In its recent decision in Forest Group, Inc. v. Bon Tool Co., No. 2009-1044 (Fed. Cir. Dec. 28, 2009), the U.S. Court of Appeals for the Federal Circuit addressed an issue of first impression regarding the false marking provisions of the Patent Act. Specifically, the court concluded that the statutory damages provided under 35 U.S.C. § 292 must be assessed on a “per article” basis. Id. at 8. This holding allows for a significantly higher maximum penalty for the false marking of unpatented articles than available under prior case law.
The Patent Act provides that “[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 . . . [s]hall be fined not more than $500 for every such offense.” 35 U.S.C. § 292(a) ¶ 2. The statute allows “any person” to bring a lawsuit for false marking and to retain half of the penalty assessed by the court (the remaining half going to the U.S. government). §292(b). The Federal Circuit noted in Forest Group that actions by so-called “marking trolls,” who had not suffered any direct harm from the false marking, were not only permitted but encouraged by Section 292. See Forest Group, slip op. at 12-13.
The Forest Group opinion is the first Federal Circuit decision to consider what constitutes an “offense” subject to the maximum fine of $500: each individual, unpatented article or the decision by the patentee to improperly mark a product-line as patented? Previous cases, such as London v. Everett H. Dunbar Corp., 179 F. 506 (1st Cir. 1910), had imposed a single fine for each decision to falsely mark a product-line or had imposed a time-based fine (e.g., per week of false marking). See Forest Group, slip op. at 8-10 (listing district courts following London). The Federal Circuit rejected these approaches of prior case law and held that “the statute’s plain language requires the penalty to be imposed on a per article basis.” Id. at 8.
This “per article” interpretation adopted by the Federal Circuit creates the potential for much larger statutory damages awards than previously available to false marking plaintiffs. For instance, in the Forest Group case, the Federal Circuit vacated the district court’s award of $500 in damages (based upon the patentee’s single decision to improperly mark). On remand, the district court may award up to $500 per pair of construction stilts sold by the patentee after Nov. 15, 2007. This potentially harsh penalty is tempered by the fact that district courts may award damages of less than $500 per falsely marked article, at their discretion. Id. at 13 (noting that for “inexpensive, massproduced articles, a court has the discretion to determine that a fraction of a penny per article is a proper penalty”).
Before such potential liability for false marking can attach, Section 292 requires two findings: (1) an unpatented article has been improperly marked as patented and (2) the person who marked the article did so with intent to deceive the public. Forest Group, slip op. at 8 (citing Clontech Laboratories, Inc. v. Invitrogen Corp., 406 F.3d 1347, 1351-53 (Fed. Cir. 2005)). The Federal Circuit has held that false marking under Section 292 is not a strict liability offense, but requires the “state of mind arising when a party acts with sufficient knowledge that what it is saying is not so and consequently that the recipient of its saying will be misled into thinking that the statement is true.” Id. Courts frequently look to whether the patentee held a good faith belief that its marking practices were proper, including a showing of a “good faith reliance on the advice of counsel,” when considering the absence of an intent to deceive. See id. at 7; Pequignot v. Solo Cup Co., 646 F. Supp. 2d 790, 798-800 (E.D. Va. 2009), appeal docketed No. 2009-1547. In light of the holding in the Forest Group case, it is advisable for all patentees to review their patent marking policies to ensure a good faith effort to comply with Section 292.