Patent False Marking: the Stakes are Raised
Saturday, 02 January 2010 02:45

Patent owners now will pay much closer attention to the products they mark with their patent numbers or the phrase "patent pending". On December 28, 2009, the US Court of Appeals for the Federal Circuit, which decides all patent appeals in the US, handed down a decision that put patent owners on notice of the huge potential cost for mistakenly (or purposefully) mis-marking their products. The decision has sparked a rash of new lawsuits against patent owners by plaintiffs asserting false marking.

In the case of Forest Group v. Bon Tool, (Fed. Cir. 2009, 09-1044), the appellate court held that the language of 35 USC § 292 requires courts to impose the penalty for false marking on a per article basis. Previously, courts routinely applied the law in such a way that patent owners found to have falsely marked their products were penalized only on a per case basis. This decision clarified that the penalty is assessed for each and every item falsely marked. The statutory fine for false marking is "not more than $500 for every such offense". However, when multiplied by the number of marked articles, the penalty easily can escalate to billions or even trillions of dollars and cases of this magnitude are currently pending.

The patent marking statute limits a patent owner's damages for patent infringement, if the patented products are not marked with the patent number, prior to the infringement. The purpose of the marking statute is to encourage patent owners to put the world on constructive notice of their rights. Marking their products allows patent owners to obtain damages for infringement, even in cases where the infringer was unaware of the patent.

However, the statute also provides a legal cause of action in cases where a product is falsely marked, for example, if the patent has expired or if the patent claims do not cover the products marked with the patent number. Claims against patent owners for false marking are brought as a qui tam suit, which effectively is a "whistle-blower" case, brought by an individual on behalf of the government. Since the decision, a major increase in the number of qui tam suits for false marking has been observed.

This case clearly highlights the importance of conducting due diligence to make absolutely certain that all products are marked properly with only the numbers of unexpired patents that cover features of the product. Each item marked must actually be covered by all of the patents listed on the product and, when the patent expires, the manufacturer must stop marking the products with the patent numbers or face the potentially astronomical fines. This includes removing the "patent pending" notice from items, if a patent application becomes abandoned. Consider yourself warned.

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