In a series of recent decisions, United States courts have clarified the law concerning patent marking, including the consequences of falsely marking items as patented.
Caught in an unprecedented spate of lawsuits related to patent marking, the courts have taken a fresh look at several aspects of Sections 287 and 292 of Title 35 of the United States Code, which govern patent marking in the United States. These sections provide, in part:
35 U.S.C. 287 Limitation on damages and other remedies; marking and notice.1
Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them… may give notice to the public that the same is patented, either by fixing thereon the word "patent" or the abbreviation "pat.", together with the number of the patent, or when, from the character of the article, this cannot be done, by fixing to it, or to the package wherein one or more of them is contained, a label containing a like notice. In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice. Filing of an action for infringement shall constitute such notice…
35 U.S.C. 292 False marking.2
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.
These sections essentially provide that:
- patented articles may be marked
- marking is optional. Specific marking requirements are relatively loosely defined; notice must be reasonable in the circumstances
- while optional, marking is usually required to recover damages
- the marking requirement likely applies to physical objects only
- where articles are marked, they must be marked in good faith.
Pequignot v. Solo Cup and Pequignot v. Gillette3
Two of the first cases in the recent spate of decisions were filed by Matthew Pequignot, a registered US patent attorney4 Mr. Pequignot filed false-marking claims against paper cup manufacturer Solo Cup Co. in September 2007, and against razor and toiletries manufacturer Gillette and its parent company, Procter & Gamble, in January 2008. Mr. Pequignot alleged that both companies had intentionally marked billions of products, including paper cups, lids, disposable utensils, razors, and antiperspirant products, with expired patent numbers in an unfair attempt to discourage competition.
Pequignot asked the court to award a $500 civil fine for each of the several billion products marked with expired patent numbers, based on Section 292’s provision allowing "any person to sue for the penalty" of up to $500 per offence and share half of the recovery with the US government. Some observers saw Mr. Pequignot’s lawsuits as an attempt to exploit an outdated qui tam statute for his own profit, pointing out that information confirming whether the patents were in fact expired is readily available on the Internet. Others defended the lawsuits as protecting the public against sophisticated companies which might try to unfairly hinder or control competition.
Solo admitted that its patents had expired, but stated that it continued to use the same patent-imprinting moulds to make its products due to the expense of modifying the moulds to remove the patent numbers. In its defence, Solo asserted that the products had in fact been covered by the patents cited, and that the status of the patents is freely available on the Internet. Accordingly, harm to the public was minimal and Solo had no intent to deceive. Judge Brinkema of the Eastern District of Virginia dismissed the case, agreeing that Mr. Pequignot had provided no direct evidence that the false marking was done “for the purpose of deceiving the public,” as required by the statute.
Mr. Pequignot has appealed the Solo Cup ruling to the US Court of Appeals for the Federal Circuit. The Gillette case awaits action in the lower court.
Forest Group v. Bon Tool5
Bon Tool, an equipment reseller, was sued by its jilted supplier Forest Group for infringement of a patent related to stilts used by construction workers. Bon Tool had been openly selling knock-offs of the stilts. Unfortunately for Forest Group, the trial court held that its patent covered neither the knock-offs nor Forest Group’s own stilts. When Forest Group continued to mark the original unpatented stilts “patent pending” despite the ruling and an order to stop, the court found it liable for false marking. However, the court assessed a single $500 fine on grounds that the continued marking of Forest Group’s products constituted a single act of false marking.
On appeal, the US Court of Appeals for the Federal Circuit held that the finding of a single offence was erroneous. Under Section 292, a plaintiff may collect (a) up to $500 (b) for each falsely marked product distributed. This holding opened the door to very large monetary judgments in false-marking cases, particularly where thousands – or millions, or billions – of relatively low-margin products are created. The court noted, however, that
[t]his does not mean that a court must fine those guilty of false marking $500 per article marked. The statute provides a fine of "not more than $500 for every such offense." By allowing a range of penalties, the statute provides district courts the discretion to strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties for small, inexpensive items produced in large quantities. In the case of inexpensive mass-produced articles, a court has the discretion to determine that a fraction of a penny per article is a proper penalty.
The court ordered that the case be returned to the trial court, for the lower court to determine the number of articles falsely marked and the amount of penalty to be assessed per article.
Crown Packaging v. Rexam Beverage Can6
Rexam sued Crown for making beverage cans according to Rexam’s patented method. Crown alleged, in part, that it was not liable for damages because canning machines Crown purchased pursuant to a licence were not marked with the corresponding patent number. On appeal, the Federal Circuit Court of Appeals affirmed that marking is not required in order to provide notice of a patented method, because marking of patented methods is often impossible or impractical.
However, in American Medical Systems,7 the same court ruled that marking would be required if "both apparatus and method claims" were asserted and there existed a "tangible item to mark." In the present case, the patent included both method and apparatus claims, but Rexam sued only on the method claims.
Inventorprise v. Target
Inventorprise sued Target for false marking on grounds that Target was selling articles that were falsely marked. Importantly, while the articles were marked, Target had not itself added the markings. The trial court dismissed the claim for lack of jurisdiction because Target had only sold the items, and had neither marked nor advertised them. The court found that
[t]o state a claim under 35 U.S.C. § 292(a) against a party that has had no role in the actual marking of a product, a plaintiff must show that the defendant (1) used the word “patent” (or any word or number importing that the product is patented) “in advertising in connection with any unpatented article;” and (2) acted with the intent to deceive the public.
The court went on to conclude that the marking on a product itself does not constitute "advertising," at least where the marking is on the back of the packaging and not normally visible to potential customers passing the items on shelves. The court further noted that there were insufficient allegations to support a finding of intent to deceive.
OUTSTANDING CASES AND ISSUES
At least nine cases involving improper marking were filed by a new breed of “marking trolls” in 2009. Moreover, on February 26, 2010, it was reported that Thomas Simonian had filed a new series of at least 27 complaints asserting continued marking of products with expired patents and marking of products not actually covered by patents identified in the markings. Mr. Simonian’s defendants are reported to include Blistex, the Hunter Fan Company, Mead Westvaco, Pfizer, 3M, Novartis, Kimberly-Clark, Monster Cable Products, Global Instruments and Merck.
These and other developments have generated an initiative by some public interest groups to persuade Congress to revisit the statute. Proposals include amending the statute to:
- delete its qui tam provisions, and deny standing to individuals who have suffered no actual economic harm due to false marking
- clarify levels of culpability required for imposition of penalties
- clarify factors to be considered in assessing penalties.
Owners of patents for devices and other physical items should mark their products as patented to improve the chances of recovering damages for patent infringement. However, patent holders should carefully review marking instructions with their patent counsel and engineers to ensure that items are marked only when appropriate, and in such a way that notice can be effectively conveyed to potential infringers.
Patent marking programs should be periodically reviewed to ensure that they continue to comply with legislation and case law to avoid the pitfalls of cases such as Forest Group. Until restrictions on qui tam lawsuits are imposed, the Forest Group decision will continue to spawn even more “marking troll” lawsuits.
Licences for the manufacture or sale of patented articles should include requirements for the marking of patented articles and provision for notice of the use of patented methods.