If your products are marked with patent numbers, you should strongly consider reviewing whether the patents listed on your products really cover those products. And you may also want to consider reviewing your competitors’ products. In The Forest Group, Inc. v. Bon Tool Co., No. 09-1044 (Fed. Cir. Dec. 28, 2009), the Federal Circuit Court of Appeals ruled that a penalty of up to $500 applies to each individual article that is wrongly marked, creating the prospect of significant penalties against companies that mass-produce articles incorrectly marked with a patent number. The court also noted that the potential for such large recoveries is likely to motivate a wave of new false marking lawsuits.
What Actions Create Liability for False Marking?
There are two elements of a false marking claim under 35 U.S.C. § 292: marking an unpatented article and intent to deceive the public. To prove intent to deceive the public, it is sufficient to show that a manufacturer does not have a reasonable belief that the marked patent covers the article. In other words, if the manufacturer knows the patent does not cover the marked article but allows the patent marking to continue, it is unlikely he will prevail by arguing there was no intent to deceive the public.
For example, in the new Federal Circuit decision, The Forest Group ("Forest") owned a patent related to stilts used in construction work. The patent covered a "resiliently lined yoke," and a court in a previous lawsuit involving Forest had construed that term in a way that ruled out Forest’s own products. Nevertheless, Forest had continued to mark its patent number on those products. The Federal Circuit affirmed that, as of the date that previous court ruling became final, Forest had to know that the patent did not cover Forest’s products. Therefore, Forest was liable for false patent marking for articles it made after that date.
Importantly, the Federal Circuit emphasized that, although the lower court decision found overwhelming evidence of the manufacturer’s knowledge that the patent did not cover the product, more subtle evidence also could be sufficient. For example, the court noted that Forest’s patent attorneys also advised Forest that its own stilts did not meet the "resiliently lined yoke" limitation. Moreover, the Federal Circuit emphasized that, in the face of such evidence of knowledge of falsehood, a party’s claim that it did not intend to deceive, standing alone, was "worthless."
The Per Article Penalty for False Marking
Before the Forest case, trial courts almost always ruled that the $500 penalty for false marking could be assessed only for each decision to falsely mark—that is, when a manufacturer decided to mark a patent on a product, the maximum penalty was $500 total even if the production run yielded ten thousand falsely marked articles. The Federal Circuit disagreed, stating that the plain language of the statute requires a penalty for each individual article that is falsely marked. In other words, each unit so marked could subject the manufacturer to a fine of up to $500. The court noted that the per article penalty is justified because the "more articles that are falsely marked, the greater the chance that competitors will see the falsely marked article and be deterred from competing." In contrast, a total penalty limited to $500 for a decision to falsely mark, which "could span years and countless articles," would be insufficient to deter the harm caused by false marking.
Increased Lawsuits in This Area Are Likely
The false marking statute permits any member of the public to sue on behalf of the government and keep fifty percent of the penalty recovered (known in the legal field as a qui tam action). The Federal Circuit acknowledged that the up to $500 per article penalty could encourage "a new cottage industry" of false patent marking suits by profit-seeking plaintiffs. However, the court found no fault with such an outcome because it fits Congress’ intent in establishing qui tam actions. The court also noted that overreaching would be limited because the $500 per article penalty is an upper limit, not a requirement. "In the case of inexpensive mass-produced articles, a court has the discretion to determine that a fraction of a penny per article is a proper penalty."
Conclusion
The Forest case establishes that a penalty of up to $500 per article may be imposed on a manufacturer who falsely marks a patent number on its products. Liability is possible in any instance where the manufacturer has been given knowledge that its patent does not really cover the marked article. This raises the stakes on many common marking practices throughout the United States. These include failing to remove expired patents from marked products and listing numerous patent numbers on a product with the caveat that the product "may be covered" by "one or more of the following patents." Indeed, "marking trolls" are watching and waiting to find companies to sue.
If you have doubts about whether your own products are properly marked, a review by patent counsel may be advisable. In addition, it may be worthwhile to review your competitors’ patent marking practices to determine if they are making a false representation to the public. The Intellectual Property Services Group at Armstrong Teasdale LLP invites you to contact us with any questions or concerns that your company may have about marking patent numbers on your products.
