Anyone who intentionally mismarks an article with a patent number can be subject to a fine of up to $500 for every mismarking "offense." This little known provision in the patent law was recently given really "big teeth" by the Federal Circuit in Forest Group, Inc. v. Bon Tool Co. The Federal Circuit ruled that the fine should be imposed for each improperly marked article. This decision is a significant departure from previous decisions, which imposed a single penalty for a single decision to continuously mark goods or imposed penalties on a per-time period basis. This decision thus has numerous potentially significant consequences:
- Even though the $500 is a per-item maximum, this decision significantly increases the potential false marking penalties, especially for mass-produced goods. A million mismarked items could, for example, be subject to a penalty of up to $500 million. Even if future cases clarify how courts will determine the per-article penalty amount, the threat of large mismarking penalties is very real for patentees.
- Because the statute authorizes anyone to file a false marking action, the potential for large damages may incentivize plaintiffs to bring false marking claims purely for personal gain. Some have already begun to speculate, and anecdotal evidence at Reed Smith suggests, that the potential for this "bounty" could spawn a new type of "patent" plaintiff.
- This case also gives patent defendants additional leverage. The potential for massive mismarking penalties may give a patent infringement defendant, who counterclaims for mismarking, leverage for settlement purposes. Thus, potential patent plaintiffs should consider this additional risk before filing suit.
- The potential penalties for false marking certainly suggest that product companies should review how they patent-mark their products to ensure that products being marked fall within the scope of the marked patents, and that such patents continue to be enforceable and valid.
- Many commercial transactions may also be impacted. In asset acquisition transactions, we will likely see more attention being given to patent marking during due diligence reviews. We also will likely see requests for representations and warranties relating to the marking of articles. Likewise, the classic "obligation to mark" clauses in patent licenses will likely now be subject to more careful negotiation as patent licensees will want to avoid any risk of a potential significant false marking sanction.
Finally, because Forest Group only related to marking articles that were not actually patented, an unanswered question is whether the false marking sanction applies to articles marked with an expired patent number. The pending Federal Circuit case, Pequignot v. Solo Cup Co., may clarify this. In Solo Cup, the district court found no liability for false marking because Solo Cup did not intend to deceive the public, despite knowing that its patents had expired. On advice of counsel, Solo Cup intentionally continued marking its products until the molds that imprinted the patent numbers wore out.
The Federal Circuit thus will have to address if and when marking with expired patent numbers amounts to false marking. That decision could determine how vigilant patentees should be about patent expiration dates. The Solo Cup case is currently in the briefing stage at the Federal Circuit and a decision is not likely for several more months.