A pending Federal Circuit decision may force licensing counsel to rethink one of the most routine provisions in patent settlement agreements — the licensee’s denial of infringement.
Patent settlement agreements usually contain a denial of liability by the defendant/licensee, e.g., “[l]icensee denies any infringement of the asserted patents.” For decades, this language has largely been viewed as harmless boilerplate — a standard concession to the settling defendant with no apparent downstream consequences. However, an appeal pending before the Federal Circuit suggests that this boilerplate sentence may have effects far beyond the agreement in which it appears.
The case, VDPP, LLC v. Volkswagen Group of America, Inc., No. 24‑2226, arises from VDPP’s August 2023 lawsuit in the Southern District of Texas asserting U.S. Patent No. 9,426,452 (the ’452 Patent), which is directed to a 3D display and glasses system. VDPP — a non-practicing entity (NPE) — accused Volkswagen of infringement for certain surround‑view camera systems. Volkswagen moved to dismiss, arguing that VDPP failed to comply with the patent marking statute (35 U.S.C. § 287(a)) before the patent expired. The district court agreed with Volkswagen and dismissed the case with prejudice, denied leave to amend, and later granted Volkswagen’s motion for attorneys’ fees under 35 U.S.C. § 285 holding both VDPP and its counsel jointly and severally liable. VDPP appealed. Oral argument was held on April 9, 2026, before Chief Judge Kimberly Moore, Judge Alan Lourie, and Judge Tiffany Cunningham.
Link to The issue on appeal, in plain terms The issue on appeal, in plain terms
Under 35 U.S.C. § 287(a), a patent holder who licenses patented technology must ensure that products covered by the license are properly marked. If the patent holder — or its licensees — fail to mark, damages are limited to the period after the accused infringer receives actual notice of infringement. For an expired patent where only pre‑suit damages are available, failure to mark can eliminate any recovery entirely.
For NPEs that do not themselves manufacture products, § 287(a) often lies dormant. The obligation typically arises only once the patent holder licenses others to make products under the patent.
The unresolved question now before the Federal Circuit is whether that marking obligation is triggered by a settlement agreement — even when the agreement contains an express denial of infringement by the licensee.
Link to A skeptical reception at oral argument A skeptical reception at oral argument
VDPP’s position on appeal is that its prior settlement agreements with other alleged infringers were not the kind of licenses that trigger § 287(a) at all. According to VDPP, the agreements were simply litigation settlements in which the respective defendants paid to resolve disputes while expressly denying infringement. VDPP argued that the agreements did not permit the defendants “to produce a patented article for or under” the ’452 Patent and, therefore, should not be viewed as licenses in the traditional sense such that any imposed a marking obligation.
The panel appeared unpersuaded. For example, when VDPP claimed that the licensees’ denial of infringement should be dispositive, Chief Judge Moore pushed back:
Every defendant insists they don’t infringe. And if I were to adopt a rule that says a patentee has no obligation to force marking upon a licensee if they claim they don’t infringe, then I fear we would pretty much never have marking by licensees.
Link to What to watch for when the decision drops What to watch for when the decision drops
The central question is whether denial-of-infringement language insulates a settlement from the marking trigger of § 287 — or whether the court will look past the label to the substance of what the agreement actually permits.
If the court focuses on substance over form, a licensor with a portfolio of prior settlement agreements — each framed as a dispute resolution — may have unknowingly started a marking clock years ago. Subsequent defendants could point to those prior agreements and argue that the patentee and prior licensees were obligated to mark but failed to do so, cutting off all pre‑expiration damages. And if the court signals that substance controls, the choice of settlement instrument will likely matter far more than it has historically: A covenant not to sue or a bare release of past claims may be treated differently than a license, giving practitioners a structural tool to resolve disputes without inadvertently triggering obligations that could impair future enforcement.
Link to Practical steps before the opinion issues Practical steps before the opinion issues
Counsel advising patent holders with enforcement portfolios should not wait for the decision to begin reviewing their settlement agreements. Three steps worth taking now:
- Audit prior settlement agreements. Review existing agreements to determine whether any were structured as outright licenses versus covenants or releases. If licenses exist, assess whether marking occurred — or realistically could have occurred — during the license period.
- Revisit current templates. For any active licensing negotiations, consider whether the settlement agreement being used is appropriate given the marking risk, particularly for patents approaching or past expiration.
- Address § 287 expressly. If a denial-of-infringement clause is non-negotiable, consider pairing it with explicit language requiring the licensee to mark any covered products — notwithstanding the denial.
The panel’s questioning at oral argument suggests an uphill battle for VDPP. But the § 287 issue presented here — whether a denial-of-infringement in a settlement agreement defeats a marking obligation that would otherwise attach — is genuinely novel. A clear ruling in either direction will be a meaningful addition to patent licensing practice.
Stay tuned.