New Federal Circuit Decision on False Marking

January.19.2010

The Federal Circuit recently issued an opinion that significantly increases the impact of the false marking statute, 35 U.S.C. § 292, which prohibits falsely marking a product with a U.S. patent number. Forest Group v. Bon Tool Co., No. 2009-1044, 2009 WL 5064353 (Fed. Cir. Dec. 28, 2009).

Section 292 assesses a maximum $500 fine for marking an unpatented article with an indication, such as the word "patent" or a patent number, that the article is covered by a U.S. patent for purposes of deceiving the public. 35 U.S.C. § 292(a), ¶ 2. It also prohibits the use of patent markings without the authorization of the patentee, as well as the false marking of a product as "patent pending" or with a patent application number. Private parties can enforce the fines, with any recovery being split evenly between the recovering party and the United States.

Prior to the Forest Group opinion, Section 292 had been generally interpreted to mean the $500 maximum fine was imposed once for each decision to mark falsely one or more products, rather than once for each separate article that was falsely marked. The Forest Group Court rejected this line of reasoning and held the statute's plain language mandates the fine be imposed once for each article that is falsely marked.

In Forest Group, the patent holder was held to have engaged in false marking due to the district court's claim construction, which held that a key claim term did not read on the patent holder's own products. The patent holder had been advised by its patent counsel to modify its products to conform to the construction given to this key term. The patent holder, however, made at least one order for products (from its contract manufacturer) after the claim construction decision was handed down and after receiving the advice from patent counsel, without modifying its products. The district court, adhering to the old rule, assessed a single $500 fine for one act of ordering products bearing the false mark.

The Federal Circuit affirmed the finding of false marking, but reversed the damages award, holding that the plain language of the false marking statute required a separate fine for each falsely marked article. In so doing, it rejected the holding in London v. Everett H. Dunbar Corp, 179 F. 506 (1st Cir. 1910), which had found that the pre-1952 Patent Act version of the false marking statute imposed its then $100-minimum fines on a per-decision basis, primarily because of the inequitable result that would arise from a per-article fine for low-value articles. The Federal Circuit found it significant that Congress, in the 1952 Patent Act, had changed the fine from a $100 minimum to a $500 maximum fine. This change removed the possibility for any inequitable result from a statutory minimum fine. The change also introduced an inequitable result as to the public, should the statute be interpreted on a per-decision basis since a $500 per-decision fine would not deter anyone from falsely marking. The court also noted and rejected various subsequent district court decisions that imposed a time-based approach to Section 292 fines (e.g. $500 per day or per week of false marking).

This decision could have a significant impact on a patent holder's patent marking practices. For example, the practice followed by some patent holders where they provide a laundry list of patent numbers, preceded by a statement the article is covered by "one or more of the following U.S. patents:" will be significantly riskier after Forest Group, if any of the list of patents does not actually cover the marked product. Additionally, continuing to mark a product after a patent on that product has expired will be significantly riskier, particularly if the patent holder is deemed to have knowledge of the expiration dates of its patents. This decision may significantly increase the burdens on patent owners to police their marking practices, to ensure their products are marked only with the actual patent or patents that cover them, and to remove expired patents from the marked articles. Furthermore, it would appear from this decision that patent holders will need to re-evaluate their patent marking practices and decisions each time one of their patents is construed in district court.

This decision could also give defendants in infringement actions a valuable counterclaim to assert, in actions where the plaintiff manufactures its own products, that plaintiff marks its products improperly.