Among the sweeping changes to the U.S. patent system by the Leahy-Smith America Invents Act, enacted on September 16, 2011, are reforms to the false marking statute. The false marking statute safeguards against the use of a false patent mark with an intent to deceive the public and was designed to permit a private individual to sue on behalf of the U.S. government. One-half of any recovered penalty is awarded to the person asserting the false marking claim while the other half goes to the U.S. government.
An accurate patent mark provides a number of benefits such as putting the public on notice that government granted monopoly rights cover a marked product. Patent marking also helps maximize recovery of damages. With respect to patented articles (as opposed to patent processes or methods), patent marking is a prerequisite for recovering patent infringement damages. A patentee may only recover damages for infringing activity that occurred after the patentee provided actual or constructive notice (met by marking) of its patent rights. Patent marking is not limited to products but also applies to websites, advertisements, brochures, and other marketing materials.
Prior to September 16, 2011, one key decision relating to the false marking statute was rendered by the U.S. Court of Appeals for the Federal Circuit (CAFC) in December of 2009. See Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009). In that decision, the CAFC held that where a patentee falsely marks an article with an intent to deceive the public, the false marking statute permits a penalty of up to $500 per article. This decision expanded the liability of patentees and licensees whose liability was previously limited to $500. Because a false marking suit is a qui tam action - an action that allows any person to raise a suit and split any award with the U.S. government - a huge spike in false marking lawsuits ensued following the December 2009 decision with over 1,000 lawsuits filed against unsuspecting patentees.
Prior to enactment of the America Invents Act, an act of false marking included: marking a product “patent pending” when no patent application is pending, marking a product with a patent number or “patent” when the product is unpatented or the patent is expired, marking a product with a patent number where the claims of the patent do not cover the product, or marking a product with a patent number of another without the patent owner’s consent. Also, a false marking claim could by raised by any person, whether or not the person was actually harmed by the mismarking, and included the potentially hefty penalty of up to $500 per article for violators of the false marking statute.
The false marking statute changes substantially under the America Invents Act. First, a private party is no longer automatically eligible to raise a suit for damages in the name of the U.S. government. Instead, the new law requires that a plaintiff have “suffered a competitive injury.” See Leahy-Smith America Invents Act of 2011, 35 U.S.C § 287 (2011). Second, it is no longer a violation of the false marking statute to mark a product with a patent number or “patent” when the product is expired. These changes are effective immediately and apply to all false marking cases pending on, or commenced on or after the September 16, 2011 enactment date.
For the numerous patentees who have been accused of falsely marking products with expired patent numbers, the immediate and retroactive application of the changes to the false marking statute is a godsend. Many defendant patentees have already raced to the court with motions to dismiss and at least one district court judge in Texas has started to clear his docket of false marking suits sua sponte. With the retroactive application of the new law and the new requirement for a plaintiff’s “competitive injury,” it seems evitable that other similar false marking suits will share the same outcome.
What about false marking suits alleging false marking on grounds other than an expired patent? What will be their outcome? Those cases should have a fighting chance provided they can meet the “competitive injury” requirement. But since the new law does not define or offer any guidance regarding “a competitive injury,” the requirement will surely be open to interpretation and will give a false marking claimant the added burden of proving such injury. But how will a claimant prove a competitive injury? It is anyone’s guess and it will no doubt be interesting to see what evidence a court will accept as sufficient.
The hurdle for false marking claimants, however, does not end with the new competitive injury requirement. A false marking claim includes two elements that appear to remain untouched by patent reform: 1) an act of false marking and 2) an intent to deceive the public. Thus, mismarking, alone, is not enough to find a violation of the false marking statute. A claimant will still have show that the patentee did not have a reasonable belief that the products were properly marked.
The America Invents Act has undoubtedly changed the landscape of false marking patent litigation. The new requirement of a competitive injury and the definite end of false marking suits based on expired patent numbers will surely dissuade those claimants who may be in it to make a fast buck.