False Marking Claims Are Expected To Continue
In December 2009, in The Forest Group, Inc. v. Bon Ton Tool,1 the Federal Circuit held that the false marking statute (35 U.S.C. § 292) imposes a penalty of up to $500 for each product that is marked with an incorrect patent number for the purpose of deceiving the public.2 Section 292 is a qui tam, or private attorney general, statute. This means that Congress specifically contemplated that private parties could bring suit to enforce the statute and provided a monetary incentive to encourage private citizens to do so.
In Forest Group, the Federal Circuit recognized the possibility that interpreting the fine contemplated by Section 292 to apply on a per article basis could create a surge of “marking trolls” who bring litigation purely for personal gain. Nevertheless, the Court concluded that by permitting members of the public to sue, Congress encouraged individuals to help control false marking. After the Forest Group decision, many commentators expressed concern that a new cottage industry of “marking trolls” would be encouraged.3 As predicted, since the Forest Group decision, more than 500 false marking lawsuits have been filed.4 One company alone has been the plaintiff in 44 cases in the Eastern District of Texas, the majority of which were false marking suits.5
The Federal Circuit subsequently issued two decisions that many had hoped would judicially slow the swell of false marking litigation. In Pequignot v. Solo Cup Co.,6 the Federal Circuit held that, although improperly marking items with expired patents was false patent marking, the standard for proving deceptive intent was “particularly high,” and required “a purpose of deceit, rather than simply knowledge that a statement is false.” Acting on the advice of counsel, Solo Cup had included on its packaging language that the product “may be covered” by certain patents. The Court concluded that Solo Cup had rebutted the presumption of intent to deceive with this “may be covered” language.
In Stauffer v. Brooks Bros. Inc.,7 the plaintiff accused Brooks Brothers of falsely marking bow ties with patents that expired almost 50 years ago. The district court had dismissed the case holding that a private person does not have standing unless he shows that he or the government has suffered an injury. The Federal Circuit reversed this ruling, concluding that, by enacting Section 292, Congress defined an injury in fact to the United States. In other words, violation of the statute inherently constitutes an injury to the United States.
Even though the Federal Circuit has held that the plaintiff must prove intent to deceive, it is presently unclear whether a plaintiff is required to meet fraud standards at the pleading state.
While qui tam false marking plaintiffs have yet to prevail at trial and recover significant damages award, false marking suits are expected to continue with plaintiffs imposing serious discovery costs on defendants to force settlement.8
At least two legislative provisions to stem false marking suits were proposed to amend the Patent Reform Act of 2010. The first would have required a plaintiff to show that it suffered a competitive injury as a result of the false marking. The second would have changed the language of Section 292 to expressly assess one $500 fine, in the aggregate, for all offenses of false marking. It presently appears unlikely that Congress will tackle patent reform in the lame duck session.9 Even if another comprehensive patent reform act is not proposed in the coming legislative session, legislative proposals to end false marking actions likely will be revived.
1 590 F.3d 1295 (Fed. Cir. 2009).
2 35 U.S.C. § 292 provides that half of the fine goes to the party that sues for false marking and the other half of the fine goes to the federal government. (On remand, in Forest Group, the actual amount of the fine imposed was less than $7,000).
3 Erin Coe, False Marking Claim Wave Can’t Last, Attys Say (Mar. 23, 2010), available at http://www.law360.com/articles/155305.
4 C. Edward Polk Jr. & Justin E. Gray, Fighting False Marking Through Gov’t Settlements (Nov. 2, 2010) available at http://www.law360.com/articles/205540; Mike Cherney, False Patent Marking Dominates Rise in IP Suits In Q3 (Oct. 11, 2010) available at http://www.law360.com/articles/199929.
5 Joseph Marks, Cisco Escapes False Marking Suit Over Cable Boxes (Oct. 8, 2010) available at http://www.law360.com/articles/199951.
6 608 F.3d 1356 (Fed. Cir. 2010).
7 No. 08-CV-10369 (Fed. Cir. Aug. 31, 2010).
8 Erin Coe, Solo Cup Won’t Put Dent In False Marking Suits (June 16, 2010) available at http://www.law360.com/articles/175398.
9 Erin Coe, Election Leaves Fate of Patent Reform Up In The Air (Nov. 3, 2010) available at http://www.law360.com/articles/206540.