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CAFC: Patent Act Imposes $500 Fine for Each Falsely Marked Article

December 28, 2009

The U.S. Court of Appeals for the Federal Circuit ruled Dec. 28 that Section 292(a) of the Patent imposes a $500 for each falsely mark unpatented article, not $500 for each decision to falsely mark articles (Forest Group Inc. v. Bon Tool Co., Fed. Cir., No. 2009-1044, 12/28/09).

The court vacated an award of a fine of only $500 where multiple construction stilts were falsely marked with a patent number, reasoning that the statute “requires a fine to be imposed for every offense of marking any unpatented article.”

Falsely Marked Construction Stilts.

Forest Group Inc. is the assignee of a patent (5,645,515) on an improved spring-loaded parallelogram stilt of the type often worn on the legs of construction workers.

Forest sued Bon Tool Co. for patent infringement, and Bon Tool counterclaimed with a charge of false marking pursuant to Section 292 of the Patent Act, 35 U.S.C. § 292.

The district court concluded that Forest presented no evidence that the accused stilts had a “resiliently lined yoke” claimed in the ‘515 patent and granted summary judgment of noninfringement to Bon Tool.

Further, the court found that Forest falsely marked its S2 stilts with the  ’515 patent number after November 15, 2007—the date of the summary judgment of noninfringement favoring another defendant in a different case on the ground that the S2 stilts lacked the claimed yoke feature and were not covered by the ’515 patent. However, the district court found that Forest did not have the requisite intent to falsely mark before that date. Finally, the district court ruled that this was not an “exceptional” case that warranted an award of attorneys’ fees pursuant to Section 285 of the Patent Act.

Bon Tool appealed.

No Clear Error as to Lack of Intent Before November 2007.

Bon Tool first challenged the district court’s finding that Forest lacked the intent to deceive required for a false marking charge prior to November 15, 2007.

However, the Federal Circuit found no clear error in the decision below. Observing that a false marking claim requires the elements of (1) marking an unpatented article and (2) intent to deceive the public, it said that the district court found that Forest genuinely believed that the S2 stilts were covered by the ’515 patent prior to that date. Judge Kimberly A. Moore further noted the district court’s point that neither patentee had “strong academic backgrounds” or “in-depth appreciation of patent law” and that one (Lin) was not a native English speaker. “Based on the facts in this case, the district court did not clearly err in finding that Forest did not have the requisite knowledge that its own S2 stilts did not fall within its patent claims until November 15, 2007,” Moore said.

Court Reads § 292(a) as Requiring a Per Article Fine.

Section 292(a) of the Patent Act states:

Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word “patent” or any word or number
importing that the same is patented, for the purpose of deceiving the public . . . Shall be fined not more than $ 500 for every such offense.

Bon Tool then argued that the district court erroneously fined Forest only $500 even though multiple S2 stilts were falsely marked.

The Federal Circuit agreed. Refusing to follow precedent decided by the First Circuit 100 years ago in London v. Everett H. Dunbar Corp., 179 F. 506 (1st Cir. 1910), Moore noted that such early false marking cases imposed a single fine of $500 because the penalties were then imposed for each day that products were falsely marked. However, she said, such a “time-based approach does not find support in the plain language of § 292,” which “clearly requires a per article fine.” 

Moore explained:

The plain language of the statute does not support the district court’s penalty of $500 for a decision to mark multiple articles. Instead, the statute’s plain language requires the penalty to be imposed on a per article basis. The statute prohibits false marking of “any unpatented article,” and it imposes a fine for “every such offense.” … The statute requires a fine to be imposed for every offense of marking any unpatented article. The act of false marking is the offense punished by the statute. The phrase “for the purpose of deceiving the public” creates an additional requirement of intent but does not change the relationship between the act of marking an article and the penalty. We conclude that the statute clearly requires that each article that is falsely marked with intent to deceive constitutes an offense under 35 U.S.C. § 292. …

Policy considerations further support the per article interpretation of § 292. The marking and false marking statutes exist to give the public notice of patent rights. “Congress intended the public to rely on marking as a ‘ready means of discerning the status of intellectual property embodied in an article of manufacture or design.’” … Acts of false marking deter innovation and stifle competition in the marketplace. … If an article that is within the public domain is falsely marked, potential competitors may be dissuaded from entering the same market. False marks may also deter scientific research when an inventor sees a mark and decides to forego continued research to avoid possible infringement. …  False marking can also cause unnecessary investment in design around or costs incurred to analyze the validity or enforceability of a patent whose number has been marked upon a product with which a competitor would like to compete. … 

These injuries occur each time an article is falsely marked. The more articles that are falsely marked the greater the chance that competitors will see the falsely marked article and be deterred from competing. … This court’s per article interpretation of § 292 is consonant with the purpose behind marking and false marking.

Forest’s proposed statutory construction—that the statute imposes a single $500 fine for each decision to falsely mark—would render the statute completely ineffective. Penalizing those who falsely mark a mere $500 per continuous act of marking, which act could span years and countless articles, would be insufficient to deter in nearly all cases. Congress’ interest in preventing false marking was so great that it enacted a statute which sought to encourage third parties to bring qui tam suits to enforce the statute.

Accordingly, the appellate court vacated the award of $500 in penalties for a single offense of false marking and ordered the district court on remand to recalculate fines based on a determination of how many articles were falsely marked after November 15, 2007.

No Clear Error in Denial of Attorneys’ Fees.

Finally, the appellate court upheld the decision denying Bon Tool attorneys’ fees as a prevailing party under Section 285 of the Patent Act. While Bon Tool insisted that Forest’s case was frivolous, Moore cited the district court’s finding that Forest had a reasonable belief that its products—and the exact replicas sold by Bon Tool—were covered by the ’515 patent until November 15, 2007.  
 Further, though Bon Tool did not infringe the ’515 patent, the district court did not find the patent invalid, Moore added. Accordingly, the Federal Circuit ruled that the district court did not clearly err in finding that this case was not “exceptional” for purposes of 35 U.S.C. 285.

The district court’s ruling was affirmed in part, vacated in part, and remanded.

Judge Randall R. Rader and Senior Judge S. Jay Plager joined the opinion.

Bon Tool was represented by Richard A. Ejzak of Cohen & Grisgy, Pittsburgh. Forest Group was represented by Kristin K. Tassin of Dry & Tassin, Houston.

Read the Forest Group Inc. v. Bon Tool Co. opinion.

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0 #1 ErymnAvemnmar 2010-09-04 14:06
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