Patent Marking

In Forest Group, Inc. v. Bon Tool Company, the Court of Appeals for the Federal Circuit held that penalties for selling falsely marked goods—goods on which the patent marked is not valid—  applied per item and not per decision.  Courts had previously held that the penalty for a false marking was only a maximum of $500 per decision (a one-time, flat $500 fine), but Forest Group vastly increased the potential liability to $500 multiplied by the number of items sold.  Judge Moore of the Court of Appeals for the Federal Circuit reasoned, in making her decision, that a fine per decision did not have the desired deterrent effect and that a per item penalty was instead necessary. 

While courts have discretion to assess lower penalties, the penalty could still be extremely large when considering the quantity of some products sold today.  Half of the penalty assessed is payable to the suing party while the other half goes to the government.  In addition, the language of the statute permits anyone to sue, regardless of whether or not they claim injury from the false marking.

In the wake of the Forest Group decision, a dramatic increase in false marking qui tam actions has occurred.  The highly publicized qui tam action against Solo Cup for marking its cups with an expired patent is just one example of a myriad of actions filed by qui tam plaintiffs.  Members of the public can browse the aisles of local stores for items with expired patents, looking for a potential lawsuit.  Consequently, companies now need to be on careful watch to ensure that the patents marked on their products are not expired. 

Congress has stated an intention to reform the marking statute to limit the liability that companies face from qui tam marking actions.  On March 25, 2010, H.R. 4954 was introduced, which would have the effect of limiting the potential plaintiffs to only those who have suffered a “competitive injury” as a result of the false marking.  "Competitive injury" is likely difficult to demonstrate for a small entity, so the proposed legislation would favor large corporations.  According to THOMAS (Library of Congress), the bill has now been referred to the House Committee on the Judiciary.

At Maier and Maier PLLC, we will be monitoring any developments in the trend of qui tam false marking cases as well as any proposed reform to the marking statute.  Maier and Maier is also available to assist companies in decreasing the potential liability faced from false marking.  Please contact us to schedule a consultation.