Federal Circuit Finds False Marking Statute Imposes Liability for Each Infringing Article

In Forest Group Inc. v. Bon Tool Co., 93 USPQ2d 1097 (Fed. Cir. 2009), Forest Group, Inc. owned U.S. Patent No. 5,645,515 (the ’515 patent).  The ‘515 patent is drawn to a stilt.  Forest Group licensed the patent to Southland Supply Company (Southland).  Southland sold the patented stilts to Bon Tool.  Subsequently, Bon Tool began purchasing exact replicas of the patented stilts made by a Chinese supplier.  Forest Group sued Bon Tool for patent infringement for the sales of the replicas.

As a defense, Bon Tool alleged, among other defense, that the patent was invalid and counterclaimed for damages for false patent marking in violation of 35 U.S.C. §292.  At trial, the district court construed the claims in a manner which precluded infringement.  Thus, the district court dismissed the infringement claim at a first summary judgment, but found the patent otherwise valid.

In regards to the counterclaim of false marking, the district court found that the stilts were improperly marked for at least stilts manufactured by Forest Group after November 15, 2007.  The district court found that since, on November 15, 2007, Forest Group had lost a second summary judgment in another litigation over the ‘515 patent which demonstrated that the ‘515 patent did not cover the stilts produced by the Forest Group, and since this was the second such ruling, Forest Group knew that their stilts were not covered by the ‘515 patent.   As Forest Group had knowledge that the stilts no longer were covered by the ‘515 patent as of November 15, 2007, the continued marking of the stilts was contrary to 35 U.S.C. §292.  As a penalty, the district court assessed a $500 fine for the single decision to continue marking the stilts.  The district court did not assess the fines based upon each manufactured stilt.

On appeal, the Federal Circuit reviewed whether Forest Group had the requisite knowledge needed to find a violation of 35 U.S.C. §292.  Specifically, the Federal Circuit noted that, to find a violation under 35 U.S.C. §292, the claimant must show both that the patent number appears on an unpatented article, and there was an intent to deceive the public.   The Federal Circuit quoted Clontech Labs. Inc. v. Invitrogen Corp., 406 F.3d 1347, 1352 (Fed. Cir. 2005) in noting that for purposes of 35 U.S.C. §292, “[i]ntent to deceive is a state of mind arising when a party acts with sufficient knowledge that what it is saying is not so and consequently that the recipient of its saying will be misled into thinking that the statement is true.” (citing Seven Cases of Eckman’s Alterative v. United States, 239 U.S. 510, 517–18 (1916)).”  This evidence needs to be shown by at least a preponderance of the evidence.  Further, a bare assertion by an accused party that it did not intend to falsely mark is “worthless as proof” of a lack of intent to deceive.

Under this standard, the Federal Circuit held that there was a lack of intent to deceive before November 15, 2007.  Specifically, the court found it credible that the inventors truly believed the stilt was covered by the ‘515 patent, and that the mere first summary judgment finding non-infringement was not sufficient to show intent to deceive by itself.  Instead, the Federal Circuit noted that the district court’s decision was supportable given the lack of academic knowledge of the inventors about patents, as well as the fact that their patent was prosecuted by an experienced patent attorney who had a model of the stilt being patented.  Thus, it was not until the second summary judgment that the inventors should have been aware that the ‘515 patent did not cover their stilt and that there was no evidence as to why they continued marking the stilts with the ‘515 patent.

The Federal Circuit specifically noted that they are not making a bright line rule that there need to be two adverse summary judgments before finding intent.  Instead, the Federal Circuit noted that under the facts of the case, the second summary judgment assuredly put Forest Group on notice that their stilts were not covered by the ‘515 patent and that their continued marking evidenced the requisite intent to deceive.

In regards to the adequacy of the $500 fine, the Federal Circuit turned to the statute to determine whether the $500 fine was per article, or per each decision to mark a batch of articles with the patent number.  As noted by the Federal Circuit, 35 U.S.C. §292 “prohibits false marking of ‘any unpatented article,’ and it imposes a fine for ‘every such offense.’” As such, the Federal Circuit found that the statute requires the fine for each article, not merely for each decision to mark multiple articles.   While noting that this decision is contrary to London v. Everett H. Dunbar Corp., 179 F. 506 (1st Cir. 1910), the Federal Circuit also noted that the statute has changed since the decision in London and that the Congressional intent is clear in requiring the fine per article.

Further, the Federal Circuit noted that there are strong public policies in deterring false marking that support its interpretation that 35 U.S.C. § 292 imposes the fine per article.  In contrast, the Federal Circuit noted that the arguments that the fine should be limited to $500 per decision would eviscerate both the intent of the statute and ignore the statutory language itself.  As such, the Federal Circuit remanded the case to the district court to determine the number of falsely marked articles and to reassess the fine accordingly.

Significance for Patent Owners

In general, patent owners can enjoy significant benefits by marking that their products are covered by U.S. patents.  However, where the products are not actually covered by an enforceable U.S. patent, these markings can become a large liability.  Thus, as demonstrated in Forest Group, patent owners need to be especially careful to ensure that they are behaving reasonably in policing their marked products to ensure that they are not running into potential liability problems under 35 U.S.C. §292.

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