent, seeking past damages while unable to allege compliance with the marking statute, failing to disclose the very settlement agreements at the center of the marking dispute and making false statements about those agreements that prolonged the litigation. The lower court also flagged a pattern of “sloppy errors” and a broader history of repeat suits on the ʼ452 patent paired with settlement demands untethered to any real damages theory.
VDPP pushed back on several fronts, none of which gained traction. It blamed its nondisclosure of the settlement agreements on a misunderstanding traceable to its elderly president’s representations, but the Federal Circuit noted Volkswagen had told VDPP about those very licenses on multiple occasions well before that representation was made. VDPP also argued that conduct that would not independently support Rule 11 sanctions could not support a § 285 award, but the court reaffirmed the familiar Octane Fitness teaching that sanctionable conduct is not the benchmark for exceptionality; unreasonable conduct can be exceptional even if it is not independently sanctionable. And while a large volume of patent suits does not by itself prove an improper motive, the court held it was fair game for the district court to weigh VDPP’s pattern of litigation alongside the other evidence of unreasonable conduct in the record.
Link to Sanctions: A Name Buried in the Fine Print Is Not a Clear Notice of Appeal Sanctions: A Name Buried in the Fine Print Is Not a Clear Notice of Appeal
The most instructive piece of the decision from an appellate perspective may be the one the Federal Circuit never reached on the merits. Ramey wanted to challenge his personal sanctions, but the panel held it lacked jurisdiction to consider that challenge at all. Federal Rule of Appellate Procedure 3(c)(1)(A) requires a notice of appeal to specify the party or parties taking the appeal, and that requirement, though liberally construed, cannot be waived. Both of Ramey’s timely notices of appeal named only “Plaintiff VDPP, LLC” as the appellant; his own name appeared just once — misspelled — buried within a list of orders being appealed. Because the underlying order held VDPP and Ramey jointly and severally liable, the court found it was not clear from the notices that Ramey intended to appeal on his own behalf rather than simply on behalf of his client. His later “corrected” notices naming himself came more than 90 days after the appealed orders and were untimely under Rule 4.
Ramey leaned on a 5th Circuit case in which a notice of appeal was read to cover the attorney because the sanctions order there ran against the attorney alone. The Federal Circuit found that authority expressly limited by more recent 5th Circuit precedent to judgments naming only the attorney, not judgments like this one naming both the client and the attorney. VDPP separately tried to claim its own standing to challenge Ramey’s sanctions, but the court held VDPP suffered no injury from Ramey’s sanctions and, if anything, benefited from the joint-and-several arrangement. With no timely, adequately specific notice of appeal from Ramey and no standing for VDPP to stand in for him, the court dismissed that portion of the appeal for lack of jurisdiction, leaving the sanctions order undisturbed by default.
Link to Key Takeaways Key Takeaways
• A blind spot for a licensee’s marking requirements is damaging to damages. A patentee seeking pre-suit damages must plead compliance with 35 U.S.C. § 287, and that duty extends to licensees. Settlement-driven licenses get no exception, and a plaintiff’s own belief that licensed products infringe only sharpens the need to show the licensees marked.
• Enough scratches on the lens makes the whole view look exceptional. A district court may add up nondisclosure, misrepresentations, weak damages theories, and a pattern of low-value settlement demands, even where no single piece of that conduct would independently justify Rule 11 sanctions, to find a case exceptional under § 285.
• Don’t expect a court to read between the lines of a notice of appeal. Listing counsel’s name once, in connection with the order being appealed by the client, does not put anyone on notice that counsel is appealing on his own behalf. When a judgment holds a party and counsel jointly and severally liable, counsel’s own interests will not simply ride along on the client’s notice of appeal.