This bulletin addresses false marking issues under U.S. patent law. Foreign jurisdictions may have similar rules about false marking, although those lawsuits are usually brought by government plaintiffs.
The false marking floodgates are open. In 2010 over 1,000 claims were filed against companies selling products or distributing marketing materials marked with an expired or inapplicable patent number, i.e., false marking. It is well established that marking with an expired patent number can constitute a violation of the false marking statute. See Pequignot v. Solo Cup Co., 608 F.3d 1356, 1361 (Fed. Cir. 2010). Historically, each decision to falsely mark related articles constituted only one offense, which could be fined no more than $500. A recent change in case law allowed fines of up to $500 per item falsely marked. False marking penalties for major manufacturers can now potentially exceed millions of dollars. This bulletin outlines liabilities for false marking and strategies to avoid these lawsuits.
False Marking Claims
False patent marking is prohibited—or at least discouraged—by a federal statute, 35 U.S.C. § 292, which applies to "[w]hoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word 'patent' or any word or number importing that the same is patented for the purpose of deceiving the public . . . ." 35 U.S.C. § 292(a) (emphasis added). An offender "[s]hall be fined not more than $500 for every such offense." Id. (emphasis added). The purpose of the statute is to protect the public from unscrupulous business practices and deception. False marking harms competitors, who may be illegitimately deterred from offering a competing product, as well as consumers, who may pay artificially inflated prices for the article, believing it is patented.
The recent flurry of false marking lawsuits was triggered by the Federal Circuit's decision in Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009), resolving a split of authority regarding whether the fine should be levied only for each decision to falsely mark multiple articles, or per article falsely marked. Bon Tool held that companies could be liable for fines of up to $500 per item falsely marked. Subsequent courts have levied fines as high as the total sales price of the falsely marked article (up to $500 for each item).
Exposure to Qui Tam Lawsuits
The false marking statute is a "qui tam" statute, meaning it grants "any person" standing to bring a false marking lawsuit. Stauffer v. Brooks Bros., Inc., 619 F.3d 1321, 1325 (Fed. Cir. 2010). Under 35 U.S.C. § 292(b), "[a]ny person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States." Of the 1,035 false marking lawsuits filed in 2010, competitors filed some, but opportunists, including entities formed for the sole purpose of pursuing qui tam lawsuits, filed the majority.
Shoring Up Patent Marking Practices
Many plaintiffs have had difficulty showing that defendants intentionally falsely marked "for the purpose of deceiving the public," as required under 35 U.S.C. § 292(a), and this is typically the best defense to a false marking claim. Nevertheless, courts sometimes presume that the false marking was done with deceptive intent. See Pequignot, 608 F.3d at 1362-63 ("[T]he combination of a false statement and knowledge that the statement was false creates a rebuttable presumption of intent to deceive the public . . . ."). In that situation, the burden is on the false marker to prove otherwise.
Patent law offers a strong incentive to mark patented inventions accurately: recovery of infringement damages under 35 U.S.C. § 287 is typically only available for properly marked inventions. A patent owner or licensee that fails to mark patented items may still obtain infringement damages, but only damages accruing after the infringer receives notice of the patent and the infringing acts. Marking manuals and associated marketing materials (as opposed to the product itself) may be ineffective for purposes of preserving the right to seek damages under 35 U.S.C. § 287. The difference in recoverable damages can differ by millions of dollars if only post-notice damages are available, and marking patent numbers on the product is the best way to preserve infringement damages.
Using a broad-brush approach of listing all numbers in brochures and manuals may be ineffective under 35 U.S.C. § 287, and it is counterproductive because it increases exposure to a false marking claim. A better strategy to avoid being dragged into court includes weeding out anything that may be construed as false marking. Patent owners should review patent marking practices to limit exposure to false marking lawsuits. Here is a conservative checklist to follow:
- Review products, manuals, and marketing materials and avoid marking products, packaging, manuals, catalogs, or advertisements with expired patent numbers or inapplicable patents. Patent counsel can assist in this review.
- Avoid marking products, packaging, manuals, catalogs, or advertisements with the statement "This product may be covered by one or more of the following patents:" followed by a long list of patent numbers, when only one or two of the patents are applicable to the particular product.
- Avoid marking "patent pending" or "patent applied for" when a patent has not yet been filed, or after a patent application has been abandoned.
- Avoid marking "patented" when a U.S. patent has not yet been granted covering the product (including when an application is pending but not yet granted), or after the patent has expired.
False Marking Relief
In light of recently introduced legislation, false marking lawsuits may have reached their high-water mark. H.R. 6352 and H.R. 4954 were proposed in the 111th Congress, but neither came to a vote before the close of the legislative session. Both bills would have amended 35 U.S.C. § 292(b) to eliminate the qui tam provision for all pending cases or cased filed after enactment. Plaintiffs would have been required to demonstrate a "competitive injury" to recover damages that "compensate for the injury." H.R. 6352 also provided for a single $500 penalty not tied to the number of articles falsely marked. The original sponsor of H.R. 6352, Rep. Robert Latta, recently reintroduced the bill as H.R. 243 in the 112th Congress.
Most recently, on February 23, 2011, in Unique Product Solutions v. Hy-Grade Valve, a District Court in Ohio found the false marking statute to be unconstitutional under the Take Care Clause of the United States Constitution, Article II. This decision is only by a lower court and is likely to be appealed. Despite this news, the risk of further suits persists.
Overmarking or incorrectly marking products and marketing materials poses a serious risk to patent owners. The penalties for false marking can be extreme. Conversely, ineffective patent marking on manuals or other product literature may not preserve a patent owner's right to infringement damages. Patent owners should confer with patent counsel to assess patent marking practices and avoid the flood of expensive false marking lawsuits.