Patent Marking: Do It, But Know When to Stop

April 26, 2011, 3:40 PM

Most patent holders know that, under Section 287(a) of the Patent Act, they should mark their patented devices. Failure to mark in accordance with the statute may deprive a patent holder of the right to recover damages in infringement litigation. Because of a recent flood of false patent marking cases, patentees should also know it is important to stop marking patented inventions when the patents expire.

Section 292(a) of the Patent Act has long provided that [w]hoever marks upon, or affixes to ... any unpatented article, the word patent or any word or number importing that the same is patented, for the purpose of deceiving the public ... shall be fined not more than $500 for every such offense. A false patent marking claim requires a plaintiff to prove that (1) the defendant marked an unpatented article and (2) had the intent to deceive the public.

A change in the statute, coupled with two recent Federal Circuit rulings, has resulted in a veritable cottage industry of qui tam false marking suits. One web site has catalogued over 1,400 false marking suits that have been filed since the beginning of 2010.

Qui tam claims are those where a statute authorizes private individuals to bring lawsuits on behalf of the government as well as themselves. They are permitted only in rare circumstances. For example, the federal False Claims Act authorizes whistle blowers to bring qui tam suits alleging fraud on the government by private contractors. Section 292(b) of the Patent Act also allows qui tam suits for false patent marking: [a]ny person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.

Two Federal Circuit decisions have made false marking qui tam suits quite attractive to plaintiffs and their lawyers. In late 2009, the Federal Circuit held in its Forest Group decision that the language of Section 292(b) requires that the penalty for false marking, not more than $500 for each such offense, be applied for each article that was falsely marked (the rule under the prior statute, which had different wording and a potentially unlimited penalty, was that the penalty would apply for each patent that was falsely marked, regardless of the number of articles bearing the mark). Then, in its 2010 Stauffer decision, the court of appeals held that a qui tam plaintiff need not prove any injury to himself in order to have standing to bring suit: Section 292(b) provides standing in itself. As a result, if a company sells 10,000 products bearing patent marking after the patent expires, it is potentially exposed to damages of up to $5 million. Moreover, anyone can assert the claim, even if he did not purchase the product.

A qui tam plaintiff still must prove the defendant had the intent to deceive in falsely marking its products, and in most cases that intent probably is lacking. Yet, intent is a question of fact not easily determined, which means that most courts will not quickly dismiss false marking claims. The costs of litigation and uncertainty of outcome are such that even companies that falsely mark inadvertently will be inclined to settle these claims.

Not surprisingly, the flood of qui tam suits resulting from these decisions has been highly controversial. The Patent Reform Act passed by the Senate in March would limit qui tam marking suits to those brought by the government and private parties suffering competitive injury. In February, the district court for the Northern District of Ohio ruled that the qui tam provision was unconstitutional, and in March the Federal Circuit held that such claims are subject to Rule 9(b)s strict pleading requirements for fraud. Yet, at least for now, even accidental false patent marking potentially can be very costly.

To cope with the problem, patentees should establish procedures to prevent false patent marking and clearly demonstrate that any post-expiration marking was not intentional. Patentees should track when patents expire, have routines to communicate when patent marking should cease, follow those routines, and take steps to verify compliance. Those licensing their patents should include in license grants not only the requirement to mark, but also the requirement to stop upon expiration, and include provisions for auditing and/or certifying compliance.

Christopher Mugel practices intellectual property law from Kaufman & Canoles Richmond, Virginia office. --Christopher J. Mugel