If your company makes or distributes products that include references that a product is “patented” or suggest that it is covered by one or more patents, beware. Your company may be targeted for a lawsuit. Following a trilogy of cases from the Court of Appeals for the Federal Circuit starting in December 2009, a previously little used statute addressing “false patent marking” is now being used, on average, nearly twice a day by a new class of litigation prospectors seeking to profit at patent owners’ expense. With potential fines for false marking reaching into the millions of dollars, and more, it is critical to understand this issue. Being proactive to ensure that you are properly marking your currently patented products can help your company avoid a lawsuit and defend yourself should you find your business accused of false patent marking.
False Patent Marking FAQ’s
Q. What is “false patent marking”?
A. The patent act allows patent owners to provide notice of their patent rights by marking products with applicable patent numbers. The patent act also provides that any one marking an “unpatented article” as patented or with any indication suggesting that it is covered by a patent, with the intent to deceive the public, “shall be fined not more than $500 for every such offense.” (Emphasis added.)1
Q. What is meant by “unpatented article”?
A. An “unpatented article” is one that is not covered by at least one claim of a valid, enforceable U.S. patent. The majority of false patent marking cases are based on continued marking of products with expired patents.2
Q. If my company did mark an “unpatented article” with patent information, does that mean that it automatically violated the false marking statute?
A. No. There are two elements to false marking. First, there is the marking of an “unpatented article” or advertising materials with a patent reference. Next, in order to have violated the statute, the marking must have been made “with the intent to deceive the public.”3 Good faith mistakes, reasonable business reasons for some acts of marking, and other proof of good faith can establish that the marking was not made with an intent to deceive the public.4
Q. Who needs to worry about “false patent marking” lawsuits?
A. Any business that makes, distributes or even just sells products that include markings related to patents, or indicates on its website, marketing materials, advertising and the like, that its products are covered by a patent, should be taking this issue seriously and taking precautions to ensure that all patent markings are accurate. Actions have been commenced against companies of all sizes and new cases are being filed nearly every day.
Q. Why has there been such a dramatic increase in the number of false patent marking cases recently?
A. Quite simply, individuals now see an opportunity for relatively easy money. There have been several recent court decisions that have motivated individuals to bring these suits. Most notably, in December 2009, the Federal Circuit clarified that “every such offense” in the statute means that the applicable fine of “not more than $500” is assessed against every product made.5 Previously, many courts viewed the offense as the decision to mark a line of products instead of each individual product marked. Thus, as clarified, for high volume products, the potential fine (which the party bringing the lawsuit shares with the United States) can be huge. Also, the Federal Circuit recently held that an article marked with an expired patent is an “unpatented article.”6 Since it is relatively easy to determine if a patent has expired, this has made it easier for even unsophisticated parties to allege false patent marking with minimal investment.
Q. Who can sue my business for false patent marking?
A. Anyone. The false marking statute is recognized as a so-called “qui tam” statute that allows “any person” to bring an action on behalf of the United States. The court of Appeals for the Federal Circuit has now held that individuals do not need any individualized injury or harm to have standing to bring these suits. Merely alleging that the statute has been violated is sufficient to confer standing.7
Q. How is the fine determined in false marking cases?
A. The statute provides for a fine of “not more than $500 per offense,” which has now been held to mean each and every product that is marked.8 However, a district court has wide discretion in determining the actual fine “to strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties for small, inexpensive items produced in large quantities.”9 Thus, fines can range from “a fraction of a penny per article” to the maximum of $500 per article marked.
Q: Our product was covered by our patent, but the patent has now expired, can we still mark with the patent number?
A. No. A recent appellate decision makes it clear that even if a product was properly marked when a patent was in force, once the patent expires the article is an “unpatented article.”10 You should evaluate product markings and if patent numbers are listed on a product, make sure that the patents have not expired, not lapsed for failure to pay maintenance fees, or been found invalid by a court or in a patent office proceeding.
Q. With the increased risk of false patent marking cases, should my business simply stop putting patent information on products?
A. Although the risk of being targeted for a false patent marking suit is growing, the benefits of properly marking your products can be considerable. For example, in order to recover all available damages against infringers of your own patents, proper marking of your products may be required. Balancing the benefits of proper marking against the risk of a false patent marking suit is a decision that is best made after consulting with your patent counsel.