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District Court Awards $180 Per Falsely Marked Item

In our recently issued Client Alert regarding the rash of False Marking lawsuits, we advised that the Federal Circuit had reinterpreted the False Marking statute in the Forest Group v. Bon Tool case to permit damages on a “per article” basis.

Forest Group originally sued Bon Tool for infringement of its patent on stilts used by drywallers. Forest’s claims were dismissed on summary judgment for lack of infringement. However, Bon Tool counterclaimed for false marking. The District Court then held that Forest was liable for a $500 fine for false marking.

Bon Tool appealed and the Court of Appeals for the Federal Circuit reversed and remanded, holding that the fine must be imposed for each falsely marked article. On remand late in April, the district court assessed a fine of $180 per article, even though the stilts were sold for prices between $130 -$180.

The judge reasoned that this decision will deprive Forest of more than it received for the falsely-marked stilts, fulfilling the deterrent goal of § 292’s fine provision. Based on the $180 per article fine for the 38 falsely-marked stilts of which there was evidence at trial, the Court imposed a fine of $6,840 against Forest, or more than the gross revenue attributed to the stilts.

Judge Atlas based her decision on the Federal Circuit’s three stated policy goals: discouraging mismarking; encouraging enforcement; and avoiding “disproportionately large penalties.” Bon Tool had asked for the maximum $500 per offense. Forest argued that the fine should be limited to its profits of $2,400 on the falsely-marked products.

As the case comes from a trial court, the decision is subject to appeal. However, all patent owners should be concerned about this decision because we believe that it would result in the disproportionately large penalties the judge was trying to avoid, particularly for relatively inexpensive mass produced items. Consider the effect of a $500 penalty on a $500,000 machine (minor) as opposed to a $13 penalty on thousands of $13 items (catastrophic).

We will continue to monitor this case and others like it and keep you posted with further news regarding this subject. If you have any questions or would like more information regarding patent marking issues, please contact your Davis & Kuelthau attorney.