Expert Commentary

Patent Marking in Light of

Marking a company's products with its patents is a critical step in making sure that its patent has teeth behind its bite. By marking products, organizations ensure that they will be able to recover damages against subsequent infringers. Accordingly, prudent business strategy dictates that, where possible, firms should mark their products with its patents. In light of the Federal Circuit's recent ruling in Forest Group Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009), however, companies must also be careful not to be too cavalier in their marking practices.


Intellectual Property
April 2010

A patent gives the holder the exclusive right to practice its invention. As part of the right to exclusively practice the invention, the patent holder also has the right to sue for infringement when another practices the invention without its permission. Damages, however, can only be recovered if the infringer was on notice of the patent. The simplest and easiest way to give the public notice of patent is to mark the product. In short, marking products helps ensure an organization's ability to collect damages for infringement. But patent marking should not be done recklessly.

False Marking Damages Can Be Significant

Under 35 U.S.C. § 292(b), any person may bring suit against a company for false marking. Moreover, false marking carries a fine of up to $500 for "every such offense."1 In Forest Group, the Federal Circuit interpreted the "every such offense" language to mean per article. Under this view, a widget manufacturer that falsely marks 1,000 widgets faces a fine of up to $500 per widget or $500,000! False markings per article damages structure can easily eliminate your company's profit margins on its products.

It should be noted that 35 U.S.C. § 292 only authorizes fines up to $500; it does not require them. Indeed, the fine can be as small as mere fractions of a cent per article. Nevertheless, it does not take a finance degree to see that the price you pay for false marking can be devastating to the financial health of your company.

The Increased Popularity of False Marking Suits

Furthermore, given that a false marking suit can be brought by any plaintiff, a very real possibility exists that false marking will become the cause of action du jour for patent trolls. In fact, in the 3 months following the Federal Circuit's ruling in Forest Group, 114 false marking suits have been filed.2

The elements necessary to prove a false marking claim make it clear why the cause of action is becoming so popular among plaintiffs. False marking requires a plaintiff to prove two elements: (1) marking an unpatented article and (2) intent to deceive the public. Moreover, as the Federal Circuit held in Forest Group, the intent to deceive requirement is satisfied where the patentee lacked a reasonable belief that the articles were properly marked. Forest Group, 590 F.3d at 1304.3

In light of the Federal Circuit's ruling, there is no easy way for a defendant in a false marking suit to control the costs of the suit. False marking suits can easily require substantial discovery surrounding the defendant's intent and pose the threat of significant damages. Accordingly, the best strategy for firms is to try to minimize the possibility of a false marking suit altogether.

Practices To Help Avoid False Marking Suits

While there is no way to eliminate the possibility of a false marking suit, basic risk management practices can help companies decrease the chances of being in such suits in the future. By employing practices, such as having the legal department approve and review the packaging and labeling of products, tracking the expiration of patents, and seeking indemnification from patent holders licensed from, companies can reduce the risk of a false marking suit.

Having the legal department oversee marketing and packaging departments can be very beneficial in terms of avoiding a false marking suit. Overzealous patent marking by the marketing department on products can easily lead to a false marking suit. As such, companies should make sure that marketing knows not to use the words "patent" or "pat." on products without first seeking the legal department's approval. By making sure all packaging is preapproved by the legal department, organizations can reduce the chances that patents appear somewhere they should not be. In addition, spot checks should also periodically be conducted of all products and packaging to make sure that the approval process did not break down.

In addition to making sure all patent marking is preapproved, firms should also monitor the expiration of their patents. If the legal department has made the decision to mark a product with a patent, be aware of when the patent will expire and be prepared to stop marking the product at that time. Inadvertently using an expired patent to mark a product does not necessarily constitute false marking, but it does create a situation where litigation is likely. Accordingly, good business practice dictates that the expiration of patents be tracked and marking products ceases once the patent expires.

Last, organizations can reduce the likelihood of false marking suits by seeking indemnification from third parties who license their patents to them. Often as part of a patent licensing agreement, the licensor will require the licensee to mark its downstream product with the licensor's patent. While such an agreement may be necessary for a company to create its product, it also exposes the company to potential false marking claims. Accordingly, where a firm agrees to mark its products with a third-party patent, indemnification for any false marking claims that may arise in regards to such a patent should be sought from the third party.

Conclusion

The sheer number of cases that have been filed following the Federal Circuit's ruling in Forest Group Inc. v. Bon Tool Co. make it clear that false marking suits have become quite popular among plaintiffs. As such, false marking suits should be a very real concern for many organizations. Given that there is no way to mark products and eliminate the possibility of a false marking suit, companies should instead take steps to decrease the likelihood of such a suit. Specifically, wise organizations will have their legal departments monitor any patent marking done by the marketing and packaging teams, track the expiration of patents, and seek indemnification from licensors who require to marking of downstream products.


1In the event a plaintiff recovers for a false marking suit, one-half of the damages go to the plaintiff and the other half go to the government.

2See Erin Coe, "False Marking Wave Can't Last, Attys Say," March 23, 2010 (accessed April 26, 2010).

3Currently, H.R. 4954 is before the House Committee on the Judiciary. If adopted, H.R. 4954 would likely reduce the popularity of false marking suits, as H.R. 4954 changes the damage structure for false marking suits by requiring plaintiffs to show competitive injury and instituting compensatory rather than statutory damages.


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