Recently, a judicial decision raised the penalties for incorrectly labeling patented products by multiple powers of 10, potentially exposing manufacturers to staggering increases in liability. Here’s an example: a manufacturer makes a run of 100,000 widgets and marks them with expired, incorrect or inapplicable patent numbers. Until December 2009, the maximum fine for false patent marking that could be assessed against the manufacturer would have most likely been $500. Now, however, the maximum fine allowed by statute would be $50,000,000. This is a dramatic increase.

The relevant statute is 35 U.S.C. § 292 and the violation is called “false marking.” False marking consists of attaching incorrect patent numbers or terms (such as “patented” or “patent pending”) to articles in order to mislead others as to its patent status. Under the language of the statute, false marking an article (or selling an article falsely marked) incurs a civil penalty of up to $5001 on a per “unpatented article” basis.

Historically, a single large-scale production run of a falsely marked unpatented article was considered one “continuous”2 offense since all of the articles were identical. In late 2009, however, the landscape changed significantly. In Forest Group Inc. v. Bon Tool Co.,3 the Court of Appeals for the Federal Circuit held that the false marking statute should be interpreted to assess a fine up to $500 for each improperly marked article. Consequently, the risk involved with patent marking has increased significantly, which leads to situations like the one mentioned at the outset. Tempering this staggering result is the discretionary power of the court to assess fines less than $500 per article.4

Article Authored by McAfee & Taft Attorney: Ryan Lobato.