12 FOR 2012

Here is a link to the materials from last night's IP presentation at the Brewhouse.

Thanks to all those who came, and especially to those who helped close it down.

FROSTY THE PATENT? FUN HOLIDAY READING FOR PATENT GEEKS

If you’re looking for a fun patent to read this holiday season (and who isn’t?), here’s one for “Apparatus for Facilitating the Construction of a Snow Man/Woman.”  I’m disappointed not to have seen the invention in any of the hundreds of holiday catalogs I’ve received, but its nice to see a patent that involves snow men and includes a bit of humor. Besides it includes a few tips on making snow men the old fashioned way.

Merry Christmas.
 

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The Death of False Marking

Good post by Paul Morgan on PatentlyO concerning the death of false marking litigation and ongoing importance of patent marking.

COPYRIGHT (AND PATENT) MISUSE - IT'S NARROWER THAN YOU THINK

The copyright misuse doctrine does not prohibit a copyright owner from requiring that licensees use the copyrighted work only on it own products. It only prohibits the copyright owner from imposing conditions that prohibit the licensee from making competing products. That is one of the rulings in the recent Ninth Circuit case of Apple v. Pystar. Other discussions of interest in that case concern the validity of software developers issuing “licenses” rather than engaging in “sales” to avoid application of the first sale doctrine, and application of injunction standards in the absence of a presumption of irreparable harm. (See my post of July 13, 2011 for a discussion of the elimination of the presumption of irreparable injury in copyright cases.)

The doctrine of copyright misuse derives from the similar doctrine of patent misuse. Basically, it prohibits a copyright owner from using his copyright to inhibit competition in either products that compete with the copyrighted work or “tied” products. So, for example, in the patent context, once cannot require a licensee of a salt shaker patent to buy salt only from the licensor. One might think, then, that it could be copyright misuse to require that a user of copyrighted software use it only on the licensor’s hardware.

Not so, says the Ninth Circuit. In the Ninth Circuit, copyright misuse occurs only when the copyright owner seeks to prevent a licensee from using a competing product. In the Apple case, the court held that although Apple prohibited use of its software on non-Apple hardware, it did not commit copyright misuse because it did prevent the licensee from developing or using competing software or hardware.

With respect to the license/sale distinction, the court endorsed the principle that so long as the copyright owner restricts the uses that can be made of his product, he can call it a license and avoid the first sale doctrine (the principle that once there has been an authorized sale, the buyer can resell or use the product without restriction).

Notwithstanding the absence of a presumption of irreparable harm, the court found irreparable harm sufficient to impose an injunction, based on the facts that liability had been determined against the defendant, there was a history of infringement, and a significant (albeit unexplained in the court’s opinion) threat of future infringement remains. Hopefully that means that the demolition of the presumption of irreparable harm will not, as a practical matter, curtail the issuance of injunctions in many infringement cases, and infringers will not be able to successfully adopt the “infringe now, pay later” model.
 

TAMING THE E-DISCOVERY BEAST

The Federal Circuit’s proposed Model Order on E-Discovery offers a number of good suggestions that should help reduce the burden of electronic discovery in patent cases, and some that merit further consideration and debate. Among the best ideas are the following three:

1. Requiring separate requests for email, rather than permitting email to be included in requests such as “all documents and electronic information” (¶6). This will sharpen the focus on just what types of email communications are relevant. We should consider whether all types of electronic information should be requested separately, and indeed whether to require that specific types of “documents” (correspondence, memoranda, drawings, etc.) should be specifically requested rather than encompassed with omnibus terms.

2. Limiting the metadata parties are required to produce to that revealing times of sending and receipt and the distribution list (¶5). There are times when creation and edit dates are important, so perhaps that also should be included. Most other metadata is typically irrelevant.

3. Presumptive limits of 5 custodians and 5 search terms (¶¶ 10-11). Those limits obviously will not be suitable in all cases, but at least we have a low-number starting point. The suggestions about how to treat conjunctive and disjunctive combinations of terms, and encouragement of the use of narrowing search criteria, are excellent.

Three ideas that merit more careful thought are:

1. The blanket exemption of disclosures of privileged esi from the usual rules concerning waiver, and prohibition on use of allegedly privileged material to challenge the privilege (¶¶ 12-14). One might consider whether we should go that far. Exclusion of material based on privilege is an obstacle to the discovery of truth, and examination of the privileged material itself is the best way to see if it should be privileged. Particularly since the model rules require that requests specify custodians and search terms and limit data to senders and recipients, it should be easier to identify privileged materials and therefore we may not need to be so tolerant of inadvertent disclosures.

2. The extent to which the proposed rules rely on cooperation among counsel (¶¶ 2, 9-11). Not all patent litigants and litigators are particularly cooperative, and one might argue that we are better off just ringing the bell and allowing the parties to come out fighting rather than asking them to make nice first. The idea that parties will jointly agree to modify presumptive limits strikes me as fantastic. One side or another will always think it is in its interest to have less discovery rather than more and vice versa.

3. The decision not mandate initial disclosure of basic documentation about the patents, prior art, accused products and relevant finances (¶ 8). Why not?

The premise and impetus for the proposed model rules cannot be disputed. Far reaching electronic discovery can be tangential to the real issues in a patent case, and collecting volumes of electronic data with the idea that one will run key searches later is expensive and inefficient. The proposed model rules for patent litigation offer possible ways to address those concerns that merit serious examination, not just for patent cases, but for all intellectual property cases.
 

DEFINITELY NO PRESUMPTION OF IRREPARABLE HARM FOR PATENT INFRINGEMENT

The Federal Circuit this week expressly confirmed that there is no presumption of irreparable harm for patent infringement, and injunctions should not be granted automatically in patent cases. That is consistent with the Supreme Court's decision in Ebay v. MercExchange and the rule in copyright cases as reported in the July 13, 2011 post on this blog.

The following is an excerpt of the relevant portion of the opinion in Robert Bosch LLC v. Pylon Mfg. Corp., No. 11-1096 (Fed. Cir. Oct. 12, 2011) (internal citations omitted):

Prior to the Supreme Court’s decision in eBay, this court followed the general rule that a permanent injunction will issue once infringement and validity have been adjudged, absent a sound reason to deny such relief. . . . In addition, at least in the context of preliminary injunctive relief, we applied an express presumption of irreparable harm upon finding that a plaintiff was likely to succeed on the merits of a patent infringement claim. In eBay, the Supreme Court made clear that "broad classifications" and "categorical rule[s]" have no place in this inquiry. Instead, courts are to exercise their discretion in accordance with traditional principles of equity. The Supreme Court, however, did not expressly address the presumption of irreparable harm, and our subsequent cases have not definitively clarified whether that presumption remains intact. . . . We take this opportunity to put the question to rest and confirm that eBay jettisoned the presumption of irreparable harm as it applies to determining the appropriateness of injunctive relief. In so holding, we join at least two of our sister circuits that have reached the same conclusion as it relates to a similar presumption in copyright infringement matters. Although eBay abolishes our general rule that an in-junction normally will issue when a patent is found to have been valid and infringed, it does not swing the pendulum in the opposite direction. In other words, even though a successful patent infringement plaintiff can no longer rely on presumptions or other shortcuts to support a request for a permanent injunction, it does not follow that courts should entirely ignore the fundamental nature of patents as property rights granting the owner the right to exclude. . . . While the patentee’s right to exclude alone cannot justify an injunction, it should not be ignored either. 

The foregoing is a guest post authored by Chris Kinkade of Fox Rothschild's Princeton, NJ office.


 

PATENT DESTRUCTION OF TRADE SECRET LIMITED TO WHAT IS DISCLOSED

Just because you have applied for a patent for your invention does not necessarily mean that all of your trade secret protection is lost. A recent Fifth Circuit case explains that particular processes and know how that may relate to the invention but are not part of the disclosure remain subject to trade secret protection, as do undisclosed combinations of disclosed elements.

It is settled that publication by the USPTO constitutes a public disclosure that destroys any trade secret protection one might exist in the invention. Thus, historically once a patent issued and, after patent applications became subject to publication (year 2000), once a patent application is published, trade secret protection is lost. As a result, patent protection and trade secret protection can be mutually exclusive.

What is lost when a patent is published, however, is limited to what is disclosed. Knowledge such as how to adapt the invention to work with another device, how to care for the invention, and even how to use the invention in combination with other disclosed inventions, may remain subject to trade secret protection. Patentees would be well-served to consider what secret knowledge they have developed beyond what is disclosed in their patents, and treat that knowledge as they would any other trade secret.
 

PATENT LITIGATION GETS EVEN HARDER FOR PATENTEES

Although indisputably correct, the Federal Circuit ruling earlier this year that patentees could not rely on the “25% rule” in calculating damages can only serve to increase billings for experts and litigators, and raise costs for patentees. The 25% rule was an accepted “rule of thumb” that a reasonable patent license fee would typically be 25% of the profits earned from sales of the infringing product. In situations where damages were difficult to quantify, and comparable license fee figures were not available, patentees would use the 25% rule as a basis for their money demand. So long as courts accepted that, patentees could sometimes avoid the extremely difficult, if not actually impossible task of quantifying damage when good data was not available.

The Federal Circuit in Uniloc v. Microsoft exposed the absence of sufficient statistical foundation for the 25% percent rule in most situations. Moreover, the court explained that even if the rule had statistical validity, courts should not make damage awards based on results in other circumstances. The court’s message to patentees is that they will not be permitted to cut corners on their damage proof; to prove damages patentees are going to have to do the often extremely hard work.

That, of course, will lead to more hours billed by experts and litigators. Experts to dig for more data and create defendable formulae. Litigators to argue over whether the experts have done it successfully. Although intellectually correct, rejection of the 25% rule further increases the expense of patent litigation and further cements its inaccessibility to many individuals and small businesses.
 

PATENTLY ABSURD

Here's a link to a cogent editorial from the Economist regarding Congress' decision to continue to divert PTO funds. The editors agree with the thesis of my April 26 post, that this is simply absurd.

WE HAVE AN INJUNCTION, WHY CAN'T WE GET CONTEMPT?

It is not always the case that once a court issues an injunction prohibiting further patent infringement , any further infringement will be punishable by contempt. That is often a disappointment for patent owners, but the recent Federal Circuit en banc opinion in Tivo v. Echostar explains how this can occur.

A two part inquiry is required to determine whether the enjoined party may be found in contempt. The first question is whether there are “colorable differences” between the enjoined product and the re-designed product. The crucial question for determining whether there are colorable differences is: what are the differences between the features relied on to determine infringement and the modified features? If the differences are “colorable” or “significant” there can be no contempt, even if the re-design still infringes the patent. If, on the other hand, any differences are not colorable, the court must then determine whether the re-design infringes the patent. The enjoined party should be held in contempt only if the differences are non-colorable and the re-design infringes.

On a motion for contempt, the patentee bears the burden of proving both the absence of colorable differences and the continuing infringement by clear and convincing evidence. It is no defense, however, that the enjoined party did not intend to violate the injunction, although the court may in its discretion consider diligence and good-faith efforts for purposes of mitigating the punishment.

The Court rejected Echostar’s argument that it should not be held in contempt because the injunction was vague and overbroad. The Court emphasized that the time to challenge the clarity of the injunction is when it issues; a party cannot act first and then complain about ambiguity or breadth when it is caught.
 

CONGRESS SHOULD STOP DIVERTING PTO FUNDS

It’s amazing how our elected officials continue simultaneously to tout technology and innovation as the keys to creating jobs and for the twenty-first century, and deny the PTO the ability to use the revenue the PTO generates to improve its systems. The news posted April 22 on the Director's Forum blog that as a result of Congress’ decision to continue to divert PTO funds, the PTO will need to delay implementation of procedures to expedite applications, again delay updating its outdated computer systems, scrap plans to open an office in Detroit, reduce training and eliminate overtime, can only be described as disheartening.

But this is nothing new. Fifty years ago, in Graham v. John Deere, 383 U.S. 1 (1966) Justice Clark wrote: “…the primary responsibility for sifting out unpatentable material lies in the Patent Office. To await litigation is---for all practical purposes—to debilitate the patent system…In this connection we note that the Patent Office is confronted with a most difficult task.” The Court expressed concern about the backlog of applications and observed that the President had appointed a task force to “develop more efficient administrative procedures and techniques that will further expedite dispositions and at the same time insure the strict application of appropriate tests of patentability.”

The PTO would have a better chance of achieving those goals if it were permitted to use the money it generates to take the actions it will now need to postpone.
 

DON'T COUNT ON GETTING ATTORNEYS' FEES IN PATENT CASES

It isn’t easy to recover attorneys’ fees from one’s adversary in patent cases, and it does not happen often. In the American system overall, the presumption is that each side pays its own attorneys’ fees. Patent cases are not really an exception, notwithstanding the fact that the Patent Law, 35 U.S.C. § 285, grants the court discretion to award attorneys’ fees in “exceptional cases.”

In two recent cases, Old Reliable Wholesale v. Cornell Corp. and iLOR v. Google, the Federal Circuit reiterated that the exceptional case standard is an “exacting” one. Absent misconduct in the course of the litigation or in securing the patent, sanctions may be imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” Brooks Furniture Mfg., Inc. v. Dutailer Int’l, Inc., 393 F.3d 1378, 1381 (Fed Cir. 2005).

Patent litigants are sometimes seduced by the prospect of recovering attorney’s fees, and sometimes threaten to seek fees in an effort to intimidate their opponents. But in patent litigation the costs and the stakes will inevitably be high for both sides, and it is more likely than not that the parties will bear their own costs.
 

A GOOD PODCAST

If you're interested in the net neutrality debate and want some historical context, or if you would just enjoy hearing two smart guys having a thoughtful conversation about economics and the history of telecommunications in this country, check out the latest podcast from the Intellectual Property Colloquium. Professor Doug Lichtman of UCLA Law interviews Professor Tim Wu of Columbia Law.

Attorneys can get CLE credit for listening.

An earlier interview Professor Lichtman did with Chief Judge Rader of the Federal Circuit is also worth a listen.

All of Professor Lichtman's Intellectual Property Colloquim podcasts are available on iTunes.

MORE PATENT HUMOR

For a laugh, read Claim 9.

Faster Patent Processing Still Won't Be Fast Enough

Interesting article by Jennifer Martinez on Politico last week: Tech investors call for patent reform, followed by an even more interesting response from a tech VC, Gary Lauder of Lauder Partners, the day after. The essence of the Martinez article is that certain VCs suggest that we need a separate patent regime for software because our existing system is unable to keep up with the rapid pace of software development. Mr. Lauder's response recalls my post from last month in which I questioned whether even 20 months would be fast enough.  Politico quotes him as saying: "The patent backlog is the primary problem, not laws providing fair protections to inventors. The patent backlog for software and Internet patents is now at least 40 months in an industry that re-invents itself several times a year. This is caused by the patent office's revenue being diverted away by Congress, so it can't hire sufficient examiners."

Mr. Lauder went on to highlight one obstacle to patent reform.  Politico quotes him as suggesting: "it may make sense to adopt different rules for software patents (e.g. forced Peer-to-Patent), but I would be concerned that the body that comes up with such rules would not adequately represent the ones who need patents most: start-ups."

False Patent Marking - You Can't Fudge It

Courts in several recent cases have held that one cannot avoid a charge of false patent marking by fudging the marking. Back in April, when I posted about false marking concerns arising out of the rule in the Forest Group case that the qui tam damage award of up to $500 applies to each item improperly marked, some practitioners suggested that one might be able to avoid the problem by fudging the marking. Suggested markings included examples such as “this product may be covered by the following patent” and “this product is the subject one or more of the following patents.”

The court rejected the “may be covered” marking in Pequignot v. Solo Cup Co., 540 F. Supp. 2d 649, 654-55 (E. D. Va.2008). In a case decided in the Eastern District of Pennsylvania just last month, Hollander v. Etymotic Research, another court held that a marking that stated “ [X products] are covered by one or more of the following U.S. patents: [list]” would be false if any of the listed patents had expired.” The defendant argued unsuccessfully that if any of the listed patents had not expired, the statement would be literally true and therefore there should be no possible liability for false marking. Another court reached the same conclusion in Brinkmeier v. Graco Children's Products Inc., 684 F. Supp. 2d 548 (D. Del. 2010).

False marking requires both falsity and intent to deceive. The take away here is that it may be difficult cannot win on the falsity prong if one marks his product with any expired patent, regardless of the possible literal truth of the marking statement as a whole.

 

No Secrets in IP Litigation

One of the things that seems to surprise and offend many IP litigants is the invasiveness of discovery under the Federal Rules of Civil Procedure. Parties often are surprised to learn how much they must disclose about their business in discovery. Understandably, they are offended when their adversary is given the opportunity to inspect sensitive business information, particularly product development and financial information.

Agreed upon protective orders often provide a measure of comfort by limiting the number of people who will have access to the disclosed information, but they are a double edged sword. Once a protective order is in place, one can almost guarantee that arguments that disclosure of possibly relevant evidence should not occur because of the secrecy of the material will fail.

A recent opinion that illustrates the point comes from a patent case in the Northern District of Illinois, Jab Distributors v. London Luxury. Jab sought discovery of London Luxury’s sales and financial information pertaining to the allegedly infringing product. London Luxury opposed production of such information generated prior to the time Jab began marking its product with the patent number, on the ground that such information was irrelevant because London Luxury could not recover damages prior to marking, and on ground that disclosure to a competitor would be harmful.

The court required production. It found that the profitability of the infringing product pre-marking would inform the calculation of a reasonable license fee (a measure of damages), and also relevant to the alleged obviousness of the patent. The Court rejected London Luxury’s argument that disclosure would be inappropriate because the information in question was the subject of a confidentiality agreement with a third party, and held that the protective order, which included an “attorneys eyes only” provision, provided adequate safeguards against disclosure of sensitive information to a competitor. The court noted that London Luxury offered only attorney argument and failed to submit sworn declarations or affidavits explaining the need for secrecy.

The take-away here is that parties involved in litigation should be aware of the presumptive expansiveness of federal court discovery, and that they will be fighting a steep uphill battles to keep even sensitive competitive information from their adversaries. If there is information that should not be disclosed, parties should first determine whether a suitable protective order can provide adequate protection. If so, more often than not courts are receptive to those. If not, parties should prepare early to resist disclosure and provide the best possible admissible evidence of the need for secrecy, but be aware that the odds are against them.
 

IP Rules the World

Interesting article in the New York Times this morning reports that Silicon Valley companies in the business of developing solar panels have been beaten to market by the Chinese, and that the Chinese are driving down prices and margins while the U.S. companies are struggling to gain enough efficiencies to enable them to compete. The article quotes the CEO of one of the U.S. companies, Innovalight: “How do you fight against enormous subsidies, low-interest loans, cheap labor and scale and a government strategy to make you No. 1 in solar?” The obvious answer he gives: “Innovation will be the heart of the U.S. strategy, and although it might not create the same scale, we’re exporting well-protected technology to China and creating well-paying jobs here.”

Recent news on the domestic “well-protected technology” front is less encouraging than one would hope, however. The USPTO reports on its Data Visualization Center that the average time a patent remains pending is nearly three years (35.3 months), and there is a backlog of nearly three quarters of a million patents. If no new patents were to be filed, the USPTO estimates that it would take approximately 26 months to issue a first office action for every one. The USPTO aspires to reduce the average time a patent remains pending to 20 months. That would be much better, but is it good enough for the heart of our strategy?
 

New Green IP Tool

Here's a link to a new WIPO page, the IPC Green Inventory, that basically aggregates the various patent classifications relevant to "environmentally sound technologies" or "ESTs" so that one can search the relevant classifications.  Here's the WIPO press release.

more on cgl insurance policy coverage for patent disputes

Following up on my August 16 post concerning coverage for patent infringement claims under the “advertising injury” provision of a company’s Comprehensive General Liability (“CGL”) policy, Judge Kane of the U.S. District Court for the District of Colorado issued an opinion recently in which he offered a fairly bright line distinguishing what is covered from what is not.

In Dish Network v. Arch Specialty Ins. Co., Judge Kane explained:

…the fact that a patented technology is capable of advertising goods or carrying promotional messages does not transform the technology into an advertising idea. Patent infringement may, however, constitute an advertising injury where an entity uses an advertising technique that is itself patented. The crucial inquiry, therefore, focuses on whether the complained of advertisement incorporates a patented advertising techniques as an element. If so, then the alleged infringement may constitute ‘advertising injury.’ If, however, the alleged infringement concerns the method of conveyance there is no ‘misappropriation of advertising idea.’


The patents in suit addressed methods of automated telephone call processing. Claim 219 of one of the patents in suit, "Telephone interface call processing system with call selectivity" claimed “A telephone interface system according to claim 199, wherein said select interactive operating format involves advertising of a product for sale."  Claim 199 claimed a telephone interface system for individually interfacing callers at a multitude of remote terminals for voice-digital communication through a telephone communication facility….”

The Court held that the patents involved technology that was capable of advertising goods or carrying promotional methods rather than advertising techniques, and that the insurer had no duty to defend or indemnify Dish Network with respect to the patent infringement claims.
 

A Humanitarian Exception to the Patent Laws?

Interesting article in the New York Times Magazine concerning Plumpy'nut, a patented peanut product that has worked wonders at re-nourishing starving children in the Third World.  The Peanut Solution dips a toe into the debate over whether limitations should be included in the patent regime for inventions with humanitarian implications.

More on False Patent Marking

Here is a link to an informative article written by some colleagues at Fox Rothschild concerning recent developments in false marking jurisprudence.  False marking issues were the subject of April 4, 2010 and June 16, 2010 posts on this blog.

Check Your Insurance Policy, and the Case Law, Again

I’m not sure why we can’t seem to settle the question of what IP litigation is covered under the typical Comprehensive General Liability insurance policy. Whether it is because the form is continually evolving, insureds are ever-clever in their strategies for seeking coverage, or the language in the policies is just so bad, we cannot. As a result, every single time a potential coverage issue arises, insureds should check both their policy and the case law in the likely forum for litigation to see if there may be grounds to assert coverage.

A case from the Ninth Circuit, Hyundai Motor v. Nat’l Union Fire Ins. Co., is the latest reminder that it pays to re-evaluate coverage every time. Hyundai was sued for patent infringement based on its “build your own car” feature on its Website. Patent infringement is not covered under the typical CGL policy. On that basis, the insurer declined coverage and declined to defend the lawsuit.

Hyundai reasoned that its build your own car feature was a form of advertising, and should have been covered under "advertising injury" clause in the policy. It sued the insurer and won. The court reasoned that the patents-in-suit involved advertising methods, therefore the patent infringement claims involved misappropriation of advertising ideas, and the claims were covered under the advertising injury clause.

Just goes to show you don’t ever know, so it pays to check both the policy and the case law every single time.
 

Patent Humor

I definitely want one of these for Christmas.iplawwatch.foxrothschild.com/uploads/file/int75.PDF

IP Counsel Must Communicate With Marketing and Manufacturing Personnel - Redux

Following up on my April 4, 2010 post concerning false patent marking, the Federal Circuit ruled last week in the Pequignot v. Solo Cup case.  Here is my take away.

1. Marking a product with an expired patent number is false marking.  Solo Cup argued that because the public could look up the patent, marking with an expired number was not misleading.  The Court explained that it is not so simple to determine when a patent expires and so it could be misleading.

2. Marking a product with a legend that says something like "this product may be protected by one or more patents" is not false marking, but neither is it adequate marking under 35 U.S.C. 287, so that does not seem like a very effective strategy.

3. To be actionable, false marking must be intentional. The marking must be for the purpose of deceiving the public.

4. Proof that a marking is false and that the marker knew of its falsity, creates a rebuttable presumption of intent to deceive.

5. The accused can rebut the presumption by proving, by a preponderance of the evidence, that he did not consciously desire that the public be deceived.  One way to do that would be to prove that the accused relied on reasonable advice of counsel. Merely asserting that one had no such intent will not be sufficient. 

On a related note, on remand the district court in the Forest Group case awarded damages in the amount of the highest price for which the 38 falsely marked stilts at issue in that case sold ($180, prices ranged from $103-$180).  The total award was only $6,840, but if courts are going to award what amounts to gross revenues on products sold for $500 or less, penalties for false marking could be severe.

New WIPO Site A Useful Tool

WIPO, the World Intellectual Property Organization, recently launched the WIPO Gold website.  WIPO Gold functions as a portal through which one can access all of the various WIPO online resources, including for domain name arbitrations, patents and trademarks.  I spent some time trying it out and found it very useful.  If you use any of the WIPO resources or have international IP issues, WIPO Gold is worth visiting.

IP Counsel Must Communicate With Marketing and Manufacturing Personnel

A recent decision from the Federal Circuit underscores the need for IP counsel to communicate with the company’s manufacturing and marketing staff. IP counsel, and company management, should be aware of the importance of marking patented products properly. Generally, it takes little prodding or persuasion to insure that patented products are identified with the patent number; everyone involved can easily see value in that, not only in terms of preserving the right to seek damages, but in terms of intimidating competitors and impressing consumers.

But what about when the patent expires? We all know we should not be marking our product in a way that is deceptive, but it typically doesn’t seem so urgent to adjust molds, presses or packaging to delete the patent information. So what if we make a few runs marked with the expired patent?

Forest Group Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009) cautions that we should be more diligent. In that case, the Federal Circuit held that the penalty for intentional false marking, up to $500, applies on a per product basis, as opposed to a per run basis. So if you are making widgets and run a single post-patent production of 100,000, your potential exposure is $50,000,000.

Bear in mind that imposition of false marking penalties requires actual intent to deceive, so demonstrably honest mistakes should not result in punishment.  Also, courts have discretion to determine the amount of the per product penalty, so an award could be significantly less than $500 per. The Federal Circuit itself suggested in the Forest Group case that in cases involving large runs of inexpensive products, the penalty could be limited to fractions of a penny per article. And, in the Pequignot v. Solo Cup case, although the court held that marking with an expired patent constituted false marking subject to penalty, the court ultimately exonerated the defendant, holding that a patent owner that used production machinery that was expensive to re-tool and, for that reason and in consultation with patent counsel, did not change its markings until it changed its machinery, was not liable for intentional false marking on runs it made post-patent term but pre-purchase of new machinery.

On the other hand, there are reports of emergence of a new type of patent troll, who seeks out products marked with expired patents and then sues to collect half the penalty (the other half goes to the government). That raises the level of risk for owners of expired patents. It is possible the Federal Circuit could disagree with the Virginia court’s analysis and apply a less lenient standard to patent owners that mark with expired patents. Moreover, subsequent case law could condemn the advice Solo received from its patent counsel, removing reliance on counsel’s advice as a justification for less than prompt re-marking.

Rather than putting your company at the mercy of an opportunistic plaintiff and ultimately a court, if your patent expires, the safest course may be to change your markings immediately. If that is impossible or highly impractical, one would be wise to document the reasons and weigh carefully the potential litigation costs against the re-tooling costs.