Court of Appeals Reins in False Marking Litigation

Court of Appeals Reins in False Marking Litigation

^{June 10, 2010 | Intellectual Property News}

For more than a century, the patent statutes have made it illegal to include a patent number on a product that is not actually covered by the patent. 28 U.S.C. 292 provides that the use of a patent number, or the words “patented” or something similar, on a product or in advertising for the product, is illegal if it is done with an intent to deceive the public into thinking that the product is patented when it actually is not. The same restriction applies to the use of terms such as “patent applied for” or “patent pending.”

The false marking statute of Section 292 has been largely ignored because of its weak remedies. The statute provides for a fine of not more than $500 for every offense of false marking. Although there have been very few court decisions applying the statute, most of the courts that had encountered it had concluded that the $500 cap was the maximum remedy no matter how many units had been sold with the erroneous patent number. Even a continuous and ongoing campaign to falsely mark products for years would merit no more than a $500 fine.

But on December 28, 2009, the Federal Circuit Court of Appeals held that the $500 total cap should not be applied in this fashion. Instead, the penalty applies to each unit of a product that is sold with the false marking. Here’s a link to the decision: http://www.cafc.uscourts.gov/opinions/09-1044.pdf.

In the wake of this precedential interpretation of the false marking statute, a cottage industry of lawsuits has sprung up, with potential plaintiffs scrutinizing patent numbers appearing on products in the hope of finding an error that might support a lawsuit. Notably, a false marking lawsuit can be filed by literally anyone, and a plaintiff need not be a competitor or someone who was actually harmed by the marking.

In a few high profile cases, the number of units sold is great and the potential damages are astronomical. In one recent case involving lids made by the Solo Cup Company, the case alleged that 21 billion lids were sold with expired patent numbers on them. If the court were to award $500 per lid, the damages would be enormous. While a maximum of $500 per unit seems unlikely in most cases, even a penny per infraction can be huge if the volumes are high enough.

In a June 10, 2010 decision, the Federal Circuit ruled that even though the damages may be calculated per unit, a plaintiff in a false marking lawsuit must prove that the false marking ws done with an “intent to deceive the public” in order to receive the damages. Merely placing an incorrect patent number is not enough to trigger damages under this statute without proof that the inaccurate patent marking was done with an intent to deceive. In the Solo decision, the court also noted that intent to deceive the public may not necessarily exist even if the company marking the products knew that the patent marking was incorrect. Read the full decision at http://www.cafc.uscourts.gov/opinions/09-1547.pdf.

While each case is unique, and the best practice is to only mark products with patent numbers that are applicable to the product, merely marking a product with a false number does not trigger damages for false marking.