Virginia Business Law Update : Virginia Business Lawyers & Attorneys : PCT Law Group : Litigation Defenses, Contract Disputes, Business Formation : Northern Virginia, Arlington, Fairfax, Alexandria

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There has been a lot of recent talk, blog posts, articles, court activity and even proposed legislation in Congress around the issue of “False Patent Marking.”  What does it all mean and why should small- and medium-sized enterprises (SMEs) care!?  Well, I present answers, in brief, to these questions below.

The first thing to know is that the U.S. Patent Laws allow patent owners to give notice to the public by affixing a notice to the patented product (or its packaging if marking the product is not practical or possible) such as “Protected by U.S. Patent No. 3,141,592”  See 35 U.S.C. § 287(a).  This is colloquially known as the “patent marking” statute.  Absent such a marking, in most cases, a patent owner cannot recover damages for patent infringement unless they can prove the infringer was notified of the infringement.

Second, we know that affixing a patent notice to a product (or its packaging) not only acts as a deterrent to competitors by putting them on notice, but it also has some marketing cache!  Thus, that is why it is common to see not only actual patent number notices, but also notices of “patent pending” on many products.

Third, there is also what is known as the “false marking” statute which prohibits anyone from marking a product (or its packaging) with:

• an expired patent number
• a false patent number
  
• with the words “patent applied for” or “patent pending” when no application for patent has been made or is no longer pending, respectively.
  

See 35 U.S.C. § 292.  Each of these three false marking offenses, however, must be shown to have been done “for the purpose of deceiving the public,” and not merely done as a result a good faith mistake.

What makes the false marking statute interesting is that it contains a whistleblower-type provision.  That is, any private citizen can sue the manufacturer of a product they believe has been falsely marked to recover “not more than $500 for every such offense.”  Thus, one can imagine that if a company produces 1,000,000 units of a product that in some way was falsely marked, a $500M lawsuit becomes very attractive for anyone with the time and the right contingency law firm behind them.  See Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009).  In fact, over 150 of these types of lawsuits have been filed in the last several months alone!  The only drawback is that 50% of any recovery must go to the federal government.  (Thus, the private citizen in my example can keep only $250M of the possible recoveries – still not too shabby!)

On June 10, 2010, a federal court of appeals, interpreting the false marking statute, ruled that “the combination of a false [patent marking] and knowledge that the [patent marking] was false creates a rebuttable presumption of intent to deceive the public.”  See Pequignot v. Solo Cup Co., Case No. 2009-1547 (Fed. Cir.).  A defendant in one of these false marking suits can successfully defend itself by showing via “a clear preponderance of the evidence that it did not have the requisite purpose to deceive.”  For example, the defendant in the Solo Cup case successfully obtained a dismissal of the suit by explaining that they knew the patent number on their products had expired but it was prohibitively expensive and disruptive to the business to prematurely replace the manufacturing molds which contained the now-expired patent numbers.

So, what should SMEs glean from all this hoopla?  Well, four things:

1. If your enterprise manufactures no products covered by U.S. patents, ignore it;
2. If your company has no patents that cover a specific product, do not “fake it until you make it” by marking it with one or more non-existent patent numbers;
3. If your company has not applied for any patents that cover a specific product, do not use the words “patent pending” in an attempt to obtain marketing cache for such product; and
4. If any of your competitors are manufacturing products which you suspect are falsely marked with an intent to deceive the public, consult a plaintiff’s lawyer!