11 January 2011

Reintroduced US IP Bill to Slay the False Marking Troll?

Look at them, troll mother said.
Look at my sons! You won't
find more beautiful trolls on this side
of the moon.(John Bauer, 1915)
On 7 January 2011, a Bill was reintroduced to the US Congress that, if passed, will significantly, and perhaps excessively, curtail the penalty that can be imposed against a manufacturer that falsely marks a product as being protected by one or more patents.


Over the past couple of years, numerous companies have been sued in the US under the 'false patent marking' provisions of US patent statute, 35 USC 292(a).  False marking is the offense of marking a product as being protected by a patent that does not, in fact, cover the article in question.  This may be because the product does not fall within the scope of the patent claims or, as has often been the case in the recent spate of law suits, because a patent that may once have covered the product has expired.

For many years, US district courts interpreted the false marking provision as allowing for the imposition of a penalty of up to US$500.00 in total.  However, in the case of The Forest Group, Inc v Bon Tool Co (Fed. Cir. 2009), the US Court of Appeals for the Federal Circuit overruled the district court, finding that the law as it currently stands provides for a penalty of up to US$500.00 per offense, i.e. for each article sold that is inappropriately marked. 

While a court is free to award much less that the US$500.00 maximum, the Bon Tool decision triggered a veritable deluge of law suits, because subsection 292(a) is a qui tam style provision, which means that although false marking is a general offense against the statute, an action may be brought by a private individual or entity, who will receive half of any award granted by the court (the government receives the other half).  And so the 'false marking troll' was born.

The firm of McDonnell Boehnen Hulbert & Berghoff LLP is maintaining a web site dedicated to the false marking issue, including a lengthy list of the many suits currently pending before various district courts.

More recent decisions have stemmed the tide a little, such as Pequignot v Solo Cup Company (Fed. Cir. 2010), in which the court emphasised the statutory requirement that there be an intent to deceive the public, and ruled that the mere expiration of a patent that had covered the marked product was not necessarily sufficient to establish intent, but instead creates only a weak, and rebuttable, presumption of intent.


During the 111th Congress in 2010, Representative Robert Latta [R-OH] introduced Bill no. HR 6352, The Patent Lawsuit Reform Act 2010.  The Bill proposed to assess one US$500.00 fine against a party found guilty of deceiving the public under Section 292, rather than allowing the interpretation of being fined for each product on the market.  It would also require the individual bringing the lawsuit to have suffered a competitive injury as a result of the violation, thereby preventing opportunistic, and otherwise disinterested, litigants from bringing suit purely for financial gain.

When the 111th session of Congress ended, HR 6352 was cleared from the books.  However, Rep. Latta reintroduced the bill to the 112th Congress on 7 January 2011 as HR 243, and it has been referred to the House Committee on the Judiciary.


In our opinion, a total fine of no more than US$500.00 seems pointless.  Nobody would bring suit in order to collect US$250.00 (whether commercially aggrieved by the false marking or not), and no manufacturer would bother to avoid false marking (with deceptive intent or otherwise) to avoid such a small penalty, especially given the reasonable expectation that nobody would bother to sue anyway.

A fixed maximum fine might be reasonable, but would need to be substantially larger to have any deterrent effect.  However, we can see no real problem with the current provision for up to US$500.00 per offence.  There is nothing to prevent a court from awarding US$0.10 for each one of 200,000 separate offenses, for example, if that is deemed to be appropriate in a given case.

The requirement for standing to sue seems more sensible.  While there is no doubt something to be said for enabling the general public to police the offense of false marking, the commercial reality is that competitors have the greatest incentive to do so, and the cost to the court system of a flood of lawsuits would seem to outweigh the benefits of allowing open season on false marking.

It will be interesting to see whether this bill makes any progress during the current session.


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