Maximizing Recoveries While Avoiding Penalties
After investing significant time, effort and expense to apply for and obtain patent protection, a patent holder can maximize the return on that investment by ensuring compliance with the Patent Act’s requirements for providing notice of its rights. Why is this important? Because a patent holder is barred from recovering infringement damages for any period after the patent issues when the patented product is not properly marked, unless the accused infringer has been provided actual notice of its infringement. The damage bar also applies where the patent holder licenses the right to produce under the patent and the licensee does not properly mark the patented product. In light of this requirement, the patent holder should implement a patent marking procedure when the patent is being pursued or the patented product is first produced. Otherwise, it may be confronted with this issue after filing an infringement lawsuit only to discover that it’s damage recovery will be barred or limited.
A patent holder must also be concerned about incorrectly marking products that are not covered by its patents and marking products after its patent has expired because anyone who marks or advertises a product with words such as “patent,” “patent applied for” or “patent pending” that falsely convey that the product is patented in order to deceive the public may be fined up to $500 for each offense. Thus, a patent holder is well advised to develop a system to ensure that it only marks products that are covered by its patents and ceases marking after its patents have expired to avoid the accusation that its marking was intended to deceive the public.
Patent Marking To Maximize Recovery of Infringement Damages
Before a patent holder is permitted to recover damages for infringement of a product, it must either affirmatively notify the accused infringer of a specific charge of infringement against a specific accused product, or provide constructive notice to the public in the form of proper patent marking. In the absence of actual notice directly to the accused infringer, the period of constructive notice begins upon compliance with the marking requirements and continues as long as the patentee continues to properly mark its products. An implied de minimus exception protects the patentee whose compliance is nearly perfect, which means “substantially all” of the patented products. A patentee who has delayed compliance with the marking provision after patent issuance is entitled to damages that accrue after the patent holder has begun marking in a manner that is substantially consistent and continuous.
The patentee must mark the product itself, unless the character of the product makes this physically or functionally impossible, in which case the patentee must fix a label to the product or the package containing the product. While placing the mark in literature provided separately from the product is insufficient, it may be acceptable to list some patent numbers in an owner’s manual or installation guide provided with the product, if at least one patent number is marked directly on the product.
A patent holder who fails to comply with the marking statute will be disappointed when it comes time for the Court to determine damages. Therefore, a patent holder should develop policies and procedures for ensuring that upon issuance of the patent, covered products are marked in a consistent and continuous manner. Additionally, the patent holder should be prepared to prove that it complied with all the patent marking requirements.
Patent Marking Should Be Accurate and Should Cease After the Patent Expires
While the Patent Act rewards patent holders who put accused infringers on notice of their patent rights with the ability to maximize recovery of patent damages, it also includes a mechanism to punish those who improperly mark their products to deceive the public about whether their products are covered by a patent. The False Marking section of the Patent Act provides that “[w]hoever marks upon, or affixes to, or uses in advertising in connection with any patented article, the word “patent” or any word or number importing that the same is patented, for purpose of deceiving the public … shall be fined not more than $500 for every such offense.” This section also applies to the use of the words “patent applied for” and “patent pending” in this context. It also states that “[a]ny person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.”
To prevail on a false marking claim, a claimant must prove: (1) a marking indicating that an object is patented, (2) falsely affixed to, (3) an unpatented article, (4) with intent to deceive the public. The claimant has the burden of proving that the patent holder marked the product with the specific intent to deceive the public, so there can be no violation without evidence that the false marking or mismarking was “for the purpose of deceiving the public.”
In the past, assertions of false marking were typically raised between competitors, and it was widely believed that listing expired patent numbers on a product would not constitute a violation. Recently, however, violations of the false marking statute have been asserted by individuals or entities who do not compete with the patent holder and do not contend that they have been injured by the patent holder’s conduct, and have included claims related to marking products with expired patents. These lawsuits appear to be motivated by nothing more than the possibility of collecting a bounty of one half of up to $500 per violation.
In Pequignot v. Solo Cup, the Court held that listing an expired patent is a violation because marking a product with an expired patent number is no different than marking a product that never received protection from a patent in the first place. The Court also held that conditional markings that the product “may be covered by one or more patents or applications” if made to deceive the public could violate the false marking provisions. The Defendant in that case, Solo Cup, has argued that a false marking claim cannot be brought by a plaintiff who has not been harmed by the patent holder’s conduct because if that were permitted it would render the false marking statute unconstitutional. The Court has not yet decided this issue, but is expected to do so early in 2009. If that decision favors the Plaintiff, there will almost certainly be a proliferation of lawsuits filed alleging violations of the false marking statute by individuals or entities hoping to collect a bounty.
Failure to comply with the patent marking statute can have serious financial implications for a patent holder seeking infringement damages. Similarly, failure to comply with the false marking statute can expose the patent holder to a penalty of up to $500 for each violation of the false marking statute. Michael Best & Friedrich LLP’s intellectual property attorneys regularly counsel clients on the marking requirements of the Patent Act, as well as all aspects of intellectual property law. If you have any questions, please contact S. Edward Sarskas, at email@example.com or 414.271.6560.