District courts have seen a recent increase in the number of false-patent-marking lawsuits that could result in recovery of significant windfall monetary awards to plaintiffs. While the current landscape of patent-marking jurisprudence leaves many unanswered questions, careful review of patent-marking policies should be an issue to consider for companies manufacturing products under their own or licensed patents to avoid an adverse false-marking judgment. Section 292 of the U.S. Patent Act covers the improper marking of an unpatented article with the word "patented," or any word or number having the same meaning, for purposes of deceiving the public and provides for fines to be assessed in an amount not to exceed $500 for each offense. Individuals may file suit in federal court pursuant to Section 292 and attempt to recover damages that will be split 50/50 with the government.
The Federal Circuit Court of Appeals decision in The Forest Group, Inc. v Bon Tool Co. outlined the following elements of a Section 292 claim: (1) marking of an unpatented article; and (2) intent to deceive the public. The primary question unsettled before Forest Group was what constituted an offense—a decision to mark a product line, or each marked article put into the stream of commerce. The monetary implications of the answer to this question were significant. In Forest Group, the Federal Circuit held that "the plain language of 35 USC Section 292 requires courts to impose penalties for false marking on a per article basis." The court reasoned that allowing a range of penalties provided district courts with necessary flexibility and discretion to strike a balance between the public policy behind the patent-marking statute, namely, to give the public notice of patent rights, and imposing disproportionately large penalties for small, inexpensive items produced in large quantities. In a case involving inexpensive, mass-produced articles, the district court would have the discretion to determine that a fraction of a penny per improperly marked article is a proper penalty.
With the Forest Group decision, particularly its guidance on determination of damages, courts have experienced a significant increase in the number of lawsuits being filed on false-patent-marking grounds. In the month of February 2010 alone, nearly 60 separate lawsuits were filed in district courts around the country. The next emerging controversy in these cases, the resolution of which is likely to either promote the filing or stem the tide of false-marking lawsuits, will likely focus on what plaintiffs must prove to support the allegation that the defendant marked products "for purpose of deceiving the public." Under the current rule of law, "a party asserting false marking must show by a preponderance of the evidence that the accused party did not have a reasonable belief that the articles were properly marked." An assertion by a party that it did not intend to deceive, standing alone, "is worthless as proof of no intent to deceive where there is knowledge of falsehood."
Another issue that is likely to receive significant attention is the misuse of Section 292 lawsuits by individuals, coming to be known as "patent-marking trolls," seeking a windfall judgment by filing lawsuits against products marked with an expired patent. Some clarity on this issue is likely forthcoming in Pequinot v Solo Cup Co., which is on appeal to the Federal Circuit and has been fully briefed.
The increased occurrence of "patent-marking troll" suits could be curtailed or brought to a halt by Federal Circuit in the Pequinot decision or by Congress (the Senate Judiciary Committee has recently proposed legislation that would require patent false-marking plaintiffs to show actual competitive injury). Until the landscape of Section 292 becomes clearer, the effect of the Forest Group decision mandates that companies have a firm grasp on their patent-marking policies.
Vol. 53, June 2010