Client Alert: False Patent Marking Claims On The Rise

In Forest Group v. Bon Tool Co., the Court of Appeals for the Federal Circuit issued a ruling recognizing the possibility that it would create "a new cottage industry."¹ The court reviewed the false marking statute, 35 U.S.C. § 292, which prohibits the false marking of goods as protected by a patent — arguably, even an expired patent. The court interpreted the statute to permit fines of up to $500 per mismarked item — even though in many instances the maximum fine theoretically could reach into the billions. The appellant, Forest Group, had argued against such an interpretation in part by noting that this would encourage "marking trolls." But the Federal Circuit was not dissuaded, noting that this type of qui tam action — i.e., one brought on behalf of the government — "is what the clear language of the statute allows."

And so it has come to pass. In the two and a half months following Forest Group, courts have been deluged with false marking claims. According to one tracking Web site, over 100 cases have been filed since that decision issued.² Many of these cases are filed by individuals or, as noted in Forest Group, by entities apparently created for the sole purpose of filing these qui tam actions (for example, plaintiffs like the "Patent Compliance Group, Inc."³). In a highly reported move, a single individual plaintiff filed almost 40 suits in the Northern District of Illinois against companies with products as varied as undergarments, eye drops and drill bit sharpeners.⁴ The flood of litigation is troubling enough, but worse still is the potential exposure on multiple fronts. Different plaintiffs are filing suit on the same expired or mismarked patent numbers in different jurisdictions; in some cases, the suits are being filed on the same day.⁵

While these lawsuits are easy to file, in the end they may be tough for plaintiffs to win. The statute only awards damages if the plaintiff can prove that the mismarking was done "for the purpose of deceiving the public."⁶ In some cases, knowledge of the false marking may create a rebuttable presumption of intent, although that presumption may be "weakened" when the mark is for an expired, but otherwise proper, patent.⁷ Accordingly, plaintiffs may face a significant burden and companies without the requisite intent can escape liability.⁸ Courts may also limit just who can bring a claim. In one case, the court found that the plaintiff did not have standing to sue since he had alleged no particularized harm from the mismarking.⁹ Further, courts have discretion to limit potentially draconian penalties to "a fraction of a penny per article."¹⁰

It is too soon to tell how these pending cases will turn out. Cases addressing all of these issues are on appeal to the Federal Circuit, and those decisions will provide guidance as to how to best defend against these actions. In addition, a recently proposed amendment to the Patent Reform Act of 2010 would effectively eliminate the qui tam aspect of § 292. Instead, only one "who has suffered a competitive injury as a result of a violation" would be permitted to file suit.¹¹ Even better, the changes would apply to "all cases, without exception, pending on or after the date of the enactment."

Still, there are no guarantees. Regardless of future developments, the effects of the false marking statute's increased visibility will linger for some time and more lawsuits can be expected. Companies that use patent markings to protect their products must be vigilant and prepared to fight back on every front. Schiff Hardin's intellectual property lawyers are well-positioned to assist in this effort, and are already representing clients in § 292 litigations taking place throughout the country. Companies involved in the manufacture, production or distribution of products marked with patent numbers may wish to check those products for mismarked or expired patents. Schiff Hardin would also be happy to provide assistance to those who wish to reevaluate their marking policies in light of these new threats.

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