Patent Litigation Increases In Aftermath of Forest Group Decision

11 August 2010 Publication

There has been an explosion of false patent-marking litigation in the past six months by individuals and companies looking to benefit financially from what has been deemed to be an invitation to litigate by the Federal Circuit in Forest Group v. Bon Tool, 590 F.3d 1295 (Fed. Cir. 2009.)

By way of background, 35 U.S.C. Section 292 (False Patent-Marking Provision) provides, in pertinent part, as follows:

(a) ... 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 the same is patented, for the purpose of deceiving the public … [s]hall be fined not more than $500 for every such offense. (Emphasis added.)
(b) Any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.

Among other proscribed activities, this provision clearly makes it a violation to leave a patent number marked on a product when the patent expires (the product now being an "unpatented" article) when such is carried out for the purpose of deceiving the public. Also, as evident from the statutory language, any person can bring a suit for false patent-marking and recover monetary damages up to $500 for every offense.

Up until the Forest Group decision, the prevalent opinion was that "every offense" referred to each decision to mark a product or batch of the product. However, the Forest Group decision upended this long-established belief by holding that ":every offense" refers to every unit of the product. For example, if a company sold 1 million identical widgets, each marked with an expired patent number, and a court found the requisite deceptive intent, the court could then award up to $500 million (i.e., the maximum penalty of up to $500 for every unit).

This has resulted in the explosion of false patent-marking cases being brought by individuals known as "false marking trolls," knowing that because of (i) the expense of litigation and (ii) the potentially large damage award, many companies will settle for a sizable monetary amount rather than go through the rigors to make the necessary proof that they did not have the requisite deceptive intent. Not surprisingly, the Federal Circuit predicted that such an explosion of suits would occur, but until Congress decides to address the issue, the statute and the Federal Circuit's interpretation of the statute remain, and companies selling products with expired patent markings are targets.

Addressing False Patent-Marking

The best way to avoid such a claim, and the large expense that accompanies it, is to avoid the incorrect marking in the first place. Therefore, Gardere recommends that companies, inter alia, (i) carefully calendar the expiration date of each of patent and then either remove the patent number as of the expiration date or stop applying such number sufficiently in advance of the expiration date to use the marked inventory, and (ii) then review and analyze all remaining company-owned or -licensed patents to ensure that the products marked with the various patent numbers are actually covered by at least one claim from each patent, particularly where the design of any such product may have been modified from when it was first patented. (As part of this review, companies also need to make certain that there are no products that are marked or advertised as "patented," "patent-pending," or the like, unless such designation is, in all respects, accurate.)

Should a company find itself the target of false marking litigation, options and defenses are available to combat the claims, but require prompt legal attention.

If you or your company have questions or concerns regarding false patent-marking or any other intellectual property issues, the patent litigation professionals within Gardere’s IP practice group are available to help.

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