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Beware patent markers

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Any company selling patented products must take note of a recent change in the law which can potentially and very easily result in the company paying millions in damages.

On Dec. 28, 2009, in The Forest Group Inc. v. Bon Tool Co., the U.S. Court of Appeals for the Federal Circuit clarified the damages for false patent marking. Prior to this decision, damages for false patent marking were typically limited to $500 per decision to falsely mark (and each "decision" to falsely mark could cover thousands, if not millions of products sold). Because of this $500 ceiling on damages, the defense was infrequently raised in patent litigation, and plaintiffs brought few stand-alone false marking cases.

The Federal Circuit in The Forest Group case, however, ruled that a company that falsely marked a product with a patent number was liable for up to $500 per product marked. Now, for example, if a company falsely marks a mere 2,000 products, it could end up paying $1 million in damages. A company with a high volume of 100,000 falsely marked products could end up paying $50 million. And anybody can bring these cases.

This decision impacts every company that marks its products, regardless of size. The case has serious implications not just in litigation, but also for any company that owns patents and either is considering marking its products with its patents, or already is marking its products.

Both plaintiffs and defendants must now consider the false marking issue in patent litigation. If the facts warrant it, a plaintiff could tack on a false marking claim to a patent infringement claim to dramatically increase the defendant's potential exposure. However, any plaintiff that itself sells products and marks those products should investigate the appropriateness of its own marking before filing suit, as defendants now have a new avenue of leveling the playing field if there is any actual or perceived false marking by the plaintiff. Expect a dramatic increase in false marking claims in patent infringement cases.

False marking will not just be an issue in cases involving patent infringement allegations. Anybody can bring a stand-alone false marking case, regardless of whether they were personally harmed by the false marking. The false marking plaintiff splits any recovered damages with the U.S. government 50-50. And relatively speaking, false marking is not an overly complex thing to prove, as a plaintiff must only show the defendant marked an unpatented product with the intent to deceive the public. Just like the last several years have seen an explosion in cases brought by "patent trolls," it is reasonable to expect an explosion of false marking cases given the potential amount of money at stake. Only time will tell whether these plaintiffs also obtain a catchy nickname.

Outside of litigation, any company that obtains a patent should fully analyze whether it can legitimately mark its products with the patent number. Ideally, legal counsel is involved in this decision, and the decision to mark should be documented.

Companies already marking their products may, given the particular circumstances (e.g., insignificant previous analysis, large volume of products sold or contemplating offensive patent litigation), want to revisit that decision.

While the obtainment of a patent is often a significant and positive event for many reasons, in light of the decision, companies must be careful how they use the patents, or face the potential for millions of dollars in damages.

Bernstein is a member in the San Diego office of Mintz Levin Cohn Ferris Glovsky and Popeo PC.

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