April 30, 2010Client Alert

False Patent Marking Update: Federal Court Calculates the Fine for False Patent Marking Based on Sale Price of Falsely Marked Products

A recent district court decision in The Forest Group Inc v. Bon Tool Company et al. confirms that federal courts continue to apply the false patent marking statute (35 USC ยง 292) on a case-by-case basis.

In The Forest Group, the District Court for the Southern District of Texas initially imposed the maximum false marking fine of $500 on The Forest Group for each falsely marked stilt. Upon remand from the Federal Circuit, the court recalculated the penalty for falsely marking 38 stilts based on the prices at which The Forest Group sold the stilts. The court determined that, because the falsely-marked stilts were sold at prices between $103 and $180, the appropriate fine for deterring future false marking would be $180 per article ($6,840 total fine).

On its face, the total fine imposed by the court in The Forest Group is not large. But taken in context, the relative fine per unit is extremely high (i.e., the highest sale price at which the product was sold). Like the district court in Presidio Components Inc. v. American Technical Ceramics Corp., a decision discussed in our client alert dated April 16, 2010, the district court in The Forest Group appears to have taken into account the total number of falsely marked products that were sold and the total sales of falsely marked products, and not just the profit margin of those sales, to determine the appropriate fine.

While the Federal Circuit remand in The Forest Group indicates that imposing the maximum fine for a relatively small quantity of falsely marked products may be disproportionate to the liability of The Forest Group, to date the courts have taken the deterrence goal of the false patent marking statute seriously. Companies that sell a single product or relatively few products that are falsely marked may face a hefty fine even if that fine is significantly less than the statutory maximum.

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