Patent, Trademark & Copyright : Law Office of Kloss, Stenger & LoTempio

The latest edition of the proposed patent reform legislation was announced by the leaders of the Senate Judiciary Committee on legislation for patent reform. The act is now called the "Patent Reform Act of 2010" and is memorialized in the form of the Manager's Amendment (“Amendment to S. 515”).

When will this bill become law? This is a good question because it is a follow-up to the Patent Reform Act of 2009, the Patent Reform Act of 2008, the Patent Reform Act of 2007, the Patent Reform Act of 2006 etc. etc. etc.

Among the provisions of this proposed legislation is a modification of the false marking statute. Presently, 35 U.S.C. 292(b) provides that any private citizen can bring a qui tam action on the government’s behalf against an entity that falsely marks unpatented products. However the proposed legislation amends 292(b) to read as follows:

"A person who has suffered a competitive injury as a result of a violation of this section may file a civil action in a district court of the United States for recovery of damages adequate to compensate for the injury."

The Senate bill, if enacted, would have retroactive effect even for still-pending but earlier-filed actions as it states the amendment would "apply to all cases, without exception, pending on or after the date of the enactment of this Act."

Is this another way to protect big business at the cost of the little guy? Or is it just a way stop the onslaught of potential litigation? A list of 75 false marking lawsuits filed in the last two months against over 100 companies can be found on the Gray on Claims law blog. Many of these lawsuits have been filed by qui tam plaintiffs who are individuals or entities specifically formed to litigate such false marking suits and presumably have no claim of "competitive injury." Will they have to find an injured party?

If the patent reform amendment becomes law, qui tam plaintiffs who have filed or intend to file false marking suits for expired patent numbers will have another element to prove to win the case. How will the court define a "person who has suffered a competitive injury?"

Will something that a person would have done if not for the false marking be admissible?

1. Can a plaintiff claim it is a potential competitor and was dissuaded from entering the same market because of the false marking?
2. Can a plaintiff claim it suffered injury because it was deterred from continued scientific research to avoid possible infringement?
3. Can a plaintiff  argue that it suffered a competitive injury because it invested money to analyze patent validity or enforceability?
   

Related posts:

Patent Marking Police" Looking for the Big Jackpot

"Patent Trolls" Search for Falsely Marked Products

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Since my recent blog post entitled "Patent Trolls" Search for Falsely Marked Products the ad hoc “patent marking police” have filed at least 17 lawsuits alleging false marking against 33 different companies. This number is an approximation because False Marking suits are not consistently categorized within the federal court system. To see a list of False Marking suits filed in the last 2 months, go to Justin Gray’s blog, Gray on Claims.

The law allows any private citizen to bring a qui tam action on the government’s behalf against an entity that falsely marks unpatented products. A court can levy a fine for up to $500 for every product that is falsely marked. The final award is split evenly between the government and the person that brought suit.

What will happen if one person wins a huge damages award in one of these cases? How many more would be “Patent Police” will come out of the woodwork? In a blog post on IPWATCHDOG.com you can read A Fanciful False Marking Fiction By a Cottage Industrialist where the author daydreams about how “I just made 42 bajillion dollars today. And it’s not even 9 am.”

How easy is it to file a Patent False Marking complaint? Take a look at this complaint (PDF). Maybe you can be the next bajillionaire.

The two elements of a 35 U.S.C. § 292 false marking claim are:

1. marking an unpatented article; and
2. intent to deceive the public.

It will be interesting to see if the courts will find the necessary intent or mens rea to find false marking and what the courts will do in the “exercise of their discretion” as to the size of damage awards. Some argue that if you are marking a product with a patent number you should know when it expires and what it covers. Intent to deceive should be easy to prove. (See comment #7 by "Noise above Law"on IPWATCHDOG's post)

Now what about the damages award? The Federal Circuit held in the case of Forest Group, Inc. v. Bon Tool Co., No. 2009-1044, that the plain language of the false patent marking statute, requires courts to impose penalties for false patent marking on a “per article” basis.

The §292 statute provides a fine of “not more than $500 for every such offense. This does not mean that a court must fine those guilty of false marking $500 per article marked, even though it can. The statute provides district courts 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.

This means a court has the discretion to determine that a fraction of a penny per article is a proper penalty. The court's exercise of discretion is a balance between the chilling effect of false marking and imposing a mind boggling 42 bajillion dollars to be shared between the government and a brilliant member of the “patent marking police."

What is the chilling effect of a patent whose number has been falsely marked upon a product?

• Potential competitors may be dissuaded from entering the same market
• It may deter scientific research when an inventor decides to forego continued research to avoid possible infringement
• Can be the reason for unnecessary investment to design around
• Increases cost incurred to analyze patent validity or enforceability

I think the chilling effect of False Marking may be a serious consideration but I don’t think courts are going to start printing money. I have learned that what seems too good to be true, usually is. So don’t buy an armored truck to carry away your billions of dollars just yet.

Before taking my first law school exam Joe Walsh, a fellow law student, said to me that his attorney father gave him this advice: "If you don’t know what the answer to a question is, make pretend you are the judge and come up with a fair resolution."

Okay, you are the judge, what do you think is fair?

Related posts:

"Patent Trolls" Search for Falsely Marked Products

"Patent Reform Act of 2010" and False Marking Rule Change

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What a corporation should know about intellectual property law...

It is now in vogue for the new breed of "patent troll" to sue corporations in the US Federal Courts on behalf of the government for falsely marking unpatented products with patent registration numbers.

Corporations need to be able to identify and protect their intellectual property. However, corporate "Intellectual Property Management" and exploitation isn't always that simple. A corporate "IP Committee" should have a good understanding of the law concerning patent marking. Falsely marking a product can expose a corporation to substantial damage claims under 35 U.S.C. § 292 and not marking a patented product at all, may limit the ability of a patent holder to recover damages for infringement under 35 U.S.C. § 287(a).

Section 292 of the Patent Act prohibits:

• Counterfeit marking: marking a product with a patent number without the patent owner’s permission

• False patent marking: marking a product with a patent number on an unpatented article, or the use of “patent applied for” or “patent pending” when no patent application is actually pending for the product

The statute allows any private citizen to bring a qui tam action on the government’s behalf against an entity that falsely marks unpatented products. A court can levy a fine for up to $500 for every product that is falsely marked. The final award is split evenly between the government and the plaintiff that brought suit.

The Court of Appeals Two-step Test (Clontech Laboratories, Inc. v. Invitrogen Corp.)

To determine whether the false patent marking statute has been violated evidence must show:

1. That patent’s claims do not cover the falsely marked product; and
2. The mismarking was done with intent to deceive the public.

Over the last few years, the false marking statute has gained popularity as private patent lawyers have brought false marking claims against corporations who have marked products with expired patent numbers. Patent counsel should advise their clients to examine their patent marking practices because the new patent marking trolls are searching for falsely marked products as a basis to file a lawsuit.

Plaintiffs are seeking literally billions of dollars in penalties. How many cups does the Solo Cup Company manufacture and sell? What about the Crayola Crayon Company? How much would the fine be, if a $500 fine was levied for every cup or box of crayons sold by these companies?

In 2007 a Washington patent attorney brought suit against Solo Cup Co. In Pequignot v. Solo Cup Co., 540 F. Supp. 2d 649 (E.D. Va. 2008) Pequignot alleged that Solo Cup was manufacturing and selling millions of cups, lids, plates, bowls, and utensils with expired patent numbers.

Recently HEATHCOTE HOLDINGS CORP, INC filed a complaint (.PDF) claiming false patent marking against CRAYOLA LLC in the United States District Court in the Northern District of Illinois. Amount Demanded:$9,999,000.00

On December 28, 2009, the Federal Circuit held in the case of Forest Group, Inc. v. Bon Tool Co., No. 2009-1044, that the plain language of the false patent marking statute, requires courts to impose penalties for false patent marking on a “per article” basis.

Prior to this Federal Circuit decision, many district courts had interpreted the false marking statute to impose a single fine or penalty for each “decision” to falsely mark products, irrespective of the number of articles manufactured. As a result, now each falsely marked item may represent a $500 fine.

The court did rule however that "in the case of inexpensive mass-produced articles, a court has the discretion to determine that a fraction of a penny per article is a proper penalty" and that district courts have the discretion to strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties for products produced in large quantities.

Bottom Line: Properly Mark Patented Products

1. Mark patented products with the proper patent registration number so as to give notice and preserve infringement damages.
2. Be aware of when the patent registration expires and stop marking products at the end of the patent term.
3. Don't mark products with patent numbers unless the patent claims cover the product.

Related posts:

"Patent Marking Police" Looking for the Big Jackpot

"Patent Reform Act of 2010" and False Marking Rule Change

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