On December 23, 2009, the Federal Circuit Court of Appeals held that patent owners and others may be fined up to $500.00 for every product or advertisement bearing a false patent marking. False patent markings include the following:
- “Patent Pending”, when no patent application is actually pending.
- Any patent number, if the patent has expired.
- Any patent number, if the patent does not cover the product marked.
- The patent number of another, if used without consent of the owner.
- Any other patent markings which are false.
Any person may sue for damages for false marking.
For details see below.
DAMAGES FOR FALSE PATENT MARKING CLARIFIED—ADDITIONAL CASES LIKELY
False patent marking may be as costly as infringement to the guilty parties. A recent Federal Circuit case has substantially raised the stakes for false marking, placing all patent owners, licensees, and even sellers at risk of being liable in suits that may be brought by any member of the public.
Patent markings have historically been used to deter copying and increase the patent owner’s rights to damages in the case of infringement. Competitors who see patent markings are often less likely to copy patented products. Patent owners and licensees commonly use patent markings on products and related materials in order to maximize the damages that may be recovered in patent infringement cases – i.e., profits and/or royalties for a period of six years prior to the filing of a complaint for patent infringement – rather than being limited to damages accrued after actual notice of infringement to an infringer. The patent markings most commonly used under the patent statute are “Patent Pending” or “US Patent No. ______”.
However, it is a violation of federal patent law (35 U.S.C. § 292) to use a false mark to intentionally deceive the public. The “false marking” statute carries a penalty of $500.00 per offense - half of which goes to the party that sues for false marking, and half of which goes to the federal government. The statute states as follows:
- Whoever, without the consent of the patentee, marks upon, or affixes to, or uses in advertising in connection with anything made, used, offered for sale, or sold by such person within the United States, or imported by the person into the United States, the name or any imitation of the name of the patentee, the patent number, or the words “patent,” “patentee,” or the like, with the intent of counterfeiting or imitating the mark of the patentee, or of deceiving the public and inducing them to believe that the thing was made, offered for sale, sold, or imported into the United States by or with the consent of the patentee; or 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.
- 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.
Traditionally, when a product is incorrectly marked as being patented, courts have looked to whether there was a good faith belief that the patent covered the marked product and generally found the requisite good faith belief to be present. In recent years however, the Federal Circuit emphasized the importance of false marking and made it clear that the cost of determining whether an article is covered by a patent should be borne by the patentee instead of the public. For example, in Clontech Labs., Inc. v. Invitrogen Corp., 406 F.3d 1347, 1356-57 (Fed. Cir. 2005), the court stressed the important public interest in permitting full and free competition in the use of ideas which are in the public domain, stating that, “the act of false marking … externalizes the risk of error in the determination, placing it on the public rather than the manufacturer or seller of the article, and increases the cost to the public of ascertaining whether a patentee in fact controls the intellectual property embodied in an article.”
Sensing a new source of revenue, individuals began suing patent owners for false marking when an expired patent number appeared on a product. The lawsuits typically assert that the patent owner knows that the expired patents do not protect the products, and that the public must bear the cost of determining if the products are in fact protected. One such suit is pending against Solo Cup Company in the Eastern District of Virginia. The plaintiff there is seeking a fine of $500 per item marked with an expired patent number, which some commentators have equated to roughly nine million dollars. The case is currently on appeal to the Federal Circuit Court of Appeals.
Whether the maximum fine of $500 per offense should be calculated on a “per product” or “per patent” basis has been unsettled. Until now. In December 2009, the Federal Circuit clarified that the fine of up to $500 must be calculated on a per item basis. Forest Group, Inc. v. Bon Tool Co., — F.3d ——, 2009 WL 5064353, *6 (Fed. Cir. 2009). For example, if a patent owner has 1,000 items falsely marked, the fine could be as much as $500,000. This decision makes it likely that many more patent owners and others will be sued for false marking.
Although the law is still evolving, it appears that there are three basic steps that may be taken to help avoid liability for false patent marking.
First, the basis for marking a product or other materials should be documented. Whether this is an opinion of competent legal counsel or the reasoned opinion of an engineer or supervisor, documentation ensures that there is a review process in place and may help show good faith belief sufficient to defeat a false marking claim.
Second, conditional language in patent markings (e.g., “this product is protected by one or more of ” or “this product may be protected by”) should be avoided. As the Federal Circuit has indicated (see above), if a company wants the benefits provided by patent marking, it should bear the costs associated with determining if a product is properly marked. Thus, the patent owner (and any licensee) should form a reasoned opinion as to whether a product is covered by a patent and document that reasoning (see the first step, above). If there is doubt regarding whether a product should be marked with a patent number, consult a patent attorney.
Third, policies should be implemented to police patent markings and remove incorrect and expired markings. The policing should occur with sufficient lead time to allow incorrect marks to be removed from products and advertisements and prevent incorrect markings from being placed on newer products.
All currently marked products in the marketplace should be reviewed to determine if the patent markings are correct, and a plan should be instituted to make any necessary changes. Since certain incorrect markings will be easier to detect than others, this review may be done in stages. The expiration of a patent or the abandonment of a patent application (patent pending), for example, will be easier to determine in many cases than whether the patent is covered by the marked product.
In most cases, the costs involved with implementing a policy to avoid falsely marking will be only a very small fraction of the costs associated with defending against a false marking lawsuit. Those responsible for patent markings should visit with their patent attorney about false patent marking and take steps, such as those set forth above, to minimize potential liability.