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February 2010

Welcome to the inaugural issue of Mintz Levin's Patent Litigation Group (MLPG) newsletter, entitled "Brief." Each month we intend to bring you fundamental patent information that will assist you in protecting your most valuable — and vulnerable — assets. We welcome your comments.

Recent Change In Patent Marking Law Cause for Concern to Patent Owners

By Dean Bostock

 

  • Federal Circuit rules that penalty for false patent marking, up to $500, is to be imposed for each unit falsely marked, vastly multiplying the potential exposure for defendants
  • Parties will use this ruling to pursue huge claims for false patent marking

 

Under the U.S. patent statute, a patent owner can recover damages for infringement from the time the infringer receives actual or constructive notice of its infringement. See 35 U.S.C. § 287(a). Actual notice may be given by the patent owner informing the infringer that a specific product or process infringes a specific patent. In this regard, giving general notice of ownership of a patent is insufficient; a specific allegation of infringement must be made. Constructive notice may be provided by “marking” the patent number(s) on the patented product(s). Patent marking is not required for patents that consist of method or process claims only. For patents that contain one or more apparatus claims, marking is required for constructive notice. If a patent owner licenses its patent, it must require all of its licensees, including sub-licensees and manufacturers, to mark the product with the appropriate patent number(s) in order to obtain the benefit of constructive notice.

The purpose of the marking statute is threefold: (1) helping to avoid innocent infringement; (2) encouraging patent owners to give notice to the public that the product is patented; and (3) helping the public to identify whether the product is patented. Compliance with the marking statute is achieved when substantially all of the patented articles have been consistently marked and the patent owner is not distributing unmarked articles.

As placing the patent number on a product provides sufficient notice to trigger the accrual of damages, irrespective of whether or not the infringer ever sees such notice, the patent marking statute is a valuable tool for patent owners. Care must be taken, however, to ensure that the marking statute is properly complied with. A recent decision of the Court of Appeals for the Federal Circuit has significantly increased the potential penalties for falsely marking products.

The U.S. patent statute renders false patent marking unlawful. See 35 U.S.C. § 292. An example of false marking is marking a product with the number of an expired patent. Another example is marking a product with a patent number that does not cover the product. Further, to avoid false marking when marking a product with a plurality of patent numbers, the product must be covered by at least one claim of each such patent. The statute provides that any person engaging in false marking “[s]hall be fined not more than $500 for every such offense.” For almost a century, following the decision of the Court of Appeals for the First Circuit in London v. Everett H. Dunbar Corp., 179 F. 506 (1st Cir. 1910), many courts have interpreted the false marking provision as imposing a single fine for continuous false marking. In other words, a single fine not exceeding $500 was often imposed irrespective of the quantity of falsely marked products that were distributed to the public.

On December 28, 2009, the Court of Appeals for the Federal Circuit issued a decision that could significantly increase the penalties for false marking. In The Forest Group v. Bon Tool Co., No. 2009-1044, 2009 WL 5064353 (Fed. Cir. Dec. 28, 2009), the Court ruled that the imposition of a single fine irrespective of the extent of false marking was erroneous and contrary to the patent statute. The Court ruled that the proper penalty to be imposed should be an amount up to $500 for each individual product that is falsely marked. Thus, a person who sells a batch of 10,000 falsely marked widgets would previously only have been liable for up to $500 in penalties. Now, that person will be liable for a penalty of up to $5 million. As this example demonstrates, the Forest Group decision should be a cause for concern to those companies who distribute large quantities of products marked with patent numbers, such as manufacturers of electronic and medical components, pharmaceuticals, and plastic utensils.

Also cause for concern for mass market manufacturers is the patent statute’s qui tam authorization. See 35 U.S.C. 292(b). This provision states that “[a]ny 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.” Due to the public availability (including online) of the information, it is relatively simple to determine whether or not a patent marked on a product has expired, thus leading to potential liability for false marking. It is not difficult, therefore, to imagine a cottage industry emerging to exploit, via the qui tam provision, careless manufacturers who fail to remove expired patent numbers from their products or who fail to verify that the product is covered by the patent marked thereon. Further, if multiple patent numbers are marked on a product, at least one claim of each patent must cover the product.

In a case decided a few months prior to the Forest Group decision, an individual brought a qui tam action against the Solo Cup Company. The plaintiff alleged, and the company admitted, that the company had sold billions of plastic cups that had been marked with expired patent numbers. See Pequignot v. Solo Cup Co., 646 F. Supp.2d 790 (E.D. Va. 2009). Ultimately, the court found in favor of Solo Cup because the court determined that Solo Cup had acted in good faith. Therefore, the court found that Solo Cup lacked an intent to deceive the public, an element of proof of a false marking claim. Nonetheless, the case illustrates the potential problems for companies such as Solo Cup now that the statute has been interpreted to render each of the billions of falsely marked cups potentially liable for a penalty of up to $500 per cup. Were a similar case brought now, Solo Cup and others in a similar position would find themselves in a difficult position in deciding whether to settle or take the case to trial.

The court found that Solo Cup had acted in good faith primarily due to the company’s reliance upon the advice of its counsel. The patent numbers were applied to the cups during the molding process in cavities that could last for years. Counsel advised the company to remove the numbers of expired patents when the cavities were replaced due to wear and tear, which could be years after expiration of the patents, rather than immediately upon the expiration of a patent. The court found that reliance upon such advice demonstrated that the company lacked intent to deceive the public. Had Solo Cup not obtained this advice of counsel, it is likely that the court would have found the company liable for false marking. In view of the increased penalties now available as a result of the Forest Group decision, patent owners would be well-served to monitor closely the accuracy of their patent marking, and by seeking the advice of counsel before engaging in any activities that might violate the false marking provision of the patent statute.

Should you wish to receive further information on this or any intellectual property issue, please contact any of the attorneys listed below, or the Mintz Levin attorney who ordinarily handles your legal affairs.

Contacts

Gene Feher
Editor-in-Chief
(617) 348-4946
GFeher@mintz.com

Dean G. Bostock
(617) 348-4421
DGBostock@mintz.com

Members

Kevin N. Ainsworth
(212) 692-6745
KAinsworth@mintz.com

Matthew Bernstein
(858) 314-1571
MBernstein@mintz.com

Paul J. Cronin
(617) 348-1781
PCronin@mintz.com

John M. Delehanty
(212) 692-6703
JMDelehanty@mintz.com

Richard G. Gervase, Jr
(212) 692-6755
RGervase@mintz.com

Robert R. Gilman
(617) 348-3046
RRGilmanJr@mintz.com

Marvin S. Gittes
(212) 692-6247
MGittes@mintz.com

John Giust
(858) 314-1572
JGiust@mintz.com

Geri L. Haight
(617) 348-1675
GLHaight@mintz.com

H. Joseph Hameline
(617) 348-1651
HJHameline@mintz.com

Paul J. Hayes
(617) 348-4944
PJHayes@mintz.com

A. Jason Mirabito
(617) 348-1805
JMirabito@mintz.com

Timur E. Slonim
(212) 692-6704
TSlonim@mintz.com

Robert P. Taylor
(650) 251-7740
RPTaylor@mintz.com


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