Hefty Fines For False Patent Marking

As many patent owners and licensees are aware, U.S. law allows manufacturers of patented products to mark the product with the number of the relevant patent (or simply “patent pending” if a patent has been applied for).  This not only allows a patent plaintiff to collect damages for infringement which occurred prior to the accused infringer receiving actual notice, but also may provide a benefit with respect to the perceived quality of the product.  However, the law also imposes penalties for products which are improperly marked.

Under the statute, a party who falsely marks an unpatented article with a patent number or even the word “patent” may be subject to a fine of “not more than $500 for every such offense.”  35 U.S.C. § 292.  The statute also contains an intent element, requiring that liability be limited to those cases where the false marking was done “for the purpose of deceiving the public.”

Despite the language referring to a penalty “for every such offense,” many courts have interpreted the statute as limiting the total damages to a single $500 fine, even in cases where large quantities of a product are mismarked over a period of time.  This interpretation is based in part on London v. Everett H. Dunbar, a 1910 1st Circuit case evaluating a previous version of the statute.  179 F. 506.  That version, before being revised in 1952, listed the statutory damages as “not less than one hundred dollars” for each offense.  The London court held that the total damages should still be limited to $100, reasoning that a minimum $100 fine for each unit sold would be out of proportion to the product value in cases involving very cheap products.  Courts continued to follow this interpretation, even after the damages provision was revised from “not less than $100” to “not more than $500” per offense.

However, a recent ruling from the Federal Circuit held that each falsely-marked unit of a product may qualify as a “separate offense” when evaluating damages under the statute.  In Forest Group, Inc. v. Bon Tool Co., the court found that the 1952 statutory revision from a minimum to a maximum fine eliminated the policy concerns regarding excessive damages for cheaper products, as courts now have the discretion to award damages based on a much lower per-unit amount.  93 U.S.P.Q.2d 1097 (Fed. Cir. 2009).  The opinion also noted that Congressional intent favored a per-article award based on another statutory provision which permits members of the public to bring false marking actions on behalf of the government and keep half of any proceeds, reasoning that no plaintiff would go to the expense of pursuing litigation in order to split a single $500 award.

Based on the holding in Forest, manufacturers should to be careful to ensure that any product marked with a patent number or “patent pending” is covered by the listed patent and that the patent is still enforceable.  Particular attention should be paid to products which are manufactured in large quantities, as a total damage award for false marking may quickly escalate based on the per-unit calculation.

Please contact us if you would like more information on patent marking.