Federal Circuit Analyzes The False Marking Statute

January 11, 2010

Marking products with its patent number is an important way for patent owners to maximize damages recoverable for patent infringement. See 35 U.S.C. § 287(a). However, a recent decision by the Court of Appeals for the Federal Circuit makes it clear that it is equally important to avoid falsely marking unpatented products. In Forest Group, Inc. v. Bon Tool Co., No. 2009-1044 (Fed. Cir. Dec. 28, 2009), the Court issued an opinion analyzing the false marking statute, 35 U.S.C. § 292(a). At issue in this case was whether the false marking penalty should be assessed on a decision to mark basis or on a per article basis. The Court held that (1) the plain language of the statute, the statute's legislative history and policy considerations require that penalty must be assessed on a per article basis; and (2) trial courts have discretion in setting the amount of the penalty up to the maximum of $500 per falsely marked article in order to strike a balance between ensuring acts of false marking do not deter innovation or stifle competition in the marketplace and imposing disproportionately large penalties for small, inexpensive items produced in large quantities. The Federal Circuit also made clear that there is no change to the substantive aspects of proving a false marking violation. The practical implications of this decision makes it clear that it is important to make sure patent numbers or "patent pending" designations marked on products are correct.

Factual Background

Forest Group sued Bon Tool for patent infringement under the '515 patent based on its sale of stilts that were an "identical replica" of Forest Group's stilts. Forest Group had marked its stilts with the patent number. Bon Tool counterclaimed alleging false marking, among other things. The District Court concluded that Bon Tool's stilts were missing a resiliently lined yoke as required by the claims and granted summary judgment of noninfringement in favor of Bon Tool. In the second case involving the '515 patent, the accused infringer also obtained summary judgment of noninfringement because its stilts did not have a resiliently lined yoke as required by the claims. After both summary judgment decisions, Forest Group placed an order for more stilts marked with the '515 patent number. Concerning the false marking counterclaim, the District Court found Forest Group had the requisite knowledge that its stilts did not meet the patent claims and committed false marking as of the date Forest Group received the second summary judgment decision. The District Court then held that there was only one continuous offense, and therefore assessed the total penalty at $500.

The Federal Circuit's Analysis

35 U.S.C. § 292(a) provides that a person who falsely marks any unpatented article as being patented, where the false patent marking was done with an intent to deceive the public, "[s]hall be fined not more than $500 for every such offense." The Federal Circuit found the statute's plain language to require a penalty be imposed on a per article basis. The court observed that "the act of false marking is the offense being punished by the statute."

In determining the fine amount, the court noted that district courts have the discretion to assess the per article fine at any amount up to $500 per article. The amount could be as low as "a fraction of a penny per article" in the case of inexpensive, mass-produced articles. In view of the possible range of penalties available, the court stated that district courts should "strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties for small, inexpensive items produced in large quantities."

Conclusion

It is uncertain whether Forest Group will lead to large civil fines in actions for false patent marking. However, it is clear this decision serves as an example of the need to pay close attention to product marking and labeling. Specifically, care should be taken to ensure future and currently marked products comply with the law, and patent owners should stay informed of the current status of patents or patent applications marked on its products. 

If you would like further information about this Legal Update, please contact Judith Cothorn, Steven Goldstein, Ann Schoen or any other attorney in Frost Brown Todd's Intellectual Property Practice Group.

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