IP Law Daily, PATENT—Fed. Cir.: Volkswagen preserves infringement lawsuit dismissal and exceptional-case attorney fee award, (Aug 21, 2026)

By Ravindra Kumar Singh, B.L.

A patent owner failed to plead licensees’ compliance with marking requirements, while unreasonable litigation conduct supported an exceptional-case finding.

The U.S. Court of Appeals for the Federal Circuit has affirmed dismissal with prejudice of a non-practicing patent owner’s infringement lawsuit against Volkswagen Group of America, Inc., as well as an attorney fee award to the automaker. It found that amendment would have been futile because the patent owner failed to allege that its licensees complied with the patent-marking requirements of 35 U.S.C. § 287(a), precluding its claim for pre-suit damages. It also upheld the district court’s determination that the litigation was exceptional under 35 U.S.C. § 285. Separately, the court dismissed for lack of jurisdiction an appeal challenging sanctions against VDPP’s attorney because the attorney failed to timely appeal on his own behalf (VDPP, LLC v. Volkswagen Group of America, Inc., No. 24-2226 (Fed. Cir. Aug. 19, 2026)).

Dispute. VDPP, a non-practicing entity, sued Volkswagen, an automobile manufacturer, in 2023 for allegedly infringing U.S. Patent No. 9,426,452 (the ’452 patent), which relates to electrically controlled spectacles. Volkswagen moved to dismiss for failure to state a claim and improper venue. VDPP opposed the motion and requested leave to file a proposed amended complaint.

The federal district court in Texas dismissed the lawsuit with prejudice for failure to state a claim and denied leave to amend because the proposed amendment would be futile. It subsequently awarded Volkswagen $207,543.60 in attorney fees under 35 U.S.C. § 285 and sanctioned VDPP’s counsel under 28 U.S.C. § 1927 and its inherent authority, making VDPP and counsel jointly and severally liable for the attorney fees.

Patent marking.The Federal Circuit found no abuse of discretion in denying VDPP leave to amend. Because VDPP sought pre-suit damages, it bore the burden of pleading compliance with the patent-marking requirements of 35 U.S.C. § 287(a). Although a patent owner that never makes or sells a patented article may recover pre-suit damages without marking products itself, its licensees must comply with the statute.

VDPP’s proposed amended complaint stated that it was a non-practicing entity with no products to mark and that it had satisfied all statutory requirements for pre-suit damages. Those statements, however, were bare legal conclusions unsupported by factual allegations.

The deficiency was particularly significant because VDPP had entered into 11 settlement agreements licensing the ’452 patent. Under Arctic Cat Inc. v. Bombardier Recreational Products Inc., 950 F.3d 860 (Fed. Cir. 2020), a patent owner seeking pre-suit damages must make reasonable efforts to ensure its licensees comply with 35 U.S.C. § 287. VDPP’s proposed complaint alleged no facts showing such efforts.

VDPP argued that licenses arising from litigation settlements should be treated differently because the licensees had not admitted infringement. The court disagreed. The 11 settlement agreements were structured as standard licenses permitting the licensees to make, use, and sell licensed products, and one agreement expressly stated that the licensee had no marking obligation. VDPP also maintained that the licensed products infringed its patent.

The court reasoned that accepting VDPP’s position would undermine the purposes of the marking statute—providing public notice of patent rights, reducing innocent infringement, and allowing the public to identify patented articles. It did not foreclose the possibility that a licensor could establish reasonable efforts to secure compliance even without an express marking obligation but concluded that VDPP could not plausibly do so on these facts. The district court therefore properly denied leave to amend as futile.

Attorney fees. The Federal Circuit also upheld the determination that the case was exceptional under 35 U.S.C. § 285. The district court found that many of VDPP’s positions were frivolous or objectively unreasonable, including seeking future damages and an injunction on an expired patent and seeking past damages despite its inability to allege compliance with the marking statute.

The district court additionally considered VDPP’s failure to disclose relevant settlement agreements, inaccurate statements concerning those agreements, incorrect venue allegations, and initial disclosures concerning an unrelated patent. It found that these repeated errors made the litigation more difficult and cumbersome. The court also considered VDPP’s pattern of infringement litigation involving settlement demands substantially below the cost of defending the cases.

Under Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014), an exceptional case stands out from others based on the substantive strength of a party’s litigating position or the unreasonable manner in which the case was litigated. The Federal Circuit concluded that the district court had ample justification for its exceptional-case determination based on the totality of the circumstances.

VDPP maintained that its failure to disclose the settlement agreements resulted from reliance on its president’s representation that no such agreements existed. But Volkswagen had previously alerted VDPP to those licenses on several occasions, making continued reliance on that representation unreasonable. The court also rejected VDPP’s contention that conduct must independently warrant Rule 11 sanctions before it can support an attorney fee award under 35 U.S.C. § 285.

Although filing numerous patent lawsuits and making low-value settlement offers does not alone demonstrate an improper motive, a documented pattern of litigation abuse may be considered in determining exceptionality. Here, the litigation history was only one part of a broader record of unreasonable conduct supporting the fee award.

Counsel sanctions. The Federal Circuit did not reach the merits of the sanctions against VDPP’s counsel. The timely notices of appeal identified only VDPP as the appellant and did not indicate that counsel intended to appeal personally. Later corrected notices naming counsel as an appellant were untimely.

VDPP also lacked standing to challenge the sanctions on counsel’s behalf because making counsel jointly and severally liable for Volkswagen’s attorney fees caused VDPP no injury. The court therefore dismissed the sanctions portion of the appeal for lack of jurisdiction while affirming the dismissal and attorney fee award.

The Case is No. 24-2226.

Judge: Moore, K.

Attorneys: William Peterson Ramey, III (Ramey LLP) for VDPP, LLC. Elliot Cook (Finnegan, Henderson, Farabow, Garrett & Dunner, LLP) for Volkswagen Group of America, Inc.

Companies: VDPP, LLC; Volkswagen Group of America, Inc.

Cases: Patent FedCirNews