In a recent post titled, “False Marking: A Patent Litigator’s Perspective“, Brandon Baum, partner and IP litigator at Mayer Brown LLP, and I discussed the infamous issue of false marking and how he believes the proliferation of false marking suits are “a blip due to prior lax enforcement by patent departments, and will disappear quickly”. Today, you’ll have a chance to read what Robert Faber, partner and patent prosecutor at Ostrolenk Faber LLP, has to say on the issue of false marking.
Without further ado, Robert Faber on False Marking….
Section 292 of the United States Patent Act (35 U.S.C. § 292) imposes a criminal penalty fine of up to $500 per false marking for falsely marking or advertising that a product is covered by an unexpired United States patent or an application for a patent, and the statute provides that whoever sues the false marking party for the penalty on behalf of the United States receives one half the penalty collected.
One reason for heightened interest in the statute is the recent Federal Circuit Court Opinion in Forest Group, Inc. V. Bon Tool Co., 590 F.3d 1295 (Fed Cir. 2009) that the penalty shall be computed based on every individual falsely marked article sold, not on a group of such articles sold in a single transaction. The penalty shall not be more than $500 for the offense of selling each copy, giving a judge discretion as to the per unit amount of the penalty and therefore the amount to be shared by the plaintiff.
No reasonable or responsible company intentionally falsely marks a product as patented or as the subject of an application. Typically, a company that marks a patent number may believe its product is covered by the patent. In many recent court decisions finding false marking, the patent number marked eventually had expired, but the marking remained on further copies of the product sold after expiration. Therefore, a party which correctly marked a product with a patent number during the life of the patent has been accused of false marking after the patent expired. The other type of false marking claim arises from a patentee having incorrectly marked a product with a number of a patent that does not cover the product. This often happens in listings of multiple patent numbers, using the phrase “…under one or more of U.S. Patents…”, or an equivalent phrase, followed by multiple numbers, one of which does not cover the product marked.
I do not believe that all companies will stop either type of false marking. They did not intentionally mark falsely. I do believe that reasonable, responsible companies, aware of the risk of violating the false marking statute, will discontinue a patent marking on a product when the patent expires or stop marking shortly before expiration if the product is manufactured and stored in inventory before sale. I also believe that they will be more careful to assure accuracy in listing patents covering their product, e.g. by saying “protected by one or more U.S. patents…”, then followed by applicable patent numbers.
Minimizing the risk of a deceptive false marking claim requires keeping track of the term and expiration of the patents marked and removing a patent marking from a product when the patent expires and requires not listing patents that might not cover the product, but listing only those that surely do. To do the foregoing will require the patent marker to investigate the product and patents to be marked on it, as that will avoid the deceptive false marking claim.
I believe there is a benefit to the public in not being provided an incorrect representation that a product is covered by a patent when it is not. A false patent marking causes injury to another party which sees the false marking, believes the marked product is patented and is inhibited from introducing its own competitive product, which it may incorrectly believe infringes an unexpired patent, or the party must investigate every patent number marked.
A competitor of a party, which applied a false marking, may be deterred from selling its own product. That competitor should make at least a minimal investigation, at least to learn whether the patent number marked is still enforceable, as everyone knows that a patent term is limited in time. Studying a product and patents marked on it to determine if every one of the marked patents has claims covering the product is likely to be quite expensive, but worth investigating for commercial reasons in particular cases.
It is difficult to guess whether consumers believe that a falsely marked product is more innovative. But a marking could be written to indicate that the product had been covered by a patent in the past (e.g. by stating its expiration) although the product is not patented now, and that marking would not be false, so that consumers could still believe a product is innovative without thinking that it is patented now.
So long as the statute provides a monetary penalty for mismarking, and courts order a per unit penalty, and a member of the public who sues for false marking can receive part of the penalty awarded against the false marker, false marking claims are not a temporary wave that will fade. The quantity of false marking claims will decrease if companies applying the markings are careful about selecting the patents that apply to a particular product and are careful about removing a marking of a patent that has expired.
Further, a recent Federal Circuit decision in Pequignot v. Solo Cup Co., No. 2009-1547 (Fed Cir., June 10, 2010) will reduce the reward for suing and therefore the incentive to sue. In Pequignot, the Court said that the statutory requirement of actual intent to deceive the public must be proven, and a false marking, even when a company knows its patent marking is false, is not per se intentional deception.
The false marking statute requires that the purpose of actual false marking be “for deceiving the public”. That is an intent requirement, not satisfied by an accidentally or unintentionally false marking. The Federal Circuit Court recently decided in Pequignot v. Solo Cup, that a plaintiff making a false marking claim must establish that the false marking was intended to deceive the public. A judge can decide intent. An error in applying a number does not indicate intent to deceive. In my opinion, continuing to mark a patent number that has expired is alone not evidence of intent to deceive and marking that a product is covered by one or more of a list of patents, which list may include an inapplicable patent, does not indicate the marker’s intent to deceive. Intent to deceive the public is not satisfied merely by an act that was at one time proper and through passage of time became improper. What constitutes intent under the statute has to be determined from court opinions.
Defending a patent marker accused of false marking involves the accused marker responding via an attorney. If the amount of a potential penalty is small, it might not be worth defending a claim. Settlements reached on account of the high cost of defense are probable, regardless of satisfaction of requirements of the statute.
As a policy matter, I believe that false marking claims should not be singled out for a penalty in which members of the public share. There are many negative situations affecting the public. Yet the public cannot share an award of damages resulting from every claim for violation of all kinds of rights. Ways to avoid or minimize false marking claims are to require plaintiffs to show intent to deceive, competitive injury suffered by the plaintiff, and not merely by the public in general, and to award compensatory rather than statutory punitive damages.
Tags: accused marker, Brandon Baum, False Marking, false marking claim, Forest Group, Inc. v. Bon Tool Co., Mayor Brown LLP, Ostrolenk Faber LLP, patent marker, Patent Marking, Pequignot v. Solo Cup, Robert Faber