Wednesday, October 6, 2010

Recent Explosion of False Patent Marking Lawsuit

A recent Federal Circuit decision, Forest Group, Inc. v. Bon Tool Co., No. 2009-1044 (Fed. Cir. Dec. 28, 2009), has invoked new interest in the “false marking” statute, 35 U.S.C. § 292. The Bon Tool decision has led to dozens of new lawsuits, and we expect this trend to continue. We encourage our patent-owning clients to contact us to discuss the potential ramifications of, and our recommended responses to, the Bon Tool decision.

The false marking statute allows recovery of “not more than $500 for every such offense” for false marking. Under the statute, anyone with knowledge of false patent marking may bring a lawsuit against the manufacturer or seller of a falsely marked product. The statute is a qui tam statute, whereby the party who brings the lawsuit keeps half of any recovery, with the other half going to the government.

False marking allegations are not limited to cases of outright fraud. For example, in some cases a plaintiff may allege “false marking” where the product in question was covered by a patent, but where the patent has expired.

Before the Bon Tool decision, there were few reported false marking cases. Some of those cases held that the plaintiff’s recovery was limited to $500 per “decision to mark” – essentially, $500 per product line. Thus, a manufacturer who had applied a false patent mark to tens of thousands of units would be liable only for a single $500 penalty. But in Bon Tool, the Federal Circuit held that the statute permits a penalty of up to $500 for each item that is falsely marked. Now, it may be that a manufacturer who has applied a false patent mark is potentially liable for up to $500 per unit. Especially for mass-produced consumer products, the Bon Tool decision may create vastly larger potential liability for the manufacturer. Likewise, the decision creates significantly greater incentives for opportunistic plaintiffs to bring suit.

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