A Federal Circuit ruling in VDPP, LLC v. Volkswagen Group of America has revealed how patent settlements can carry consequences far beyond their original disputes.
The decision illustrates that a settlement authorising continued sales of patented products can affect whether a patent owner later recovers damages from entirely different defendants.
VDPP sued Volkswagen in 2023 for infringement of U.S. Patent No. 9,426,452, a patent covering technology for combining images from multiple video streams.
VDPP alleged that Volkswagen’s surround-view camera system infringed that claim, bringing the dispute squarely into the domain of modern automotive technology.
Before filing against Volkswagen, VDPP had already entered into eleven earlier settlement agreements licensing the same patent to other companies.
Despite those prior settlements, VDPP sought damages from Volkswagen for infringement occurring before Volkswagen received actual notice of the lawsuit.
The Federal Circuit rejected VDPP’s argument that restrictions on pre-suit damages under 35 U.S.C. § 287 did not apply simply because it was a non-practicing entity that sold no products of its own.
The court found that the relevant inquiry extended to VDPP’s authorised licensees, who had continued making, using, and selling products that VDPP itself contended practised the patent.
VDPP attempted to distinguish its earlier agreements from conventional commercial licences on the grounds that they arose from litigation settlements, but the Federal Circuit found that distinction unpersuasive.
Relying on TransCore, LP v. Electronic Transaction Consultants Corp., the court treated a patent licence in functional terms as an agreement not to exercise exclusionary rights against specified conduct, regardless of how that agreement was labelled.
The licensees’ refusal to admit infringement did not alter the analysis, with the court focusing on the conduct of the patent owner rather than the alleged infringer’s subjective view of coverage.
Drawing on Lubby Holdings LLC v. Chung and Amsted Industries Inc. v. Buckeye Steel Castings Co., the Federal Circuit made clear that substance matters more than a document’s label when evaluating downstream consequences.
Notably, one of VDPP’s settlement agreements reportedly went further by expressly providing that the licensee had no marking obligation at all.
Under Arctic Cat Inc. v. Bombardier Recreational Products Inc., a patent owner seeking constructive notice must make reasonable efforts to ensure marking compliance by licensees, a standard VDPP struggled to meet.
The ruling does not impose a categorical requirement that every patent settlement contain a marking clause, but it raises the stakes considerably for those that omit any consideration of the issue.
For patent owners, the decision connects litigation strategy, licensing, contract administration, and portfolio management in ways that may not have been fully appreciated before this ruling.
Companies acquiring or licensing patent portfolios should now scrutinise prior settlement agreements and their administration as carefully as they examine prosecution history or validity risks.
The economic value of enforcement rights may depend partly on agreements negotiated long before a current transaction, meaning a seemingly closed settlement file can still affect future damages claims.
Once a patent expires, the risk becomes more acute, since there can be no new post-expiration infringement period and historical constructive notice may become the only available basis for damages.
The broader lesson from VDPP v. Volkswagen is that patent settlements must be evaluated as part of a continuing enforcement and commercialisation strategy, not as isolated resolutions of individual disputes.