The Rise of False Marking Litigation

There is a new litigation trend brewing on the horizon: false marking. Much like the increase in litigation in early 2000 from patent trolls, this is now a new source that’s driving increases in litigation. Because of a recent court decision, it is extremely profitable to sue companies who have falsely marked products as patented.

For operating companies, this has serious implications for product projection strategies, maintenance decisions, and product management.

U.S. Patent Law explicitly permits marking products to indicate they are in some way protected by a patent i.e. Patent Protection. There are a number of reasons a company might decide to expend the effort of marking a product to indicate a patented technology, process, or material was used in producing it. It might be determined, for example, that as a marketing tactic, the mark provides a competitive advantage by causing the perception that the product is superior.

Another obvious reason to mark a product is that it puts your competitors on notice that they are barred from copying anything unique about your product without your written permission. A careful reading of the statute (35 U.S.C. Section 271), however, reveals something that might not be quite so obvious initially.

The statute also explicitly prevents a patent holder from being awarded compensatory damages if the product is not marked and someone infringes on the patent. The functional effect is that your product should be marked for business reasons that go beyond a simple marketing tactic. In the event you discover patent infringement of one of your products, you are limited to collecting damages only after the competitor was put on notice. Those facts by themselves seem relatively simple to understand´┐Żbut they are complicated by another section of the law known as False Marking. USC 35 Section 292 makes it unlawful to mark a product as being protected by a patent if it is not.

The law has also recently been interpreted in such a way as to make it a very expensive violation. At one time the law was interpreted on a per product basis; it was a single violation to distribute any number of the same product with a false mark. The law limits the fine to $500.00 per violation, which is not a significant incentive to a large company and, consequently, they tended to ignore the legally required due diligence. On December 28, 2009, however, a U.S. appellate court for the Federal Circuit held that fines should be imposed on a per article basis, $500 for each item shipped. With this latest ruling, due diligence is no longer a luxury; it’s an absolute necessity.