The Penalty for False Patent-Marking Just Got Much Pricier

 

By Thomas Tuytschaevers

 

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arking an article with a patent number is appropriate and generally desirable when the article is actually covered by the patent, because it puts the public on notice that an item is protected by the patent. Also, a patent owner may recover pre-litigation damages against an infringer if he has properly marked his patented articles with the patent number. 

Patent marking is a double-edged sword, however, as discussed in our previous article. An inaccurate patent marking on a product can lead to liability under 35 U.S.C. § 292, which provides, among other things: 

Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word “patent” or any word or number importing that the same is patented for the purpose of deceiving the public . . . [s]hall be fined not more than $500 for every such offense.

A long-unresolved question has been whether the clause “every such offense” refers to each article improperly marked, and requires the $500 fine to be multiplied on that basis. The Court of Appeals for the Federal Circuit recently answered that question in the affirmative in Forest Group, Inc. v. Bon Tool Company.

The question of how to calculate the fine involves competing policy concerns.
The intent of the law is to discourage false marking. Congress intended the public to rely on patent markings to identify intellectual property embodied in the patented article. 

In the face of such reliance, says the Forest court, false marking may “deter innovation and stifle competition in the marketplace,” and “may also deter scientific research” and “cause unnecessary investment in design around or costs incurred to analyze the validity or enforceability of a patent whose number has been marked upon a product….” 

On the other hand, the Forest court recognized the potential for “disproportionately large penalties” if the $500 fine were calculated on a per-article basis. One nineteenth-century court observed, under a predecessor statute, that calculating the fine on a per-article basis would mean “that penalties should accumulate as fast as a printing press or stamping machine might operate.” That court held that the “continuous marking of multiple articles should constitute a single offense.” 

Following that decision, subsequent courts conceived a variety of approaches to calculate the fine, many of which are difficult to square with the language of the statute and its underlying policy of deterrence. The Forest case presented an opportunity for clarification.     

Forest Group makes stilts that are used by workers in the construction industry for accessing and hanging suspended ceiling structures. Forest believed that its U.S. patent covered the product, and so put that patent number on its stilts. 

In 2001, Forest sued a competitor for patent infringement, and lost. The competitor’s product was effectively identical to the Forest product, but simply did not infringe the Forest patent. Ipso facto, it was clear that the patent did not cover the Forest stilts, and that the patent marking on the Forest stilts was therefore inappropriate. In fact, Forest’s patent counsel advised Forest to modify its stilts so that they would be covered by the patent, but Forest failed to do so.

When Forest sued Bon Tool for infringing the same patent, Bon Tool Company countersued Forest for false marking under 35 U.S.C. § 292. The Forest court explained that “the two elements of a § 292 false marking claim are (1) marking an unpatented article and (2) intent to deceive the public.”

Based on the outcome of the 2001 case, the court found that the Forest stilts were unpatented articles, and that they were improperly marked with the patent number. The court found intent to deceive the public because Forest knew from its prior loss that its products were unpatented articles and marked them anyway (“Intent to deceive is a state of mind arising when a party acts with sufficient knowledge that what it is saying is not so and consequently that the recipient of its saying will be misled into thinking that the statement is true.”)

Turning to the fine, Forest argued for following nineteenth-century precedent and imposing a single $500 fine. Bon Tool argued that the fine should be $500 for each stilt. The Federal Circuit responded by balancing the competing concerns of deterring false marking and avoiding disproportionately large penalties. 

The court concluded that a $500 penalty for a continuous act of marking (“which act could span years and countless articles”) would be insufficient to deter false marking “in nearly all cases,” and held that “each article that is falsely marked with intent to deceive constitutes an offense under 35 U.S.C. § 292.”

However, the court was quick to explain that its decision “does not mean that a court must fine those guilty of false marking $500 per article marked.” The statue simply says that the fine may not be more than $500 per article, and that “[b]y allowing a range of penalties, the statute provides district courts the discretion to strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties….”

The jurisprudence of the false-marking statute will continue to evolve as courts exercise their responsibility to determine appropriate penalties, but the Federal Circuit has at least pointed the way out of the forest. 

 

 

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