Patent marking—the “Pat. No. 1,234,567” or “Patent Pending” notices you see on products every day—is an important way you as a patent owner can help protect your intellectual property. If you fail to mark a patented product with the word “patent” or “pat.” and the relevant patent number, you cannot recover monetary damages from an infringer until that infringer has actual notice of the infringement. In such a case, you must either file suit or send a formal notice of infringement to the other party to begin the damages period. One downside to sending a formal notice of infringement is that it may trigger the infringer’s right to file a declaratory judgment action in the forum of their choice. The use of proper patent marking avoids this problem and gives you more control over enforcement of your patents.
Patent owners must also be careful not to falsely mark an unpatented article with a patent number or “patent pending.” Under Section 292 of the Patent Act, the penalty for false marking with intent to deceive the public is “up to $500 per offense.” Any private party can bring a qui tam lawsuit and keep one half of the penalty collected.
Previous courts deciding the issue had held that an “offense” under Section 292 meant a specific decision to falsely mark. For example, the trial court in Pequignot v. Solo Cup Co. held that “an ‘offense’ is committed when a party makes a distinct decision to falsely mark.” That court stated that its interpretation was supported by “concerns that an alternative interpretation could result in disproportionate penalties” as well as “by the vast majority of case law.”
Recently, however, the Court of Appeals for the Federal Circuit held that an “offense” means each individual falsely marked item sold. In The Forest Group v. Bon Tool Co., the patent owner manufactured and sold stilts to be used in construction work and marked the stilts with a patent number. In an earlier case, however, another court had construed the claims of that patent so that it could not cover the patent owner’s stilts. The trial court found that, because the patent owner had actual knowledge that the patent did not cover its stilts when the earlier decision was issued, its continued marking of the patent number after that time was improper. The trial court also found that the patent owner had the requisite intent to deceive, in violation of Section 292. Similar to the Pequignot decision, however, the trial court found that only a single $500 penalty applied to the decision to falsely mark and refused to apply a penalty to each falsely marked stilt.
On appeal, the Federal Circuit held that both the plain language of Section 292 and policy considerations behind it required that fines be imposed for each and every falsely marked article. It stated that a single $500 penalty for a decision to falsely mark would “eviscerate” the statute, and would be insufficient to deter those who would falsely mark. Since a fine on each falsely marked item sold may be excessive, the Federal Circuit noted that district courts have discretion to assess the per item fine for any amount up to $500, including fractions of cents. Thus, this new interpretation of Section 292 puts much more power in the hands of the district courts to determine the appropriate penalty so as to satisfy the policy objective of deterring false marking without providing a windfall to the plaintiff in such a case.
The decision in Forest Group case serves as a reminder that patent owners should carefully review their products and patent portfolios to avoid any improper marking. Given the requirement of intent to deceive under Section 292, a simple mistake in marking should not create liability. The “party asserting false marking must show by a preponderance of the evidence that the accused party did not have a reasonable belief that the articles were properly marked.” Note, however, that the Federal Circuit also noted that the patent owner should have corroboration of its lack of intent to deceive, if the marking is proven to be incorrect. “An assertion by a party that it did not intend to deceive, standing alone, ‘is worthless as proof of no intent to deceive where there is knowledge of falsehood.’”
In light of this development, it is crucial to exercise care in the creation, review, and maintenance of your patent marking. If there is any question, you should consult with a registered patent attorney to confirm whether or not a number should be marked on a product.