False patent marking has become a hot topic in the business world recently. Case law around patent marking on products and recent legal developments have created a lucrative opportunity with very low barriers to entry. More than 100 cases have been filed so far in 2010, targeting industry leaders such as 3M, Cisco, L'Oreal, Merck, and Pella. New cases are being filed daily. Below, we walk through the background of the patent marking, factors behind the recent increase in risk, and suggest how your company might respond.
Layman's takeaway: Marking products ensures that you can pursue infringers to the fullest extent allowable by law, therefore realizing the greatest value from your IP.
The recent increase in activity has been around false marking where products are marked with patents that have expired (therefore unenforceable). This type of false marking is easily detected and does not require technical know-how or claim interpretation.
As of late, recent case law has further defined the penalties that may be imposed in these types of suits. For example, in Forest Group v. Bon Tool, Bon Tool, an equipment reseller, was sued by its supplier Forest Group for infringement of a patent and false marking related to stilts used by construction workers. The US Court of Appeals for the Federal Circuit held that the finding of a single offense was erroneous. The Court construed the law stating that a plaintiff may collect (a) up to $500 (b) for each falsely marked product distributed.
Layman's takeaway: This decision set the precedent for penalties due to falsely marking products to be as much as $500 for each falsely marked product that is distributed, opening the door to a potentially very large monetary judgment in these cases.
With the lure of a handsome judgment, these qui tam actions are being brought by members of the public such as patent attorneys and businesses that have scoured the shelves looking for falsely marked patents or patents that have expired. Some of these individual plaintiffs (e.g. Thomas Simonian, David O'Neill) are being represented by the three same law firms (Vanek, Vickers & Masini; Sperling & Slater; and Eugene M. Cummings) and have brought over 30 suits against major consumer product companies, asserting that the manufacturers are marking their products with now-expired patents.
Some of the companies behind these suits are Accord Patents, LLC; O & G SearchQuest; Perfection Product Management, LLC; Patent Compliance Group, Inc.; and Heathcote Holdings Corp, Inc. (just to name a few). It is very likely that many of these companies have recently been formed just to pursue this type of litigation. For example, Perfection Product Management, LLC is a recently formed Ohio company (as of 02/26/2010) that has filed against companies that create tool equipment (Stanley Tools, Allway Tools, Homer TLC) just in the last two months. Other companies have been formed by patent attorneys such as Paul M. Hletko who started Heathcote Holdings Corp. Heathcote has pursued companies such as Crayola, Leapfrog Enterprises, Phillips Screw Company, and P&G in the last two months.
As mentioned above, most of the companies being pursued are consumer product companies that have products on the shelf, although no particular industry appears to be immune to these types of suits. To date, the targeted entities have tended to be large-scale producers of high-volume goods, but there is as yet no indication how far these activities will extend. Law suits have been brought against companies producing contact lenses such as Bausch & Lomb to companies that manufacture windows such as Pella. A current, more detailed list of companies being targeted can be viewed here.
It is highly recommended to document this effort and work closely with legal counsel. Performing this triage exercise was a significant factor in the outcome of the Solo Cup case. Even though the Solo Cup products in question were still marked with expired patents, the company's internal efforts to identify the patents and plan for how to remove them from the molds were instrumental in the dismissal of the case for no intent to deceive the public.
The process for assessing marking on current products would likely include some of all of the following steps below, where these activities are integrated with any pre-existing infrastructure for patent/product tracking:
An important question to ask is should you mark products and which patents to use? Typically, products covered by one or more patent claims should be marked with those patent numbers. However, it is important to identify patents that (1) provide a competitive advantage or value in the marketplace; (2) may potentially generate royalty streams from licensees; and/or (3) you would enforce with a lawsuit if infringed. Other considerations include the amount of time remaining in the patent term and whether it is feasible and cost-effective to mark at all.
The benefits of this effort are multiple. Beginning the assessment with current products enables you to correct the marking and ensure that you would be eligible for damages in the instance that the products are copied and the patents infringed. It will also allow you to set up a monitoring system to warn when patents used in markings will expire or are abandoned, preventing any future accusations of false marking.
There are additional benefits to understanding the alignment of products to patents, such as business-related IP metrics, insights into the value of your portfolio, the ability to assess the impact of patent protection on product margins, and highlighting patents that are not currently being utilized and therefore may be considered for sale, license, or abandonment.