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October 2012

The End of Easy Money: Changes to the Patent Notice and False Marking Statutes

Before the Leahy-Smith America Invents Act

Under 35 U.S.C. § 287(a), a patent holder can only receive damages for patent infringement if the patent holder gave notice that the product was covered by a patent.  Providing notice is generally done by marking the actual product with “pat.” and the patent number or by marking the product packaging if marking the product was not feasible.  Conversely, under 35 U.S.C. § 292(a), a product owner can be penalized for falsely marking a product with a patent number with the intent of counterfeiting, imitating, or deceiving the public.  False marking includes marking a product with a patent that does not cover the product and, prior to the passing of the Leahy-Smith America Invents Act (AIA), false marking also included marking a product with an expired patent.  The penalty for false marking is a fine is up to $500 for each offense, that is, every single product falsely marked can cost the defendant $500.  The pre-AIA false marking statute, 35 U.S.C. § 292(b), also allowed any person to sue under this statute, i.e.  a qui tam action, with half of the penalty going to the person bringing the suit and the other half going to the U.S. government. 

One Half of 21 Billion  x 500 is How Much?

One of the more notable qui tam false marking suits was Pequignot v. Solo Cup, (540 F.Supp.2d 649 (E.D.Va. 2008); 640 F.Supp.2d 714 (E.D.Va. 2009); 646 F.Supp.2d 790, 795-800 (E.D.Va. 2009); and 608 F.3d 1356 (Fed. Cir. 2010)).  In this case, Pequignot a patent attorney, brought a false marking suit against Solo Cup for Solo Cup’s continued marking of its plastic ware with expired patent numbers.  Solo Cup is probably best know for its red plastic cups that have been a staple at college parties and are the subject of a song by Toby Keith.  For damages, Pequignot only sought one half of the $500 per each offense as was due under 35 U.S.C. § 292(b), pre-AIA, which he estimated to be at least 21,757,893,672 separate offenses.  Unfortunately for Pequignot, both the district court and federal circuit dismissed his case.  While both courts acknowledge that Solo Cup falsely marked its products, neither court found the necessary “intent to deceive” that would warrant penalties.  While the patent holder had won this round, qui tam actions for false marking were still suits that patent holders and manufacturers would have to deal with.

Post Leahy-Smith America Invents Act

The end of qui tam suits for false marking happened on September 16, 2011, when President Obama signed the Leahy-Smith America Invents Act into law.  The AIA made notable changes 35 U.S.C. § 287 and 35 U.S.C. § 292 that severely restricted law suits for false patent marking.  Under the revised 35 U.S.C. § 287(a), patent holders can now place patent notices on the internet.  Instead of marking the product or packaging with the patent number, the patent owner can mark the product with “pat.” plus the website.  This will allow patent holder to update their patent notices in a more efficient and economical manner.  Under the revised 35 U.S.C. § 292(b), only persons who can prove they have suffered a competitive injury as a result of the false marking may bring suit.  Furthermore, under the new 35 U.S.C. § 292(c), marking products with expired patent numbers is no longer considered false marking as long as the patent did cover the product. 

As a toast to the death of false marking qui tam actions, I offer up the immortal words of Toby Keith, “red solo cup, I fill you up, let’s have a party.”

Kathryn K. Hull