IP ALERT: Qui Tam False Patent Marking Liability

    5 May 2010

    Typically businesses mark their products with “patent pending” or a U.S. patent number to put competitors on notice that their products are patent protected. While companies tend to focus on the initial task of obtaining intellectual property protection and marking their products, recent court decisions have focused on another question: when should the patent marking be removed?

     

    False patent marking occurs when anyone marks a product as patented or patent pending when the patent or patent application has lapsed. The false-marking statute, 35 U.S.C. § 292, is intended to promote competition as a counterbalance against scams and potentially overreaching claims. Section 292 is a criminal provision with only monetary penalty usually payable to the government. The statute also allows any person to sue on behalf of the Federal Government in a qui tam action and receive one half of any damages. If a party is found to have falsely marked their goods, 35 U.S.C. § 292(a) states the business “shall be fined not more than $500 for every such offense.” 

     

    The Federal Circuit issued a decision in Forest Group, Inc. v. Bon Tool Co. in late December 2009, to address false marking violations. The court held that the $500 maximum penalty attaches to each individual article that is falsely marked, not each decision to falsely mark. According to this court interpretation of Section 292, the damages if found guilty can be astronomical. Since Forest Group, more than 100 qui tam lawsuits have been filed against a myriad of companies such as Fujifilm Holding Corp., United Parcel Service and L’Oreal, alleging “false patent marking.” 

     

    Congress is addressing this sharp increase in filings by introducing bill H.R. 4954 to amend the Patent Reform Act. The amendment would require the plaintiff show competitive injury and compensatory, instead of statutory, damages. In the interim, however, businesses are faced with the onerous task of checking the label and marking of each product and hoping they catch any false marking before a litigious third party.