Companies in industries such as pharmaceuticals, medical devices, consumer products, electronics, and the like have found themselves as defendants in false patent marking law suits filed either by competitors or average consumers seeking, among other things, a ruling under the Patent Act for up to a $500 per unit penalty for listing or using an incorrect patent marking. False patent markings are any patent designation on the product or in advertising that was inapplicable to the product, or the listing of an expired patent. What does this mean? If a company has 1,000 units in circulation that have an incorrect patent marking, the company could potentially be looking at a penalty of half a million dollars. Taken to the extreme, in the case involving Solo Cup, where 21 million units had erroneous markings, the potential damages were as high as $5.4 trillion.
Scores and scores of these patent cases are being filed all over the United States, and recent rulings from the Federal Courts have not diminished the amount of filings. Kaz Inc., the maker of the Vicks Steam Inhaler, is one of the latest defendants in such suits, where it is accused of falsely marking one of its Vicks product with expired patents. Moreover, a three judge panel of the U.S. Court of Appeals for the Federal Circuit in a case involving Brooks Brothers ruled that individuals who bring false marking cases do not have to show they were personally harmed, solidifying the grounds for individuals to file cases. In this economy your competitors will also be seeking to take advantage of this popular patent claim.
The basis for a false marking claim arises from Section 292 of the Patent Act which provides in part that whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word "patent" or any word or number indicating that the product is patented, for the purpose of deceiving the public, shall be fined not more than $500 for every such offense. It is considered anticompetitive to mark a product with a patent that is out-of-date or does not exist, and this section of the patent statute provides monitoring incentive for individuals or companies to seek out this anti-competitive behavior, even when half the award goes to the U.S. government.
One of the key defenses to a patent false marking claim revolves around the fact the activity of false patent marking must be shown to have been done with the intent of deceiving the public. So mistakenly marking a product with an incorrect patent number or a patent that is out-of-date without any intent to deceive the public would not trigger the statutory penalty. Nonetheless, lawsuits can be expensive and consume a tremendous amount of a company's resources in defending claims. Given the proliferation of these false patent marking suits, companies should strongly consider conducting audits of its product patent markings (including advertising) so as to avoid possible claims.
Auditing of patent markings is akin to Merger and Acquisition due diligence investigation of a company's intellectual property. A skilled patent attorney reviews the company's patents to determine which are still valid and to determine whether claims within the valid patents are appropriately matched with the product upon which or with which the patent designation is being used. Not only can such an evaluation of a company's patent markings help avoid possible false marking claims, it can also potentially act as evidence of good faith in an attempt to clear up any errors in the marking of products if a suit is filed. Overall, patent marking audits can be a concise project that saves time and money in the future.
Should a false marking suit ever be filed against your company, seeking the advice of counsel with an experienced false patent marking litigation team is crucial. The need to develop a defense based upon a diligent investigation of the facts and the company's internal records should be conducted at the outset. While not always possible, experienced counsel may find avenues to seek early settlement based upon credible evidence that the defendant company made a mistake or had a misunderstanding about its patent markings and did not have the requisite intent to deceive the public.