Pitfalls of Patent Marking
Labeling your products with expired patent numbers or marking products not covered by a patent could expose your company to litigation, hefty fines, or forced settlements to avoid litigation from plaintiffs seeking quick payouts.
Patentees selling products covered by a U.S. patent or patent application are advised by patent attorneys to mark their products using appropriate language. While patentees understand the benefits of patent marking, they may be unaware that false marking could expose them to liability.
Obtaining patent protection can be beneficial to a patent holder, allowing the patentee the right to prevent others from making, using, selling, offering to sell, or importing the patented product and an ability to recover monetary damages from infringers. Marking products under the United States Patent Act1 provides patentees the right to place the phrase "patent or pat., along with the patent number" directly on their product. For products which cannot be directly marked, the statute states that affixing such information to a label placed on the product or product packaging is acceptable. Marking provides constructive notice to the public that the product is covered by a U.S. patent, which affords the patentee the opportunity to maximize the amount of damages recoverable in litigation. In the event that the patentee does not provide a mark, no damages will be recovered by the patentee in any action of infringement, except where the patentee can offer proof that the infringer was notified of the infringement and continued to infringe after such notice. In such a case, however, damages are linked to infringing acts which occur after notice. Clearly it is beneficial to the patent holder to mark their products as early as possible. But what happens if the patentee engages in false marking?
In addition to laws covering how patents may be marked, United States Patent Laws cover false patent marking2. A person can be subject to suit under Section 292 if that person, with the intent to counterfeit or deceive the public and without a patentee's consent, marks their own product with the patentee's patent number. Additionally, with intent to deceive the public, a patentee who marks his/her own product, including marketing materials, brochures, advertisements, websites, or the like, with either "patent" or "patent pending" (or similar language), when the product is not patented or covered under a pending application may be held liable under Section 292 as well. Penalties for undertaking such actions can result in fines of up to $500.00 for each offense.
It is important to note that in addition to proving that a patentee marked a product which was not covered by a patent, a Plaintiff bringing suit under the statute must establish intent to deceive the public. In Clontech3, the Court stated that "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." The Court further articulated in its decision that determination of intent to deceive is established in law by objective criteria and mere assertions that a party did not intend to deceive is not sufficient4. To establish knowledge of falsity, the Plaintiff must show, by a preponderance of evidence, that the Defendant did not have a reasonable belief that the products were covered by a patent and therefore correctly marked5.
A recent District Court case heard in the Eastern District of Virginia6 highlights some of the pitfalls faced by patentees and the importance of complying with the statute. The case revolves around a false marking claim brought by a non-competitor Plaintiff against the Solo Corporation. The Plaintiff alleged that Solo Corporation 1) marked some of its products with expired patent numbers, and 2) marked products with "This product may be covered by one or more U.S. or foreign pending or issued patents" when those products were not covered by a patent or subject to a pending application. Solo Corporation petitioned the Court for a Motion to Dismiss based on a lack of standing by the Plaintiff. The Court dismissed the motion, explaining that the Plaintiff had standing as a Qui Tam Relator (a private person authorized to bring a suit on behalf of the government for which the person shares in the financial recovery). The case remains before the Court as a ruling on Solo Corporation's intent to deceive has not been issued7.
Even if the Court determines Solo Corporation lacked the necessary intent to deceive the public, the case highlights several important issues involved in false marking allegations. It is important to understand that patentees may find themselves in situations in which they mark their product under a good faith belief that the product was covered by the patent when in fact it was not. For instance, manufactures sometimes add additional elements to a product that might not be coved by the patent. During prosecution or post- issue changes, the original claims may be modified resulting in commercial embodiments not covered by the amendments. Similar to the allegations against Solo Corporation, patentees may find themselves marking products covered by expired patents. Any of these fact patterns would allow a Plaintiff to initiate a claim against a patentee in Federal Court. In defending these situations, patentees cannot simply assert that it did not intend to deceive the public and relieve itself from liability. While litigation might ultimately prove no intent to deceive, defending a false marking allegation is costly and depletes valuable resources.
Section 292 clearly states that "any person may sue for the penalty." Solo Corporation argued that statutory construction should limit litigation under Section 292 to competitors only. The Court was not persuaded and found standing for a non-competitor plaintiff. While the Court hinted that this could be changed by an act of Congress, the current ruling allows numerous potential plaintiffs to bring such cause of action in Federal Courts across the country. If a patentee is found to have falsely marked its products, the statute provides a penalty of "not more than $500 for every such offense." The statute is ambiguous as to calculating damages8. What is unclear is the definition of "offense." Literal meaning of "offense" could provide penalties of up to $500 for each product falsely marked.In this interpretation, damages of up to $500 would be multiplied by the total number of products having that mark. However, "offense" could be defined as a dollar amount, up to the maximum allowed, levied as a single fine. In this case, a single dollar amount would represent the fine for all falsely marked products associated with a single offense. Clear guidance as to how such fines should be calculated is unavailable at this time as there are too few court cases which have addressed this issue and the approaches taken by courts are varied. While some Courts may be reluctant to levy a fine by calculating a dollar amount multiplied by each product falsely marked as too heavy-handed, they have not interpreted the statute to preclude such calculations
Avoiding False Patenting Allegations
What does all this mean for those marking their patents? It is clear that patentees should not wait for Congressional or Appellate intervention. The potential for payment of large penalties may result in forced settlements to avoid litigation from plaintiffs seeking quick payouts. There are steps that a patentee can take to avoid finding themselves in a false marking litigation. It is prudent to have a patent marking system in place. This system would be able to track, analyze and monitor new or existing products that are/will be covered by a patent. Part of the analysis should include a determination of whether the marked commercial embodiment sold is actually covered by the issued claims. Improvements on products should be reviewed for patent compliance as well. If the patentee is unsure as to whether or not the product as marked is covered by the patent, it may be practical to seek the opinion of patent counsel.
The system should also provide tracking of the patentee's portfolio for post-issue modifications or litigation which results in claim coverage modifications. Products marked with patent numbers associated with expired patents need to be identified and monitored so that markings on future products are avoided. Systems should be in place to identify soon to expire patents to prevent continued marking on products as soon as the patent term ends. The use of the phrase "This product may be covered by one or more U.S. or foreign pending or issued patents" should be used cautiously and carefully monitored to ensure that the product which contains such marking is actually covered by a patent or pending application.
While it may be impossible to eliminate false marking allegations, taking the necessary steps to ensure compliance with the statute will reduce the risk and avoid penalties should you be dragged into court.
1 35 U.S.C. § 287.