August 1, 2010

Liability for False Marking of Patent Information in the USA

Dr. Ilan Cohn, Senior Partner
Dr. Ilan Cohn

Senior Partner

Reinhold Cohn & Partners

False marking of patent information1 on or in connection with an article sold in the US or Israel is a criminal offense, like in many other countries. A recent decision by the US Court of Appeals of the Federal Circuit places a very heavy liability on such false marking. Those operating and selling products in the US would be well advised to take notice of this decision and its consequences.

Adding a patent notice to an article or packaging, where the article is protected by a patent, is important as it alerts the public of the patent protection and that the copier may be liable to infringement charges and damages. While such marking is optional and may not be crucial in Israel and in other countries with respect to the rights to be awarded with damages in the case of patent infringement, in the US this is of particular importance as under Section 287(a) of the US patent law this may be critical in recouping damages from an infringer in the case of patent infringement.

The US Patent law, like laws in Israel2 and in many other countries, sanctions the false marking of patent information on or in relation to articles intended to give the false impression that a product is protected by a patent or is subject to a pending patent application. Under Section 292(a) of the US patent law, every false marking offense may be sanctioned by a fine of up to US$5003. It should be noted, however, that this sanction applies only where such false marking was done with a deceptive intent (or in the wording of the law “for the purpose of deceiving the public”).

In December 2009 the Court of Appeals for the Federal Circuit (CAFC), in the matter of Forrest Group v. Bon Tool 4 (“Forrest”), ruled that false patent marking may impose damage liability of up to US$500 per product sold with false marking. 

This ruling overturned past precedents, which held that the “offense” on which a US$500 fine is imposed, is for the act of false marking, rather than for each individual product sold with the false marking.

This decision may, thus, subject entities selling products in the USA to large potential financial exposure. By way of example, simple arithmetic shows that an entity having sold 100,000 products, produced by one assembly line, bearing false marking, could be liable to pay damages of up to US$50 million; whereas, before Forrest, the liability would not have exceeded $500.

According to Section 292(b), any person may bring a false marking action and can then reap half of the damages that will be decided by the court. Thus, and as could have been expected, since the Forrest decision there has been a flood of false marking law-suits: while throughout 2009 there were only 10 false marking cases, in the first four months of 2010 over 130 lawsuits have been filed.

While a recent case by the CAFC5 may suggest some second thoughts by the CAFC on what constitutes the “offense” in false patent marking and also places a very high bar for proving deceptive intent6, the Forrest precedent is still applicable and thus a conservative approach in patent marking issues by entities operating in the USA may be prudent; and in case of doubt it may be better to err on the side of caution.

Even if false marking suits will be eventually dismissed (for example, on the ground that there was no deceptive intent) or that the fine that will be imposed will be nominal, the increased motivation to filing such lawsuits (as evidenced by the large increase in such law-suits) should serve as a strong motive to institute all necessary safety measures so as not to give others a basis to file such a lawsuit. After all, who wants to be involved in a redundant and tedious US litigation with an unpredictable outcome?

Those selling products or marketing services in the US would be well advised to review their products and the relevant marketing and product-related literature to verify that it does not contain incorrect patent-related marking.

1 For example, by referring to a patent when there is no such patent or the patent expired, or by adding the indication “patent pending” when there is no such patent application.
2 Under Section 292(a) of the US Patent Law and section 3 of the Israel Merchandise Marking Ordinance.
3 35 U.S.C. 292 False marking:

(a) …; or 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; or Whoever marks upon, or affixes to, or uses in advertising in connection with any article the words “patent applied for,” “patent pending,” or any word importing that an application for patent has been made, when no application for patent has been made, or if made, is not pending, for the purpose of deceiving the public – Shall be fined not more than $500 for every such offense.

(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.

4 Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. Dec. 28, 2009).
5 Pequignot v. Solo Cup Co., No. 2009-1547 (Fed. Cir. 2010).
6 Among others, ruling that good faith and reliance on advice of counsel is a valid defense.

 

 

This article is provided for general information only. It is not intended as legal advice or opinion and cannot be relied upon as such. Advice on specific matters may be provided by our group’s attorneys.

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