Closing The Window Of Opportunity

Having previously recounted statistics which demonstrate that legal malpractice claims are not a likely key to financial success (see previous blog FINIS), we turn our attention to false marking or mismarking claims, an exciting (lawyerspeak for “lots of money to be made”) new area of the law.

As the reader may remember from one of our earlier, fascinating and informative blog entries ("The New Trolls" and "A Vanishing Opportunity"), false marking is the intentionally deceptive representation that a product is covered by a patent or patent application. This may occur when a manufacturer marks a product with the number of a patent which has been found – by a court – to be invalid or unenforceable, or more commonly, a patent which has expired.

At present, an action for false marking may be brought by anyone. There are no statutory limitations imposed on plaintiffs – any money-grubber qualifies. A successful plaintiff gets to keep half of any recovery – the other half goes to the government.

The penalty for false marking is up to $500.00 per offense. Formerly, courts tended to construe “offense” as a production run. This created little financial incentive to sue. During 2009, only 10 false marking cases were filed.

Then, late last year, the CAFC handed down its decision in The Forest Group Inc. v. Bon Tool Co., holding that each mismarked item was an “offense.” The result? More than 180 false marking cases have been filed this year – and it’s only mid-May! Clearly, someone sees a way to make a buck here. However, what the courts giveth, the courts may taketh away.

Dicta in recent cases and questions posed by judges during oral arguments suggest that the false marking landscape may soon change. Courts are requiring PROOF that mismarking was intentional and some judges are apparently considering what the standard of such proof should be. Presently, it is the “mere preponderance of the evidence” standard of civil litigation; but, perhaps, it should be the “proof beyond a reasonable doubt” standard of criminal cases. This would afford those accused of false marking the same rights as accused serial killers and child molesters.

In addition, the courts are beginning to focus on the prophylactic purpose of the false marking statute (35 USC §292). This statute, which has nothing to do with safe sex, was intended, in the view of some jurists – and many patentees – to prevent acts which would “deter innovation and stifle competition in the marketplace” and “cause unnecessary investment in design around or costs incurred to analyze the validity or enforceability of a patent whose number was marked upon a product” or, in other words, to protect competitors of the accused mismarker. Adoption of such a standard would severely reduce the population of potential plaintiffs.

Congress is apparently unwilling to wait for the courts to act in this manner. Currently pending patent reform legislation would limit plaintiffs to those who have “suffered a competitive injury as a result of” false marking. We support this proposed legislation, in part, because it will eliminate meritless claims against the ever-decreasing number of firms actually manufacturing something and, in part, because it is one of the few pieces of proposed legislation which would not increase the national debt.

THE LESSONS TO BE LEARNED: If you’re a manufacturer, be careful as to the patent number(s) you mark on your product; if you’re a marking troll, your days may be (hopefully) numbered.

Comments

The competitive injury standing requirement sounds pretty reasonable to me. Don't get me wrong -- I'm generally in favor of money being made, and if Congress hadn't stepped in, then I would spend half of every day scouring store shelves for expired patent numbers! But a lot of the false marking suits seem like a new type of bounty hunting ... as well as an incentive for a lot of wasteful litigation that merely ties up the courts.

Add new comment