Feature Comment: New and Expanded Uses of Patent Marking Liability

By James G. McEwen[1]

I.        INTRODUCTION

While previously not a hot topic for most companies, patent marking is generating a great deal of interest in the U.S.  As background, 35 U.S.C. §287(a) establishes a mechanism for putting potential infringers on notice of a particular patent where the patent owner labels products manufactured or sold in the United States with the corresponding patent number.  The marking is supposed to be on the product itself, although there are exceptions when there is no practicable mechanism for affixing the label directly to the product.[2]  The benefit to applying the marking is that the patent owner can obtain pre-litigation damages.  Thus, instead of accruing damages after a lawsuit has begun or when the patent owner otherwise puts the infringer on notice, the damages begin when the marked product is put into commerce (i.e., shipped).

While patent marking is not mandatory, it is an important tool to discourage infringement by competitors.  However, to prevent discouraging competition where there is no risk of infringement, Congress enacted a criminal and civil penalty under 35 U.S.C. § 292.  Interestingly, 35 U.S.C. § 292(b) provides that any “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.”  In essence, 35 U.S.C. § 292 provides for qui tam actions by any person, regardless of actual harm to that person.

Liability is Broad

As to when liability attaches, 35 U.S.C. § 292(a) imposes liability on anyone who mismarks a product as being protected by a U.S. patent.  The penalty can be up to $500 per offense, and each offense is for each mismarked article.  Mismarking itself is broader than the patent marking required under 35 U.S.C. §287(a), and applies to any of the following situations:

  1. Where the marking is of an unpatented item but the marking indicates that issued patent covers product; and
  2. Where the marking indicates that a patent application has been filed (i.e., “patent pending”) but where patent application has not been filed.

Further, the marking need not be a marking under 35 U.S.C. §287(a), but also applies to uses in advertising in connection with” the article.  Thus, liability can exist even where the marking is only on a press release or on a package such that damages would not be available under 35 U.S.C. §287(a).

Objective Test for When Mismarking Is Actionable

While the liability is potentially broad, the liability only attaches in a specific instance: where the mismarking is intended to deceive the public.  Thus, even where the article is mismarked, liability will only attach where there is evidence of an intent to deceive.  It is this hurdle which, as will be discussed below, prevents patent owners from being liable under 35 U.S.C. §292 for any mistake as opposed to where there is an actual attempt to harm competition and the public at large.

35 U.S.C. § 292 existed in relative obscurity until 2005, when the Federal Circuit issued its decision in Clontech Lab. Inc. v. Invitrogen Corp.[3] In Clontech, Clontech alleged that Invitrogen had falsely marked its products, and cited a test in 2000, which put Invitrogen on notice of mismarking.  The Federal Circuit stated that the purpose of the 35 U.S.C. § 287 is to provide a mechanism for reliably determining if an article is covered by intellectual property.  However, the Federal Circuit noted that this purpose is frustrated where unpatented articles are mismarked with the intent to deceive.  Thus, 35 U.S.C. § 292 compliments 35 U.S.C. § 287 in ensuring that any markings are genuine or at least are not used with an intent to deceive competitors or the public at large.

At the same time, the court held that 35 U.S.C. § 292 is not a strict liability statute whereby liability attaches merely where there is evidence that the marking is incorrect.  There needs to be evidence of an intent to deceive which is in addition to evidence of a falsity of the marking.  Further, this evidence is not subjective as to the patent owner, but is objective such that the mere incorrect belief by the patent owner does not represent a total defense to liability if the facts show that the belief is not objectively reasonable.  Therefore, the Federal Circuit held that, in order for there to be liability under 35 U.S.C. § 292, there needed to be objective evidence of an intent to deceive the public, and found at least certain products indeed met this test and were mismarked.

Damages Confirmed as Per Article

Clontech seemed to spark the interest of the legal community as there was renewed activity for suits under 35 U.S.C. § 292.  The next unresolved ambiguity was, even assuming that the objective test established in Clontech is met, what would be the liability.  Specifically, it was unclear as to whether the damages are measured per mismarked article or per decision to mark batches of articles.  Moreover, it was unclear as to whether the damages are $500 per article or decision, or could be less than $500.  Both questions were answered in Forest Group Inc. v. Bon Tool Co.[4]

In Forest Group, the patent owner made stilts which were purported to be covered by U.S. Patent No. 5,645,515 (the ’515 patent).  The defendant copied the marked stilts, and the patent owner sued.  Importantly, the patent owner had previously sued another defendant who had also copied the stilts, and at summary judgment, had the court had found that the stilts were not covered by the ‘515 patent.  During the instant trial, the patent owner again lost at summary judgment for the same reason, and yet continued to mark the stilts as covered by the ‘515 patent.  The defendant than counterclaimed under 35 U.S.C. §292, claiming false marking by the patent owner.

On appeal, the Federal Circuit agreed that the stilts were mismarked.  Further, the Federal Circuit found that the objective test was met as the patent owner was on notice of the mismarking due to its having twice lost at summary judgment, which confirmed that the stilts were not covered by the ‘515 patent.  Thus, despite its subjective belief that the stilts were properly marked, the Federal Circuit found that the facts supported a finding that the patent owner had an intent to deceive the public in continuing to mark its stilts.

On the issue of damages, the Federal Circuit found that 35 U.S.C. § 292 requires that the damages be assessed according to each mismarked article.  This was both consistent with the statutory language, as well as with the purpose of preventing patent owners from falsely claiming that articles are patented when they objectively know that they are not.  However, while the idea is to create a steep fine to dissuade harm to the public, the Federal Circuit cautioned that damages need not be $500 dollars, and the district court has discretion to award less.

Current Strategic Uses

With the objective test for when liability attaches as well as the damages being set, the legal community has been subjected to a host of innovative uses of 35 U.S.C. § 292.  The first strategic use takes advantage of 35 U.S.C. § 292(b), which allows enforcement by any member of the public.  The second strategic use is as a counterclaim by a defendant who can claim harm but which also relies upon 35 U.S.C. § 292(b) to obtain damages.  Both theories will be discussed below separately.

1.       Qui Tam Suits and Stand Alone Claims

As noted above, 35 U.S.C. § 292(b) appears to allow suits by any person, regardless of whether they can demonstrate being harmed, so long as the Government receives half of the award.  These suits are usually referred to as qui tam suits.  Qui tam suits are a traditional mechanism which allows a private citizen to sue government contractors for fraud on the government.[5]  Indeed, such qui tam suits have been credited with returning to the Government $16 billion in fraudulent claims that the Government otherwise would not have the resources to pursue.[6]  In essence, a qui tam suit is provided by any law which gives standing to any private citizen to sue on behalf of the Government even if not personally harmed.  In this regard, 35 U.S.C. § 292(b) is such a suit.

This capability has been confirmed in at least one qui tam style suit.  Pequignot v. Solo Cup Co.[7]  In Pequignot, the District Court confirmed that 35 U.S.C. § 292(b) does allow suit by any person, and can be brought without proof of harm since, like all qui tam suits, Congress has conferred standing since the 50% of recovery goes to U.S.  While there is a contrary holding in Stuaffer v. Brooks Brothers, Inc.,[8] until the Federal Circuit resolves the standing issue, it would appear that Pequignot provides the more likely result.

Interestingly, while any person can bring these suits, patent attorneys are more often the person who brings the suits.  The reason is likely simple: a patent attorney does not need to hire outside counsel to evaluate whether a marked product is covered by a particular patent, which makes bringing the suit directly more financially feasible.  However, there is no requirement that only patent attorneys bring the suit.

While there has been a flood of filings in relation to such individuals, [9] it is believed that the increase in stand alone qui tam suits will not last as companies become more sophisticated in their marking techniques. Specifically, companies are now alerted to the fact that there is liability for false patent marking, and are taking precautionary steps to correct any mistakes on their patent markings.  Moreover, even where a mismarking occurs, the mere mismarking is not sufficient as there needs to be evidence of an intent to deceive the public.  In essence and as discussed below, this evidence is hard to obtain and, outside of a lawsuit, not known prior to filing the suit.  This makes bringing a qui tam style suit highly speculative and more easily defeated by any number of defenses which might excuse mismarking which could not be known prior to initiating the suit.  As such, it is more likely that the relative increase in the rates at which qui tam suits for false marking are currently being brought will not sustain itself in the long run.

2.       Counterclaim

As false marking claims can be brought by anyone, another use of false marking claims is brought by competitors.  Competitors have always had the ability to bring false marking suits in state and Federal courts under the rubric of unfair competition and false advertising.  However, these unfair competition style suits are more difficult to bring as they require evidence of competitive harm.  In contrast, false marking suits under 35 U.S.C. § 292(b) can be brought on essentially the same fact pattern, but with a reduced pleading requirement.  Specifically, as noted above, the only evidence required is whether the patent marking or the advertisement of the patent is false, and whether there is objective evidence of an intent to deceive the public.  Notably missing is the requirement that the competitor show actual harm.  Therefore, competitors are going to be more likely to rely on 35 U.S.C. § 292(b) than state and Federal unfair competition laws when alleging false advertising related to patents.

In contrast to qui tam false patent marking suits, actions brought by competitors under 35 U.S.C. § 292(b) are much more likely to succeed.  For instance, both Forest Group and Clontech Lab. were brought successfully by competitors.  Why would suits from competitors be more successful than suits from noncompetitors?  The reason is simple: they are brought in relation to infringement allegations by the patent owner, which results in substantial discovery of the background facts.  Moreover, the requirements for pleading objective recklessness are not far removed from charges of inequitable conduct which are customarily pled as both show an intent to deceive and awareness of some form of patent unenforceability.  Further, where the result of the Markman hearing produces a claim construction that the patent owner’s product is not covered by the asserted patent, this is evidence that the patent owner is on notice of mismarking and any continued marking is actionable.[10]  Also, during the course of discovery or during depositions, the competitor is likely to uncover evidence that shows that the marked product is not covered by the patent as was the case in Clontech Lab.  Lastly, it is always likely that an overly aggressive plaintiff attorney will adopt a claim construction which, while covering the defendant’s good, means the patent owner’s product is no longer covered by the patent.  In any of these situations, given the steep fine per mismarked goods, a competitor would be sorely tempted to add claims of patent mismarking to turn the tables, financially, on the patent owner.

Typical defenses

As noted above, there are large classes of potential litigants who can bring suit.  At the same time, as 35 U.S.C. § 292 is not a strict liability statute, this allows the accused patent owner to plead defenses beyond arguing that their patent marking is correct.  With respect to actions brought by noncompetitors, a common pleading is that the plaintiff has no standing to sue under 35 U.S.C. § 292(b).  While it does appear that 35 U.S.C. § 292(b) should be considered an enforceable qui tam cause of action, the Federal Circuit has not definitively confirmed that 35 U.S.C. § 292(b) is a Constitutionally-permissible cause of action for anyone who cannot show injury in fact.  For this reason, a common defense has been to plead that the plaintiff lacks an injury which allows suit in Federal Court.[11]

Another (and more successful) defense has been to show that the patent owner’s actions do not amount to objective recklessness such that there is no evidence of an intent to deceive the public.  For instance, successful defenses have used advice of counsel as to the form of the marking,[12] evidence that the patent owner is taking commercially-reasonable steps to correct the mismarked products,[13] the patent owner relied upon an incorrect claim construction,[14] and any other evidence to show that any mismarking was not deliberate or otherwise mistakenly done.[15]  Lastly, while such a defense should not be successful as 35 U.S.C. § 292(a) does not require the mismarking to be compliant with 35 U.S.C. §287(a), at least one district court excused a mismarked product as the mismarked product used a label that would not provide notice for purposes of the 35 U.S.C. §287(a).[16]  Thus, when faced with a patent mismarking cause of action, plaintiffs can and have successfully defended themselves by showing the commercial reasonableness of their actions once alerted to a mismarking issue.

Impact of False Marking

As noted above, there has been unprecedented interested in enforcing the false marking statute.  Indeed, there are record numbers of actions filed under 35 U.S.C. § 292, which has inspired a new label for at least the qui tam relators bring such actions: Patent Marking Trolls.[17]  Moreover, there has been the inevitable congressional response in order to curtail 35 U.S.C. § 292 actions.[18]  Given the level of interest, companies need to take action to reduce their exposure to actions under 35 U.S.C. § 292.  As demonstrated above, such actions are generally only those a responsible company undertakes and should be undertaking in the course of managing their patent portfolio. These steps include being aware of when their patents have expired, invalidated, or have had their scope reduced through court action. Yet these are the steps that companies should already have in place in order to safeguard their patent portfolios.  Thus, while companies need to be aware of the new risk posed by 35 U.S.C. § 292 both through direct actions and counterclaims, responsible companies can reduce or avoid this risk using their existing portfolio management techniques with little change to their day to day business operations.


[1] James G. McEwen is a partner at Stein McEwen, LLP.  The opinions in this article do not represent the official positions of Stein McEwen, LLP. This paper is based upon a presentation given March 26, 2010 at the International Conference For the Hongik MIP Inauguration.

[2] When it is not possible to affix the patent marking to product, the law allows the marking to instead be attached a label to the package containing the product.

[3] 406 F.3d 1347; 74 USPQ2d 1598 (Fed. Cir. 2005).

[4] 93 USPQ2d 1097 (Fed. Cir. 2009).

[5] See 31 U.S.C. §3730 as discussed in Kirk v. Schindler Elevator Corp., 2010 U.S. App. LEXIS 7097; Civ. Case 09-1678-cv (2d Cir. April 6, 2010).

[6] Supreme Court restricts whistleblower lawsuits, Washington Times (March 31, 2010).

[7] 640 F.Supp.2d 714, 91 U.S.P.Q.2d 1493 (E.D.Va. Mar. 27, 2009).

[8] 615 F. Supp. 2d 248 (S.D. N.Y. 2009).

[9] Robert J. Kriss, Jeffrey w. Sarles, and Richard M. Assmus, Watch Out for the Patent Marking Trolls, ipFrontline (March 09, 2010) (available at http://www.cafezine.com/printtemplate.asp?id=24147).

[10] Indeed, while the court in Forest Group did not find patent mismarking until after the second summary judgment loss, the Federal Circuit specifically stated that objective recklessness can be shown earlier depending on the facts and sophistication of the patent owner.

[11] A good explanation of this is found in Stuaffer v. Brooks Brothers, Inc., 615 F. Supp. 2d 248 (S.D. N.Y. 2009).

[12] Pequignot v. Solo Cup Co., 646 F.Supp. 2d (E.D. Va. 2009).

[13]Pequignot, 646 F.Supp. 2d.

[14] United States Gypsum Co. v. Pacific Award Metals, Inc., 438 F.Supp.2d 1101 (N.D. Cal. 2006).

[15] Rainworks Ltd. v. Mill-Rose Co., 609 F,Supp.2d 732 (N.D. Ohio 2009); Bibow v. American Saw and Mfg. Co., 490 F.Supp.2d 128 (D. Mass. 2007).

[16] Rainworks, 609 F.Supp.2d 732.

[17] Robert J. Kriss, Jeffrey w. Sarles, and Richard M. Assmus, Watch Out for the Patent Marking Trolls, ipFrontline (March 09, 2010) (available at http://www.cafezine.com/printtemplate.asp?id=24147).

[18] H.R. 4954 (introduced 3/25/2010).

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