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Laissez Les Bon Tools Rouler? False Marking cases in the Eastern District of Texas

By Michael C. Smith

Hopefully the NFL hasn't trademarked this phrase or I'll be arguing the parody or sarcasm exception - whatever it is. 

One of the things I have been seeing in my practice in the Eastern District so far this year is a number of "false marking" cases, several of which I am representing defendants in.  As patent practitioners (and maybe a few others) are aware, companies often place patent numbers on products.  One of my favorite examples of this is my grandfather's old pencil sharpener on my desk at home, which has patent numbers up through its date of manufacture in 1919 marked on the cover.  (It's not the one shown on above, but it's pretty close, and has about eleven patent numbers on it).  The patent numbers on such steampunk-era products are characteristic of the style, and as I'm using a fair amount of that sort of turn of the century-styled equipment in the new offices we are finishing out downtown this spring (the buildings are 1870's, and the interior target dates are 1897 on one side and 1928 on the other), I see patent numbers on brass plates on a fairly frequent basis.  For an example of the genre, here's a couple of examples of vintage Victorian desktop, with monitor, and keyboards.  Obviously the "mouse" had not been invented yet (was probably still DOS until 1914 or so). 

Back to false marking.  Such numbers are sometimes placed in order to trigger constructive notice for damages purposes.  35 U.S.C. 292, however, prohibits marking unpatented products with a patent number "for the purpose of deceiving the public."  The statute goes on to state that the penalty is a fine of "not more than $500 per offense."  Any person can file suit for a violation of the statute, and the proceeds are split half to the person suing and half to the United States.  Over the last, oh century or so, most courts have found that each decision to falsely mark is a single offense irrespective of the number of products improperly marked.

Late last year, however, the Federal Circuit in Forest Group Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009) overruled the prior decisions and found that the penalty can be up to $500 per article sold, not just per decision to mark.  It noted that the penalty may also be a fraction of a penny per sale, but that the decision of how much to assess is within the discretion of the district judge, balacing the relevant considerations.

As dockets nationwide reflect, this decision has resulted in something of a cottage industry of qui tam false marking claims - something that was raised to the Federal Circuit in Bon Tools).  The coming year promises some interesting decisions not just by the Federal Circuit, but also by district courts assessing not just whether false marking occurred and whether an intent to deceive was present, but also whether standing exists (some courts have recognized an "injury in fact" requirement) and what level of penalty should be assessed in light of the considerations outlined by the Federal Circuit of striking an appropriate balance between encouraging enforcement of the important public policy of preventing false marking from stifling competition or innovation and imposing disproportionate penalties. 

It's going to be a fascinating year, I suspect, as courts craft the tests for standing, intent to deceive, and damages, at the very least.  I'm definitely looking forward to working on these cases!

Full post as published by Eastern District of Texas Federal Court Practice on March 26, 2010 (boomark / email).