Understanding false patent marking in packaging
edited by Linda Casey -- Packaging Digest, 7/12/2010 3:43:21 PM
Packaging operations may take great pains to avoid statements on product labeling and packaging that are not true or could be misconstrued, including any labeling about product and package patents. Yet, false patent marking cases continue to be uncovered.
What is false marking?
Let's start with a very basic definition of what the Federal Patent Laws consider "false marking." Essentially, false marking involves a patent holder that labels or "marks" her patent number on products when his or her patents do not in fact cover those products.
These same laws that prohibit false marking also permit both individuals and companies alike-regardless of whether they have experienced any specific injury-to bring false marking lawsuits.
Punishment and protection
Critically, if the patent owner fails to mark her patented products, he or she forfeits damages for any infringement that occurred prior to providing actual notice, e.g., filing of the lawsuit, to the infringer. Accordingly, the law provides a strong incentive for patent owners to mark their products.
At the same time, the patent laws also strive to discourage people from attempting to purposefully deceive the public by marking her products with patent numbers that do not cover those products or with statements such as "patent pending" when no patents are in fact pending.
The patent laws also expressly authorize what are often referred to as "qui tam" actions whereby any person-regardless of whether they have experienced any specific injury-can bring a lawsuit for a false marking violation so long as the person who initiates the litigation shares any recovery with the government.
A flood of false marking case filings
A sharp increase in false marking qui tam actions this year is the direct result of the Federal Circuit's December 28, 2009, decision in Forest Group wherein the Court held that a fine of up to $500 for each, individual article mismarked is the appropriate penalty for false marking.
Under the Court's ruling, just a single act of false marking can lead to severe penalties. For instance, if a company runs a single shift on an assembly line that produces 1,000 individual falsely marked products/day, this company conceivably could incur a $500,000 false marking penalty for each day of production.
The "per-article" penalty possibilities have resulted in plaintiffs filing more than 100 false patent marking cases in the first four months of this year alone. This is roughly three times as many false marking lawsuits as had been filed in the previous 10 years combined.
Preventing ‘trolls'
The Forest Group Court recognized that its "per article" interpretation might "encourage ‘a cottage industry' of false marking litigation by plaintiffs who have not suffered any harm," and may well lead to a "possible rise of ‘marking trolls' who bring litigation purely for personal gain." The Court concluded, however, that such activities are permitted by the statute's allowance of qui tam actions.
Perhaps attempting to assuage fears of those worried about a rise in "marking trolls," the Court noted that although the statute requires a "per-article" fine, district courts still maintain discretion as to the amount of the "per-article" fine. Consequently, "[i]n the case of inexpensive mass-produced articles, a court has the discretion to determine that a fraction of a penny per article is a proper penalty."
New legislation on the horizon
The first half of 2010 has seen an unprecedented flurry in the filing of these false marking lawsuits against defendant companies of all stripes. The recent deluge of cases makes two things clear: (1) the recent ruling by the Court of Appeals for the Federal Circuit in Forest Group Inc. versus Bon Tool Co., 590 F.3d 1295 (2009) sparked these lawsuits; and (2) no industry is immune from these lawsuits.
Moreover, Congress' recently proposed legislation-HR 4954-would essentially preclude qui tam actions by limiting the possible class of false marking plaintiffs to those who have suffered a competitive injury as a result of any alleged false marking. In the meanwhile, the number of false marking litigations continues to grow.
A note from the Packaging Digest editors:
The article authors- Joseph J. Berghammer, a shareholder at Banner & Witcoff, and Timothy J. Rechtien, an associate at Banner & Witcoff-have generously offered their opinions for the benefit of Packaging Digest's readers for educational and informational purposes.
Berghammer handles litigation, counseling and prosecution matters and Rechtien handles both litigation and patent prosecution matters for the firm's clients. Berghammer and Rechtien's opinions are their own, though, and do not reflect the opinions of Banner & Witcoff.
If you would like to contact Berghammer or Rechtien in their professional capacities, you can reach them at jberghammer@bannerwitcoff.com or trechtien@bannerwitcoff.com respectively. Please do not construe any part of this article as legal advice.
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