When a company sells a product for which it also holds a patent, it is common practice for the company to mark the product with the patent number. Patent marking serves to place the public on notice that the product is patented — thus potentially deterring infringers. More importantly, marking a product helps to maximize the damages available in an infringement action. Section 287(a) of the Patent Act states that a patent owner who fails to mark its products can only collect damages for infringement if the infringer was notified of the infringement and continued to infringe anyway.
However, the decision to mark must be carefully made. Falsely marking a product with a patent number also creates a risk for the seller of the product. Section 292 of the Patent Act states that whoever marks a unpatented product as if it were patented may be subject to a fine. Marking a product with an expired patent number or an incorrect patent number can also create liability under this section.
A recent Federal Circuit case has significantly raised the stakes associated with false patent marking. Previous cases have held that the false marking fine of $500 was a maximum fine, regardless of the number of patented articles sold. However, in The Forest Group v. Bon Tool Company, the U.S. Court of Appeals for the Federal Circuit stated that the $500 fine can be applied on a per article basis for each product sold with false marking. In the decision, the Court acknowledged that it may have opened the door to a “‘new cottage industry’ of false marking litigation by plaintiffs who have not suffered any direct harm.” Nonetheless, the Court stated that “[t]his, however, is what the clear language allows.” Thus, this new case can have a significant effect on parties who mass-produce products that are marked with expired or incorrect patent numbers.
The Court noted that the Patent Act still allows courts to ensure that false marking litigation does not result in judgments that far outweigh the costs of goods sold. First, the Court acknowledged that under Section 292 a plaintiff still must establish that the product was incorrectly marked with an intent to deceive the public. In addition, the $500 per article fine is a maximum, and is not required in all situations: “a court has the discretion to determine that a fraction of a penny per article is a proper penalty” in order to avoid “disproportionately large” damage awards.
My colleagues Paul Legaard and Dan Scolnick have published additional details about the case. For those details, see their article which is available on the Pepper Hamilton website by clicking here.
My colleagues Josh Slavitt, Matt Durrell, and Russ Barron also recently published information about false marking. For their article, click here.
More articles about false marking of patents and penalties…..