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.