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Friday, February 11, 2011

False Patent Marking: Litigation and Legislation

Brian T. Yeh
Legislative Attorney

A patent holder that manufactures or sells a patented product will usually mark it with the patent number or other words that provide notice to the public that the article is patented. Such marking also permits the patent holder to recover an increased amount of damages in patent infringement lawsuits. However, marking a product with an expired patent number or inapplicable patent number is a violation of the false marking statute, Section 292 of the Patent Act. Section 292 provides that anyone who falsely marks an unpatented product with either a patent number, the words “patent,” “patent pending,” or any other words or numbers implying that the product is protected by a current or pending patent when, in fact, it is not, and does so with the intent of deceiving the public, shall “be fined not more than $500 for every such offense.”

Until late 2009, false marking lawsuits were relatively rare, and federal courts often assessed one $500 fine for the decision to falsely mark, without regard to the number of articles that had been mismarked by the defendant. Yet in December 2009, the U.S. Court of Appeals for the Federal Circuit issued Forest Group, Inc. v. Bon Tool Company, which interpreted § 292 to require a penalty of up to $500 for every article that is falsely marked. The Federal Circuit explained that this calculation is mandated by the plain language of the statute. Furthermore, the Federal Circuit identified policy considerations that support its interpretation of § 292, noting that false marking deters innovation and stifles competition in the marketplace because a falsely marked article may dissuade potential competitors from entering the same market.

The Patent Act’s false marking provision expressly allows qui tam civil actions—any member of the public may sue a false marking offender on behalf of the federal government, in which event the fine is shared evenly between the person bringing the suit and the United States. The Forest Group decision helped fuel a surge of false patent marking lawsuits nationwide, filed by so-called “whistleblower” plaintiffs who targeted defendants that sold thousands of products marked with expired patent numbers, such as plastic cups, dental floss, and mouse traps. Such product manufacturers could face considerable financial liability for false patent marking.

Legislation has been introduced in the 112
th Congress to amend the false marking statute in an effort to curb the proliferation of false patent marking suits. H.R. 243, the Patent Lawsuit Reform Act of 2011, would amend § 292 to require that the person bringing a false marking suit must have suffered a competitive injury as a result of the violation, thus eliminating § 292’s qui tam provision. In addition, H.R. 243 would specifically limit the damages available for the false marking offense to a single fine of not more than $500. If enacted, these amendments to the false marking statute would apply to all cases pending on or after the date of the bill’s enactment.

Section 2(k) of S. 23, the Patent Reform Act of 2011, also would eliminate § 292’s qui tam provision by (1) allowing only the United States government to sue for the $500 per offense fine as a civil penalty (without needing to demonstrate competitive injury), and (2) permitting any person who has suffered a competitive injury as a result of the violation to file a lawsuit to recover “damages adequate to compensate for the injury.” Like H.R. 243, the bill expressly states that the changes it would make to § 292 “apply to all cases, without exception, pending on or after the date of” the bill’s enactment.

Date of Report:
February 1, 2011
Number of Pages: 11
Order Number: R41418
Price: $29.95

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