BLOG

Another false patent marking lawsuit has just been filed in our local federal court. The case involves a pro se plaintiff Michael Muller filing on behalf of himself and The United States a (35 U.S.C. 292) suit for false patent marking (Complaint on PACER) against, among other entities, the famous multiple-choice test materials maker Scantron Corporation. Since the end of 2009, hundreds of qui tam false patent marking lawsuits have been filed (At a rate of over 3 lawsuits per working day so far according to data resources provided by McDonnell Boehnen Hulbert & Berghoff LLP). These lawsuits seek to leverage the interpretation given to the relevant statutes, specifically stating the liable defendant “Shall be fined not more than $500 for every such offense.” Until that time, this type of lawsuits were scarce, not because companies promptly removed patent-related information form mass -produced articles when patents expired, but because federal courts routinely assessed one $500 fine for the act of falsely marking, independently of the number of “falsely marked” articles produced.

The landmark case re-interpreting the statutory fine language came in December 2009, when the U.S. Court of Appeals for the Federal Circuit issued its opinion on Forest Group, Inc. v. Bon Tool Company, requiring the interpretation of the code as a penalty of up to $500 for every article that was falsely marked. The Federal Circuit considered this calculation stems from the plain language of the statute and, since false marking can have a role in stifling competition beyond the temporary monopoly granted under Patent Law, additional considerations apply in support of the “per article” interpretation.

Enter Scantron, the ubiquitous maker of testing materials which, according to its website, provides testing materials to 80% of U.S. schools. The company has been in business for many years and has been granted multiple patents along the way. Some of these patent numbers correspond to specific products and some forms were marked with those numbers. It will remain to be seen if the accused products continue to be sold by Scantron after the expiration of the patents and if the alleged false marking would have been economically feasible as it would have required new print runs and the potential waste of, presumably, tons of paper products.

The problem this type of litigation brings to the fore is not the underlying issue of when to drop the designation of expired patents, but the distortions we have seen since the Forest Group case where plaintiffs that have not been actually damaged aim to reap windfall profits from the quick calculation of $500 times millions of articles, even if 50% of the fine is required to be paid to the US Treasury (per statute). In the Scantron case just filed, the plaintiff does not claim to have been, or to have ever tried to enter, the testing supplies market, all he apparently did was notice old patent numbers on a few forms. The result, from an economic perspective, is simply an inefficient allocation of resources.

Congress is not standing idle on this issue, fortunately, and in a proposed amendment to the currently pending Patent Reform Act (S. 515), the revised statute would be changed to provide that the only plaintiffs with standing to bring these suits would be persons who have suffered a competitive injury as a result of a violation of the False Patent Marking statute. Unfortunately for the smooth operation of Intellectual Property protection, the changing agenda in Congress and the dire straits of the US Treasury do not give much hope of an expedited reform of this statute.