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Check Your Patent Markings!

Client Advisory

April 30, 2010

Failure to mark your invention with the accurate patent information could be costly.

Until recently, no one would have lost sleep over the $500 fine for a false patent marking, because the fine was levied on a per act or decision basis, not on a per item basis. See London v. Everett H. Dunbar Corp., 179 F. 506 (1st Cir. 1910).[1] Thanks to a recent Court of Appeals of the Federal Circuit (CAFC) decision, patent holders have much to worry about now. In Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009), the CAFC found the fine for falsely marking an invention must be levied on each invention that was falsely marked. 

Warning: Plaintiffs seeking to capitalize on Forest’s interpretation of the false marking statute have flooded the courts with false patent marking claims.[2]

How will Forest affect you?

In light of Forest, patent owners should take the following precautions:

  1. confirm that each article marked with a patent number (or other patent indication) falls within the claim scope of that patent;
  2. verify the patent expiration date -- and keep track of these expiration dates;
  3. create or update company policies regarding patent markings -- including provisions on how to remove patent markings from marked articles once the patent expires; and
  4. refrain from using conditional patent markings (i.e. “may be covered”) to mark articles.

Discussion

The False Marking Statute

The false marking statute penalizes those who, with the intent to deceive, falsely suggest an invention is patented. Under U.S. patent law, to prevail on a false marking claim, a plaintiff must prove two elements:

  1. the article is unpatented; and
  2. there was intent or a “purpose to deceive the public.”

See 35 U.S.C. §292(a) (2007); see also Clontech Labs., Inc. v. Invitrogen Corp., 406 F.3d 1347, 1352 (Fed. Cir. 2005).  An article is deemed to be “unpatented” if the claim of the patent used to mark the article does not describe that article. See Clontech, 406 F.3d at 1352.  The intent element is fact-specific, and requires the plaintiff to prove by a preponderance of the evidence that the defendant “did not have a reasonable belief that the articles were properly marked (i.e., covered by a patent). Absent such proof of lack of reasonable belief, no liability under the statute ensues.” Id.at 1353. Once the plaintiff makes its showing on intent, the defendant will have an opportunity to provide evidence to rebut the intent element. See Pequignot v. Solo Cup Co., 646 F. Supp. 2d 790, 797 (E.D. Va. 2009).[3]

New Statutory Interpretation: Forest Group, Inc. v. Bon Tool Company

In Forest, the false marking claim concerned a stilt used in construction and a patent marked on it.  However, the patent described only a stilt per se, and the article that bore the patent marking included not only the stilt -- but also a lining. The district court found that the stilt with a lining was unpatented for failing to fall within the scope of the patent, and the defendant was liable for false marking.

After affirming liability, the CAFC reversed on fine assessments, ruling that the “plain language of the statute does not support the district court’s penalty of $500 for a decision to mark multiple articles. Instead, the statute’s plain language requires the penalty to be imposed on a per article basis.” Forest, 590 F.3d at 1301 (emphasis added). The CAFC remanded Forest to the lower court to recalculate the fine under §292.[4]

The significance of Forest? No longer would the booty for a successful plaintiff be a paltry $500 -- now, the winnings could be as high as $500 multiplied by the number of articles that were falsely marked.

Forest also clarified that a marked article is clearly “unpatented” when it fails to fall within the claim scope of the patent. Forest, however, left open the following questions, which are now before the CAFC in the case discussed below:

  1. What happens in a case where an article is marked with an expired patent -- will it be considered an “unpatented” article?
  2. How will courts treat parties who fail to remove expired patent numbers from validly marked articles? 

Pequignot v. Solo Cup Co.

On April 6, 2010, the CAFC heard oral arguments in Pequignot, the first false-marking case heard on appeal after the Forest decision.  See Pequignot v. Solo Cup Co., 646 F. Supp. 2d 790, 797 (E.D. Va. 2009), appeal docketed, No. 2009-1547 (Fed. Cir. Sept. 9, 2009; argued Apr. 6, 2010). The buzz surrounding Pequignot results from the alleged mismarking of billions of plastic drink cup lids with expired patent numbers -- as well as the use on certain articles of conditional patent marking language, i.e. “may be covered,” which if proven to be a false marking could result in a penalty of trillions of dollars. 

The defendant provided rebuttal evidence attesting to a good faith belief in using the expired patent marking and conditional marking, including the following:

  1. sworn testimony from patent and in-house counsel discussing cost concerns and disruptions caused by replacing all mold cavities at once;
  2. policies that were formulated to replace lid molds bearing expired patents once the molds wore out or were damaged; and
  3. emails discussing mold replacement and updated tool drawings for replacing the lid mold cavities.

For each claim, the district court found no evidence of intent to deceive and found the defendant’s actions reasonable. Though the CAFC is not likely to render a decision in Pequignot until late 2010, it is important to take note of the evidence submitted by the defendant to rebut the intent element.

Conclusion

In light of the above, patent markings have assumed a new importance. If you have any questions on how to proceed, please do not hesitate to contact our patent attorneys.


Questions regarding this advisory should be addressed to Libby Babu Varghese (212-238-8727, varghese@clm.com).


Endnotes


[1] London interpreted the predecessor of the current false marking statute.  The earlier statute imposed a penalty of not less than one hundred dollars. Under the current statute, the penalty is “not more than $500”. See 35 U.S.C. §292(a) (2007).

[2] The False Marking statute includes a qui tam provision that allows an individual to bring false marking actions on behalf of the government and share one-half of the winnings with the U.S. government.  See 35 U.S.C. §292(b) (2007).

[3] The Court in Pequignot held “[A] false marking made with knowledge of falsity creates a rebuttable presumption . . . .To rebut this presumption, the defendant must present more evidence than a ‘mere assertion by a party.’” Pequignot, 646 F. Supp. 2d at 797.

[4] In a decision rendered on April 27, 2010, the lower court recalculated the §292 fine for Forest to be $6,840.00. The fine for each falsely marked stilt was based on the highest price at which each falsely marked stilt was sold. The evidence at trial indicated 38 falsely marked stilts and the highest price for each was $180.00. Forest Group, Inc. v. Bon Tool Co., No. H-05-4127, slip op. at 5 (S.D. Tex. Apr. 27, 2010).



Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. © 2017 Carter Ledyard & Milburn LLP.
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