Vacating the district court’s imposition of a single $500 penalty for to falsely marking a production run of stilts with a patent number, the U.S. Court of Appeals for the Federal Circuit found that the proper measure of damages for false marking is to impose a fine of up to $500 per falsely marked article. The Forest Group, Inc. v. Bon Tool Company, Case No. 09-1044 (Fed. Cir., Dec. 28, 2009) (Moore. J.).

The plaintiff, The Forest Group, is the owner of U.S. Pat. No. 5,645,515 (the ’515 patent), claiming an improved spring-loaded parallelogram stilt for use in construction. The ’515 patent required the stilts to possess a “resiliently lined yoke.” The Forest Group manufactured its S2 stilt and marked the ’515 patent number on each product. Bon Tool manufactured a stilt that was identical to Forest Group’s S2 stilt. The Forest Group sued Bon Tool for infringement of the ’515 patent.

In a separate action, Forest Group also sued Warner Manufacturing Company (Warner) for infringement of the ’515 patent. The Warner court issued its claim construction, finding that the ’515 patent required a “resiliently lined yoke.” In the Warner case, the court granted summary judgment in favor of Warner, finding that the S2 stilts did not have a “resiliently lined yoke” and were therefore not covered by the ’515 patent. Prior to that decision, The Forest Group was advised by its counsel to modify the S2 stilts so that they conformed to the ’515 patent. Sometime after the November 2007 decision (by the Warner court) and after receiving contrary advice of counsel, The Forest Group manufactured another line of S2 stilts without “resiliently lined yoke[s].” It marked that line with the ’515 patent number, as well.

After the district court in the Bon Tool case issued its claim construction, also finding that the ’515 patent required a “resiliently lined yoke,” it granted summary judgment that Bon Tool’s stilts did not infringe on the ’515 patent. Bon Tool then counterclaimed that The Forest Group falsely marked its S2 stilts with the ’515 patent. The district court found that The Forest Group’s actions met the two elements of false marking: the company falsely marked its S2 stilts with a patent number, and it did so with the intent to deceive the public. The district court found the requisite intent by noting that after the Warner court issued its claim construction, Forest Group knew its S2 stilts were not protected by the ’515 patent, but chose to manufacture another line of S2 stilts bearing the ’515 patent number.

After the district court ordered Forest Group to pay a single fine of $500 for the decision to falsely mark its S2 stilts with the ’515 patent number, Bon Tool appealed, arguing that the district court erred in its interpretation of the false marking statute when it imposed a penalty based on the Forest Group’s decision to mark the stilts as a group, rather than on a per article basis.

The Federal Circuit agreed and vacated the district court’s judgment. The Federal Circuit held that the plain language of the false marking provision of 35 U.S.C. § 292 requires courts to impose a penalty for false marking on a per article basis. Consequently, the Court ruled that the proper measure of damages for false marking is a fine of up to $500 per falsely marked article. The Court went on to note that in cases involving “inexpensive mass produced articles,” a court can, in exercise of its discretion, reduce the per article penalty to just a “fraction of a penny per article.”

The Federal Circuit also noted that the plain language of § 292(b) allowed for qui tam actions. In doing so the Court acknowledged that its decision could give rise to a new cottage industry: “marking trolls.”