Is Patent Marking Worth the Trouble?

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Professionals

Robinson Bradshaw Publication
May 16, 2011

Patent reform is in the news these days, with spirited debate about what types of inventions should qualify for patent protection and whether the current scope of patent enforcement encourages or hinders business activity. Patents are also increasingly important in the day-to-day business world, with companies eager to acquire patent portfolios that offer a competitive advantage and, on the defensive side, concerned about the irritating patent infringement claims asserted by “patent trolls” whenever a new product is introduced. In the midst of all of these contentious issues, it is easy to overlook the more mundane requirement of patent marking.

The high-level legal rules on patent marking are fairly straightforward. Patent marking is not mandatory. While marking your product with the numbers of your important patents that cover key product features may serve to discourage knock-offs, patent marking is not required to retain patent protection.

However, patent marking will give you an important advantage if you need to enforce your patent against an infringer. When you assert a patent infringement claim, you are only permitted to collect damages that accrue after the infringer has either actual or constructive notice of your patent. If you have properly marked your products with the patent at issue, you will have given the infringer constructive notice of your patent and you can seek damages for past infringement. Otherwise you must give the infringer actual notice of your patent at the time that a dispute arises and you will be limited to recovering damages that accrue after that notice. Few defendants will roll over in the face of an infringement claim: most will offer at least an initial defense, often by asserting that your patent is invalid. Even if your real goal is to stop the infringing behavior and you have no realistic expectation of a damages windfall, the mere threat of a large damage claim can often help to convince the defendant to discontinue the infringing behavior.

Given these advantages, any company should generally mark its products with the numbers of its most important patents covering those products, and many companies routinely follow this practice. Companies tend to have two kinds of problems in complying with the marking rules. First, they sometimes claim that it is impossible, or at least commercially impractical, to stamp the patent numbers on the actual products and will mark the product packaging instead. The Patent Act permits package marking, but only when, “from the character of the article,” individual product marking “cannot be done.” The courts have not been consistent in deciding when individual marking “cannot be done,” but are unsympathetic to a claim that package marking should be allowed merely because it is less expensive. The best approach is a practical one: if you can legibly mark individual products without extraordinary expense, then you probably need to do so.

A related question comes up when a patent covers multiple products: do you still get constructive notice if you mark some but not all of the covered products? The courts have developed a “substantial compliance” approach, which unfortunately does not provide clear guidance. It has been held that marking 95% of the covered products is good enough; below that bright line, it is hard to predict the result. Here again, the best choice is to mark all covered products individually whenever feasible.

Second, companies may over-mark by marking the product with an inapplicable or expired patent. For example, a company may identify a group of key patents that may cover a product line and then mark all of the related products with the group of patents, without carefully examining whether individual products are covered. Companies may also be reluctant to bear the expense of changing their patent notice merely because one of the listed patents has expired and may be tempted to wait to correct the problem when there is some change in the product. In most cases, over-marking does not result from any intent to deceive, but the consequences can still be significant. The Patent Act sets a penalty of $500 per offense -- which can mean per mismarked article -- for “false marking” and allows “any person” to sue to recover the penalty and split the recovery with the government. (This is called a “qui tam” action.) In theory, then, anyone who notices products marked with an expired or inapplicable patent can bring a multi-million dollar lawsuit. Here again, the courts have been inconsistent. A few such cases -- including one brought by a Washington patent lawyer (who is making a second career out of such cases) against the maker of a coffee cup lid -- have been allowed to proceed, while others have been thrown out, usually on the basis that the false marking statute is unconstitutional. Given the uncertainty in the courts, you cannot assume that you can safely ignore this risk.

Patent marking becomes a much more complicated issue if the patent is licensed to third parties. The Patent Act makes the patent holder responsible for the marking practices of anyone making or selling a patented article “for or under them,” a category that includes licensees. The third-party problem can arise in a wide range of business situations, from a focused attempt to monetize a particular patent by licensing it to generate royalties to the inclusion of the patent in a broad portfolio cross-license. In either case the rules are the same, but they are not very clear. In a 2010 case called Funai Electric v. Daewoo Electronics, the Federal Circuit (which hears all patent appeals) specified a “rule of reason” approach: “When the failure to mark is caused by someone other than the patentee, the court may consider whether the patentee made reasonable efforts to ensure compliance with the marking requirements.” Factors to be considered may include the percentage of products that have been properly marked, the contents of the relevant license agreement, and the diligence of the patentee’s efforts to audit and police the licensees’ compliance with their marking duties. Funai prevailed by proving that 88% of its licensed products were properly marked and persuading the court of the diligence of its enforcement efforts.

Cases like Funai teach one other lesson that is often ignored. If you have entered into licensing arrangements where it is impossible to impose a marking obligation for a particular patent and, as a result, you cannot meet the requirements for constructive notice, there may no longer be any significant advantage to marking that patent on other products. Unless the mere act of marking your products with a particular patent will serve as an important deterrent to knock-offs, you can consider saving time and money by simply dispensing with the marking requirement for that particular patent.

There is one overriding theme in all of these cases. You can improve your strategic patent position and minimize your exposure by dealing with the marking requirement in a timely manner. But you can lose rights by ignoring the marking rules, and once you have lost those rights, they may be impossible to recover. In the area of patent marking, delay is not your friend.

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