My July 10, 2009, blog entry addressed the issue of marking, which is one way in which a patentee may provide the public with notice of its patent rights. My blog entry also indicated that the marking of an article as patented when it is not, in fact, patented is against the law and subjects the offender to a penalty. Such actions are described as “false-marking” actions.
At the time of my original blog entry, false-marking actions were relatively rare. As a result, the law relating to false marking was unclear and full of many open questions. However, two recent decisions by the U.S. Court of Appeals for the Federal Circuit have answered many of the open questions. See Pequignot v. Solo Cup Co., Case No. 09-1547 (Fed. Cir. June 10, 2010); Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009).[1]
The Penalty for False Marking
One of the interesting aspects of false-marking actions is that false marking is a criminal offense. However, a false marking action may be brought on behalf of the federal government by a private party. Such actions are referred to as qui tam actions. The private party who brings a qui tam action is entitled to one-half of any fine that results from the action. The federal government receives the other half of the fine. Essentially, the federal government puts a bounty on the offending party.
The false-marking statute provides for a penalty of up to $500.00 for each instance of false marking. See 35 U.S.C. § 292.[2] Prior to the Forest Group decision, it was unclear whether this meant that the offending party should be fined for up to $500.00 for each article that was falsely marked or whether the marking of multiple articles could be grouped together as a single instance. The Forest Group decision clarified that each falsely marked article constitutes a single instance of false marking, which suggested that the fines for false marking could be substantial.
Predictably, the Forest Group decision has resulted in a proliferation of false-marking actions. More than 200 false-marking actions have been filed since December 2009. See http://www.grayonclaims.com/false-marking-case-information/ (Last updated June 10, 2010). Accordingly, a patentee who has marked or intends to mark his or her product with a patent number should make sure that he or she is aware of these recent developments in false-marking case law.
What Constitutes False Marking
The Pequignot decision indicates that there are at least two types of acts that may constitute false marking. The first type of act occurs when a party places a patent number on a product that is not covered by any of the claims of the patent at issue. The second type of act occurs when a party places a patent number for an expired patent on a product. Both types of false marking actions also require a showing that the party who mismarked their product must have acted with an intent to deceive the public.[3] The first type of false marking has been recognized consistently as being illegal. Prior to the Pequignot decision, however, it was unclear whether the second type of false marking could subject the accused party to liability. As a consequence, many manufacturers continued to mark their products with the patent number for expired patents.
Sometimes, as indicated by the Pequignot decision, this was done for practical reasons. The patent number may have been applied to the product through a manufacturing process, such as through a thermoforming stamping process. Alternatively, the patent number could appear on packaging. The manufacturer may have decided that it did not want to spend the money to buy new molds or to redesign its packaging.
The Pequignot decision indicates that this practice could result in significant liability because the party that brought the false marking action accused the defendant of falsely marking at least 21,757,893,672 articles. A footnote in the decision indicated that this could result in a potential award to the U.S. of approximately $5.4 trillion, which could pay off approximately 42% of the national debt. Accordingly, the Pequignot decision indicates that manufacturers should review their marking practices to make sure that they do not face such exposure in view of the Pequignot decision.
What Constitutes an Intent to Deceive
The fact that the practice of marking products with expired patent numbers is so widespread suggests that the proliferation of patent-marking actions as described above is only beginning. This has created a perception, whether fair or unfair, that the parties who are seeking to enforce the false-marking statute could receive an undeserved windfall, particularly in the case where the party does not compete with the party who is accused of false marking.
Some commentators have applied the term “marking trolls” to parties who are seeking to capitalize on false marking actions. Indeed, legislation is currently pending in Congress to curb the actions of these so-called marking trolls.
Fortunately, the Pequignot court may have mitigated the possibility of abuse of the false marking statute by focusing on the phrase “for the purpose of deceiving the public”, as it is used in the false marking statute. The Pequignot court held that the bar for proving deceptive intent is high in that the accused party must have “consciously desire[d]” to deceive the public through its marking-related actions.
Moreover, once the party bringing a false marking action proves that the accused party intended to deceive the public, the accused party is entitled to present evidence to rebut accusations of false marking. Accordingly, a party that acts in good faith is unlikely to be liable for false marking.
