Businesses that mark their products with patent numbers or language suggesting that products are covered by a patent should be aware of the Federal Circuit Court of Appeal’s recent decision in The Forest Group, Inc. v. Bon Tool Co., No. 2009-1044, 2009 WL 5064353 (Fed. Cir. Dec. 28, 2009), which interpreted the false marking statute’s “per offense” penalty as allowing for penalties of up to $500 per article improperly marked, rather than per each decision to mark. Thus, Forest Group raises the risk associated with improperly marking unpatented products by making it possible for a court to award a penalty of up to $500 per product falsely marked.
The false marking statute provides that “[w]hoever marks upon . . . any unpatented article, the word ‘patent’ or any word or number importing that the same is patented for the purpose of deceiving the public . . . [s]hall be fined not more than $500 for every such offense.” 35 U.S.C. § 292(a). Historically, this statute has been commonly invoked in counterclaims between competitors in patent infringement litigation, but rarely invoked by plaintiffs as a stand-alone cause of action. However, a number of qui tam false marking actions have been filed in the last few years by attorneys or other plaintiffs seeking to collect “bounties” under the statute despite the lack of any injury, rather than by competitors claiming to have been damaged by the allegedly false marking.
In one of those actions, Pequignot v. Solo Cup Co., 646 F. Supp. 2d 790 (E.D. Va. Aug. 25, 2009), the plaintiff sought a monetary penalty for each of the more than 21 billion products it claimed had been falsely marked. On August 31, 2009, the district court granted summary judgment in favor of Solo Cup, holding, inter alia, that the “per offense” penalty under the false marking statute allowed only for a penalty for each distinct decision to mark product, rather than for each falsely marked product. Id. at 801 (citing London v. Everett H. Dunbar Corp., 179 F. 506, 507-09 (1st Cir. 1910) (“It can hardly have been the intent of Congress that penalties should accumulate as fast as a printing press or stamping machine might operate.”). The Court in Pequignot observed that “the vast majority” of cases supported this holding, and that the plaintiff cited only one case since 1885 in which a court had imposed a fine for each falsely marked item. Id. at 801-802.
The Forest Group, Inc. v. Bon Tool Co.
Forest Group is a stark departure from the Pequignot and London opinions. In Forest Group, the Federal Circuit concluded that the “plain language” of Section 292(a) “requires the penalty to be imposed on a per article basis.” 2009 WL 5064353, at *3. The court also rejected prior decisions imposing time-based penalties for each day or week that false marking occurred. Id. at *5.
Thus, Forest Group raises the risk associated with marking products with inapplicable, non-existent, or expired patent numbers (or even conditional language suggesting that a product may be patented). The risk is somewhat tempered by the court’s conclusion that because district courts have the discretion to impose fines of “not more than $500” for each offense, they may impose a “fraction of a penny per article” penalty in appropriate cases “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.” Id. at *6. In addition, as always, liability under the statute exists only where it is proven that the marking company intended to deceive the public.
Nonetheless, the Forest Group decision provides a strong incentive to ensure accurate marking. We recommend that businesses carefully assess their current marking procedures to ensure that they (a) mark only those products that they have concluded in good faith are covered by at least one claim of each of the listed patents; (b) stop marking with a particular patent number as soon as a patent expires; (c) avoid conditional marking (such as a claim that a product “may be covered by one or more of the following patents”), unless they have a reasonable, supportable belief that the marked product is covered by at least one claim of each of the listed patents; (d) refrain from marking with “patent pending” unless they have a reasonable, supportable belief that products marked “patent pending” are covered by at least one claim of a pending patent application; and (e) stop marking with “patent pending” when the application is no longer pending.