How to Avoid the Latest Wave of Litigation Seeking Monetary Penalties Up to $500 for Each Article Marked with an Expired or Incorrect Patent Number


Since 1870, the patent laws of the United States have included some form of civil penalty to punish individuals who falsely mark unpatented items with a patent number or with “patent pending.” In the 1952 revision to the Patent Act this practice was continued in the form of 35 U.S.C. §292, which provides a fine of up to $500. This civil penalty received new significance on December 28, 2009, when the U.S. Court of Appeals for the Federal Circuit brushed aside case law to the contrary and ruled that these fines must be assessed on a “per article” basis. Forest Group, Inc. v. Bon Tool Co., No. 2009-1044 (Fed. Cir. 2009). The court determined that the fine is to be applied to each and every article produced bearing a false patent marking, and under §292(b), any person may sue for the penalty on behalf of the public and keep half of the proceeds.1

Within two months of this holding, dozens of false patent marking law suits have been filed, with dozens more expected as would-be plaintiffs prepare to cash in on a potential bonanza. Most of the complaints filed so far in 2010 allege that the defendant companies failed to remove the patent numbers from their patented articles after their patents had expired. Others allege that some of the patents listed do not describe and claim the product on which they appear. Dozens of wellknown corporations making consumer products, pharmaceuticals, and other highvolume items have been sued and are alleged to owe a penalty for false marking that it is to be multiplied by each of the million or more items alleged to have been falsely marked.

Regardless of the outcome of this recent tidal wave of cases, one thing is clear; if your company sells patented products, now is a good time to review your patent notices for accuracy and establish procedures to avoid becoming the next defendant. If you do uncover issues, it is likewise a good time to confer with outside counsel to ensure that you can effectively defend against any case that might be brought by any disgruntled employee, patent troll, or indeed, by “any person.”

Why Mark a Product in the First Place?

Given the scale of potential liabilities in view of the Forest Group decision, one might instinctually want to remove any patent markings from one’s products as a protective measure. However, in order to recover damages for infringement, the Patent Act also requires that products carry the appropriate patent number(s) as constructive notice to others that the item is patented. 35 U.S.C. § 287. If one were to sell products without indicia of patent coverage, damages for infringement could only be recovered prospectively from the time a suit is filed, or actual notice is provided to the infringer. The difference between being able to sue for years of damages for past infringement, versus only prospective damages, can be substantial. Moreover, if one has invested in research and expended the time and resources to patent a new invention, removing the patent notice, and thus the prospect of damages, diminishes the value of one’s IP assets.

For these reasons, it is important that articles of manufacture continue to carry some indicia of being patented.2 To qualify as constructive notice entitling one to infringement damages, patent marking of a product must be “substantially consistent and continuous.” American Medical Systems v. Medical Engineering Corp., 6 F.3d 1523 (Fed. Cir. 1993). This is a question of fact, which will be resolved upon the particular circumstances of each case. In Maxwell v. J. Baker Inc. 86 F.3d 1098 (Fed. Cir. 1996), the court held that marking 95 percent of all products constituted constructive notice because “substantially all” of the products were routinely and continuously marked and the patent holder attempted to comply with the statutory marking requirements. In other cases, a lower percentage of marked products failed to qualify as constructive notice and the right to recover infringement damages prior to actual notice was lost.

Avoiding False Marking Suits

Creating an effective program to avoid finding oneself defending litigation for false patent marking involves understanding not only the statute, but the type of allegations that plaintiffs are making under it. 35 U.S.C. §292 provides:

(a) * * * Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article the word "patent" or any word or number importing the same is patented, for the purpose of deceiving the public; or Whoever marks upon, or affixes to, or uses in advertising in connection with any article the words "patent applied for," "patent pending," or any word importing that an application for patent has been made, when no application for patent has been made, or if made, is not pending, for the purpose of deceiving the public - Shall be fined not more than $500 for every such offense. (b) Any 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.

In Clontech Labs., Inc. v. Invitrogen Corp., 406 F.3d 1347 (Fed. Cir. 2005), the Federal Circuit noted that a party alleging false marking must establish (1) that a mark was used suggesting that the object is patented, (2) that such statement is false, (3) that the article is unpatented or not patented as indicated, and (4) that the marking was used with the intent to deceive the public. Elements (1)-(3) can be summarized as “Inaccurate Marking,” while element (4) requires that the person doing the marking acted with an intent to deceive the public.

The types of allegations of “Inaccurate Marking” made by plaintiffs suggest attention to the following issues:

  • Enforceable Patents: In the case of valid and enforceable patents, at least one claim in each patent listed should read on the product. When the claims cover the product(s) only under the Doctrine of Equivalents, seek written confirmation from counsel to document your company’s “reasonable belief” that the product is in fact covered by the claims and that marking is appropriate.3
  • Expired Patents: To an extent, expired patents are the easiest and most likely targets for a false marking allegation. Recent court decisions suggest that an expired patent results in the product once again becoming an “unpatented article” for purposes of the statute.4 (Ironically, a company should mark its products per § 287 until midnight on the date on which its patent expires, but under plaintiffs’ theories, by 12:01 a.m. the company must destroy any production molds and advertising that included these patent notices or face a per article fine of up to $500. It is doubtful that Congress intended such a result.)
  • Pending Applications: It is false marking to state “patent pending” on a product if in fact no applications were filed. A company can also find itself in trouble with plaintiffs where all pending applications in a product family that were actually filed have been abandoned or have issued, but the patent label has not been updated to remove notations about other patents pending.  

Other Considerations

The recent increase in false patent marking cases has implications for both infringement litigations and IP transactions. In Forest Group, the district court noted as a basis for assessing liability that the patent holder placed an order for products still bearing the patent number even after it had received two adverse rulings at the district court level suggesting that its product was not covered by any of the claims of the patent in dispute. Such knowledge, coupled with the action of continued ordering of marked products, was held sufficient to establish an intent to deceive the public. This suggests that if you are embroiled in infringement litigation and receive a ruling that might have implications as to the scope of what your patent covers and does not cover, it would be wise to confer with counsel about the advisability of continuing to mark products pending appeal and to document your good faith belief that such markings are legally appropriate.

As for transactions, if you are a licensee that is required by your license to affix certain patent numbers on the products you manufacture, you may wish to include an indemnification clause whereby the licensor will defend and hold you harmless if its instructions are the subject of a false marking claim. Similarly, such an indemnity might be comforting if you are a licensor whose exclusive licensee is going to assume responsibility for decisions in prosecution and matters such as patent marking.

Checklist to Avoid False Marking:

Based on recent developments, therefore, the following steps should be considered:

  1. Review current labeling regimes – Are markings accurate?
  2. Review each patent listed - Does each have at least one claim that reads on this product?
  3. Use “patent pending” only when an application is on file.
  4. Close calls – In cases where coverage is less certain or dependsupon a Doctrine of Equivalents argument, verify coverage with outside counsel and document the appropriateness of the marking.
  5. Product configuration control - As commercial products change, put procedures in place to confirm that reconfigured versions are still covered by patents in your notices, or change the notices as appropriate.
  6. Pay attention to expiration dates, docket reports, and updates and cross-reference these against product markings periodically to mitigate risk of claims. Request expiration reminders from patent counsel or annuity services and relay these to your business units to adjust the labeling.
  7. Periodically review patent families and update markings with newly issued patents, remove expired patents and/or applications that are no longer pending.
  8. In litigation: Adverse claim construction decisions may require reconsideration of patent markings. Outside opinion may be needed to document a continued reasonable belief in coverage pending appeal.
  9. Patent licensing/manufacturing/distribution agreements: Include indemnification for false marking if instructed to label products or if you have authorized exclusive licensees to manage the marking process; shift the risk of loss for erroneous marking appropriately.