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Damage Awards Increased for Falsely Marking Products as Patented
©2010, Barry C. Kane, All Right Reserved
Another
in the Smart StartSM Series.
It is common to see “Pat Pend,” or
“U.S. Patent X,XXX,XXX” or language of similar import on
products. The notice essentially says, “Stay away or face a
lawsuit.” Moreover, the notice enhances the patent holder’s
ability to recover damages for patent infringement in the event
a lawsuit is filed. A December 2009 decision by the United
States Court of Appeals for the Federal Circuit in the case of
The Forest Group, Inc. v Bon Tool Company et al
substantially increases liability exposure to companies
producing patented products.
Congress recognized that others might
abuse the marking of products as protected by patents. False
marking deters innovation and stifles competition in the
marketplace. If an article within the public domain is falsely
marked, potential competitors may be dissuaded from entering the
same market. False markings may deter scientific research where
the researcher sees a patent notice and decides to forego
continued research to avoid possible infringement. False
marking can also cause unnecessary investment in design-around
costs and costs incurred in analyzing the validity or
enforceability of a patent whose number has been marked upon a
product a competitor wants to make or sell. These types of
injuries can occur each time an article is falsely marked.
To prevent
abuse, Congress enacted a law that prohibits a company from
marking or advertising a product as patented or using any word
or number importing the same is protected by patent, for the
purposes of deceiving the public. The penalty is a fine of not
more than $500 for each offense. The statute explicitly permits
members of the public to sue accused abusers on behalf of the
government. Citizens who successfully prosecute false marking
claims split any damage award with the government. These
actions are known as qui tam suits. Over the last
several years, there has been a dramatic increase in the number
of qui tam lawsuits throughout the United States seeking
damages for false marking.
In the Forest
case, the defendant owned a patent on an improved spring-loaded
parallelogram stilt of the type commonly used in construction.
The claimed stilt contained a loor platform, a shoe platform,
and extendable vertical supports that can be used to move the
shoe platform to different heights. The platforms and supports
are pivotally connected in a parallelogram configuration. A leg
support was attached to the side of the rear vertical support
and attached to the shoe platform by a clamp defined as a yoke.
The improvements were in the yoke design and the design of a
strap attaching the leg support to the user’s leg. The claims
required that the yoke contain a liner. The defendant knew how
the claims of the stilt patent had been interpreted to require
the liner to the yoke.
The
defendant’s stilt product did not contain the liner for the
yoke, yet the products were marked with the defendant’s patent
number. The defendant sued an alleged infringer who filed a
counterclaim for false marking, alleging the patent did not
cover the stilts sold by the defendant because it omitted the
yoke padding. The Court of Appeals held the defendant falsely
marked the stilts as protected by the patented knowing the
claims required the yoke liner. The Court also held the marking
was intentional done to deceive the public. The Court also
construed the statute as allowing plaintiff to recover up to
$500 for each stilt manufactured and sold containing the
false patent marking or notice.
The
importance of this decision is the award is calculated on a per
item or piece basis. For manufacturers who mass-produce items,
the potential damage award can be in the millions if not more.
As a result, it is likely others will strictly scrutinize the
marking practices of companies.
If you
currently are a patent owner, or manufacture product under
license of a patent owner, and placing the patent number on a
product, it is highly recommended you review the scope of the
patent claims to ensure it claims the product. If the product
deviates even slightly from the claims of the patent, you may be
subject to a qui tam “false marking” suit and exposed to
pay out substantial amounts as damages.
If you would
like additional information about the marking requirements, or
have questions concerning patent notices, please feel free to
contact Barry Kane by email at
bkane@kaneplc.com or Eric
Hultman at
ehultman@kaneplc.com. You may also call our office at
(616) 726.5905 to speak with one of our attorneys.
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