FEDERAL CIRCUIT CLARIFIES PENALTY FOR FALSE PATENT MARKING

Claiming a product is patented to help boost sales may seem like a relatively foolproof idea. After all, who’s going to check?

Yet, if the scheme is discovered, federal patent law takes a dim view of falsely marking an item as patented and can levy a penalty of up to $500 for the offense. In the recent case of The Forest Group v. Bon Tool Co., the Federal Circuit Court of Appeals made clear just how costly the offense could prove.

STILTED LANGUAGE

Forest owns a patent for “an improved spring-loaded parallelogram stilt” often used in construction projects. The patent specifically requires inclusion in the stilt of a “resiliently lined yoke.” Forest marked its stilts with the patent number.

Bon Tool sold an identical stilt manufactured without a license from Forest. When Forest sued Bon Tool for infringement, Bon Tool counterclaimed, alleging false marking because Forest’s stilts lacked the resiliently lined yoke.

The district court found that Forest had falsely marked its stilts with a patent number with the intent to deceive the public and fined Forest $500 for a single offense of false marking. Bon Tool appealed, arguing that the court erred in assessing only $500 in penalties.

BOOSTED PENALTY

The federal false marking statute calls for fines of “not more than $500 for every such offense.” The Federal Circuit found that the plain language of the statute requires the penalty to be imposed on a per-article basis. It held that “each article that is falsely marked with intent to deceive constitutes an offense.” Imposing a single $500 fine per continuous act of marking would be insufficient deterrence and render the statute “completely ineffective.”

The court, however, emphasized that district courts have the discretion to assess the per-article fine at any amount up to $500. In the case of inexpensive mass-produced articles, it noted, a court can determine that a fraction of a penny per article is the appropriate penalty.

A POTENTIALLY NEW MARKET

The Federal Circuit conceded that its ruling could unleash “a new cottage industry” of false marking litigation by plaintiffs who have not suffered any direct harm. To perhaps counter this, the amended Patent Reform Act (S. 515), which is (as of this writing) under consideration in Congress, contains a provision that would limit damages for false marking to only the damages adequate to compensate the person filing suit for an injury arising from false marking. 

In light of this notable developing litigation threat, patent holders would be wise to avoid such “marking trolls” by reviewing their markings to ensure the patents remain valid and apply to the marked articles. If there are any doubts regarding a mark’s or patent’s validity, the patent holder should contact an intellectual property attorney to clarify the matter.