DISPUTE RESOLUTION: Intellectual Property: Patent Marking: An Important Consideration For All Patented Products

by King & Spalding

The energy industry has seen a significant increase in the number of patents granted over the past decade. This increase tracks a growing use of new technology in areas such as exploration, production, monitoring, and alternative energy. As these patents – and products that are covered by them – begin to impact the industry, companies will spend more time analyzing patent enforcement and defense. Along with infringement and validity, companies should include patent marking as part of their standard analysis. Though it is an often-overlooked aspect of patent law, marking can have a big impact on the bottom line in a patent case.

What is patent marking and why is it important?

Patent marking is part of a statutory provision (35 U.S.C. § 287(a)) that encourages patent owners to provide notice to the public of their patented products. A patent owner with a patented product may not recover any damages for infringement of the patent that accrue prior to filing suit unless the patent owner had previously notified the party it believes to be infringing. The patent owner may notify such a party either (a) through constructive notice by marking its own patented products, or (b) through actual notice directed specifically to the alleged infringer. Thus, marking is not required (i.e., a patent may still be enforced without any prior notice to the accused infringer), but failure to do so may significantly reduce the recoverable damages – easily by 50 percent or more in many cases.

Patent marking has historically involved placing the word "patent" (or the abbreviation "pat.") and the applicable patent number(s) on the patented product itself. If the product cannot be marked, the same information may be placed on the product packaging. Marking the product itself is the preferred approach, particularly if the product already contains other writing. Marking is not effective until the date when substantially all of the patented products being sold are appropriately marked. This includes products made by third parties under a license. The patent owner must take reasonable steps to ensure that its licensees comply with the marking statute, such as imposing a contractual obligation to mark and following up with regular audits.

The America Invents Act, which became effective on September 16, 2011, made two important changes to the patent law designed to streamline and promote marking. First, patent owners may now use "virtual marking" to provide constructive notice. This allows patent owners to place an Internet address on the product (along with the "patent" or "pat." mark) instead of listing patent numbers. The Internet address must be free to access and must associate the product with the applicable patent number(s). Though not required, it is advisable to keep a log of when all changes are made to such an Internet posting so that the patent owner can later establish when marking began. This Internet-based approach is advantageous in that it allows patent owners to list a larger number of applicable patents without space constraints. Patent owners also can maintain current patent information without the expense and effort often required to modify the manufacturing process.

Another important change made in the America Invents Act has limited patent owners' exposure to "false marking" lawsuits. False marking occurs when a product is marked by a patent that the product is not, in fact, covered by. Previously, anyone could sue a company for false marking (which at the time included not removing an applicable patent that had expired) and impose a fine of up to $500 per product marked. Now, only the U.S. government may sue for the fine. Private plaintiffs must prove a "competitive injury" and can only recover damages adequate to compensate for that injury. In addition, marking a product with a patent that has expired is no longer considered false marking.

Considerations When Deciding Whether To Mark.

Products protected by patents that provide a competitive advantage, generate royalty streams from licensees, and/or are likely to be enforced against third parties are among the most important to mark. And, given the reduced burden associated with marking, an even broader marking program may be appropriate. Virtual marking and limitations on false marking suits have reduced some of the challenges associated with patent marking. Indeed, many companies have already set up their own web pages dedicated to virtual marking, and there is at least one third party provider offering virtual marking services through its website.

Whether and how to mark can still be complex, however. For example, some patented products may be so small that even a virtual mark would be difficult to read with the naked eye. Other patented products may be enclosed within a larger product and never seen by the public. Products such as computer software require special considerations as well. Marking is only effective if it complies with the latest requirements. And, when weighing the cost-benefit of pursuing patent litigation, it is important to have a reliable assessment of the available damages to avoid the unfortunate surprise of prevailing on the merits only to receive a fraction of the anticipated recovery.

Considerations When Defending Against An Allegation Of Patent Infringement.

A company accused of infringement should determine whether the patent owner or its licensees have any products covered by the asserted patent(s) and evaluate whether substantially all such products have been consistently marked. Some of that information can be obtained through informal investigation. If the dispute proceeds to litigation, formal discovery may be used as well, particularly to evaluate the start date and consistency of any marking program. If the patent owner has failed to mark, the issue can often be decided on summary judgment. As a result, damages exposure may be greatly reduced even before a trial on the merits. Given the potential impact on the economic outcome, an effective patent marking strategy is important for all parties involved.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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