Patent False Marking: Damages
Patent False Marking may expose a party to significant damages claims. Under 35 U.S.C. § 292, any private individual, on behalf of the government, may bring a Patent False Marking suit against any party that (1) marks an unpatented article with (2) an intent to deceive the public. If a party is found to have falsely marked its articles, a court may award damages of “not more than $500 for every such offense.” The imposed penalty will then be equally split between the private individual who brings a Patent False Marking suit and the government.
Patent False Marking and the Solo Cup Case
Patent False Marking has become of critical concern as of late. Until recently, Section 292 suits were rarely utilized other than by a financial competitor. In Pequignot v. Solo Cup Co., a private individual brought suit against Solo Cup Company for falsely marking millions of articles with expired patent numbers. Pequignot alleged that “every such offense” in the statute meant every falsely marked article, and thus an award of up to $500 should be imposed for every article. This case had two key effects: (1) it sprouted “patent marking trolls” or a class of individuals that specifically looked for articles marked with expired patents; and (2) it caused parties to closely consider its patent marking practices.
While the lower court’s determination of the meaning of “offense” in Pequignot v. Solo Cup Co was vacated as moot due to a lack of the deceptive intent element of the statute by the U.S. Court of Appeals for the Federal Circuit, the Federal Circuit subsequently confirmed that theory for the calculation of damages in Forest Group v. Bon Tool. On December 28, 2009, Patent False Marking again became a key issue as the potential for damages awarded skyrocketed. In the underlying case, plaintiff patent holder sued defendant seller for patent infringement and defendant seller counterclaimed under Section 292 for Patent False Marking. The district court granted summary judgment of non-infringement in favor of the seller and assessed the patent holder a $500 penalty for Patent False Marking. The Federal Circuit held that Section 292 provides for a fine up to $500 per article that is falsely marked with a patent number.
Fines for Patent False Marking
The Federal Circuit held that the statute prohibits false marking of “any unpatented article,” and that the plain language of the statute requires a fine to be imposed for every offense of marking any unpatented article. The Federal Circuit goes on to state that the phrase “for the purpose of deceiving the public” creates an additional requirement of intent but does not change the relationship between the act of marking an article and the penalty.
The Federal Circuit dismissed concerns that imposing a fine on a per article basis would encourage a new cottage industry of false marking litigation by patent marking trolls by discussing the Congressional intent behind the statute was to encourage third parties to bring qui tam suits to enforce the statute and the statute states only a maximum penalty per offense. The Federal Circuit emphasized that the statute provides for a fine of “not more than $500 for every such offense,” meaning that courts had the discretion to strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties for small, inexpensive items produced in large quantities.
There is no doubt that this case has increased the incentive for individuals to pursue Patent False Marking claims, meaning that parties must become increasingly cautious and diligent in its patent marking practices.
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