Uncle Sam v False Patent Marking

PatLit is pleased to host this item from an American IP enthusiast Miclelle Umansky, who is currently enjoying her postgraduate IP studies at Queen Mary, University of London.  Michelle writes:

Uncle Sam v False Patent Marking

Across the pond, Uncle Sam has been battling false patent marking since 1946 with the help of United States Code, Title 35. While some undertakings wish to market their products by prominently displaying a patent marker, there can be situations where entities may use patent markers with the intent of deceiving the public. Moreover, 35 U.S.C., § 292 covers claims where an invalid, expired or inapplicable patent has been applied.  A myriad of issues have arisen during such claims – specifically, in relation to the requirement of intent (Federal Rules of Civil Procedure, Rule 9(b)).  Recently, this hot-button topic has been heavily scrutinised because many contend countless cases go unsanctioned due to the difficulty of proving intent to deceive.  In order to ascertain whether such conclusions warrant suspicion as to the effectiveness of the statute, one must rely on the case law. Buckle-up it’s going to be a bumpy ride.

Background: the False Patent Statute

Briefly, 35 U.S.C. § 292(a), states: 

"Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word 'patent' or any word or number importing that the same is patented for the purpose of deceiving the public . . . [s]hall be fined not more than $500 for every such offense."

 The statute addresses (a) infringers using existing patent numbers; (b) individuals who mark unpatented items as patented and (c) the exploitation of the term “patent pending” when there has been no application from which to infer pending status. In Forest Group, Inc. v Bon Tool Co., No. 2009-1044 (Fed. Cir. Dec. 28, 2009), the court concluded that the term “each offense” meant the $500 penalty could apply “per article”. Monetarily raising the stakes quite high is a chilling prospect for defendants but an incentive for qui tam plaintiffs to police against false patent markers.  The Forest Group ruling can be found here.

Secondly, 35 U.S.C. § 292(b), covers standing: 

“Any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States. Any plaintiff may address a complaint even if there has been no direct infringement on the part of the plaintiff. “ 

The qui tam right is therefore a provision within the ambit of 35 U.S.C. § 292 and can be initiated by any private individual who wishes to take action against false patent markers.  

Prima facie, this statute seems like it would essentially be the ‘scarecrow’ against any potential infringers but the requisite of Rule 9(b) makes it difficult for qui tam plaintiffs to argue deceptive intent. Rule 9(b) provides:

“In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.”

BP Lubricants USA, Inc.: Requisite for Rule 9(b)

In the latest Order by the Federal Circuit Court in re BP Lubricants USA Inc., Fed. Cir. Misc. Docket No. 2010-960, (Linn J) held the requisite under the Federal Rules of Civil Procedure, Rule 9(b) applies to false patent marking claims.  The case ended up in the lap of the United States Court of Appeal, Federal Circuit after a petition for writ of mandamus due to the objection of dismissal in Simonian v. BP Lubricants USA, Inc., 1-10-CV-01258 (N.D. Ill-01258). 

"The complaint also asserts mostly “upon information and belief,” that (1) BP knew or should have known that the patent expired; (2) BP is a sophisticated company and has experience applying for, obtaining, and litigating patents and (3) BP marked the CASTROL products with the patent numbers for the purpose of deceiving the public and its competitors into believing that something contained or embodied in the products is covered or protected by the expired patent.”

After careful consideration of the general allegations and an amicus curiae brief submitted by the Intellectual Property Owners Association, when applying Rule 9(b) there was no deceptive intent found on the part of BP Lubricant. Moreover, following Exergen Corp. v Wal-Mart Stores, Inc., 575 F.3d 1313, 1328 (Fed. Cir. 2009) the IPO argued:

“[w]ith intent to deceive the public being an essential element of false marking, the heightened pleading requirements of Fed. R. Civ. P. 9(b) should apply. Mirroring its application of Rule 9(b) to allegations of deceptive intent as an element of inequitable conduct [as in Exergen], so too should the Court require claims of deceptive intent in false marking cases to be pled with specific factual support for allegations of who, what, where, how, and why sufficient to support a reasonable inference that the defendant falsely marked with a conscious desire to deceive the public.”

 The Federal Circuit Court held:

“[p]ermitting a false marking complaint to proceed without meeting the particularity requirement of Rule 9(b) would sanction discovery and adjudication for claims that do little more than speculate that the defendant engaged in more than negligent action.”

 Justin E. Gray, IP Litigation Attorney at Foley & Lardner LLP and author of Gray on Claims, illustrates in his blog that since the re BP Lubricants judgment on March 15, 2011 -- there has been a significant decrease in claims filed. For more information, Gray on Claims supplies a false marking chart that is updated daily.

Has Uncle Sam turned a blind-eye towards false patent markers by establishing a high threshold for proving deceptive intent? Or has the court applied Rule 9(b) to stop the claim flood-gates due to qui tam right provision in 35 U.S.C. § 292 in conjunction to the monetary incentive post-Forest Group? In any case, even if courts are hesitant to find the requisite intent for liability, alleged infringers still bear the expense of litigation. Therefore it is imperative that companies remove all expired, invalid, inapplicable patent numbers from their products to avoid the inevitable pricey litigation process. 

 PatLit thanks Michelle for this extremely lucid guidance on a topic that remains beyond the experience and, in some cases, the comprehension, of non-US practitioners.