AmiCOUR IP Group News and Opinions

Update IAM Disciplines to Dodge False Marking Trolls

November 2010

Here is a copy of our Viewpoints article as submitted and reprinted with our permission in LES Viewpoints.

By Scott Bechtel and Adrian Mollo 

Recent Lanham Act rulings have added another worry for IAM’s. News of false marking penalties of up to $500 per occurrence from The Forest Group, Inc. v. Bon Tool Co., and the Solo Cup case, spread as fast as the number of new suits filed by “relators.”  IP blog GRAY on Claims keeps track, with a list in the hundreds. Although false patent marking has been part of US Patent Code since 1842, cleaning up abuses has been effectively privatized by the Act. The government’s new deputies don’t hesitate to file. In Stauffer v. Brooks Brothers, where outdated bow tie patents affirmed Raymond Stauffer’s right to sue, the CAFC opened the flood gates. A relator is anyone who can demonstrate damage to the public caused by intentional false marking. A few pundits looking for an easy way out seemed surprised when the appeals court read a statute reading "Any person may sue…" as really meaning “Any person” and remanded the case to proceed in the lower court. 

Current hope to stop the tidal wave resides in anticipated interpretations of rule 9 burden to prove “intent.” The Wrigly case hinted that merely being a “sophisticated company” does not impute“intent to deceive.”  The seldom noticed dicta in Brooks Brothers might ultimately prove prophetic where the result so far is a reminder to address intent in forward proceedings. 

The ways an IAM’s employer can wind up in court range from obvious, an outdated number, to the unforeseeable; perhaps an error in understanding whether a complicated claim actually reads on the product. A missed maintenance fee could ignite the appetite of a more sophisticated relator. Complex situations carry a double edged sword of being viewed as legal “cleverness” to circumvent the Act. 

The Lanham Act isn’t new, yet first impression cases are still anticipated. For now, anyone can walk into a WalMart looking for low patent numbers relaying the results to a troll. At least one database mapping bar codes to patents exists. Being called out is no longer a matter of “if” but “when;” and, once an offense takes place, even if inadvertent, the bread is not easy to “unslice.” Under the penalty, theoretical stakes can be enormous. 

Many cases have been “sold back” at discounted “troll rates.” Once settled, another action is barred, suggesting one solution as settlement of the “friendly” suit to bar the others. Multiple suits can proceed if no settlement has occurred. With tens of millions of units per month for some products, the risk can make you wonder if patent notice is even worth it. The answer lies in managing the notice process. 

On the side of the plaintiffs, the preponderance of abuses may stem from years of misconception that getting caught meant an affordable $500 fine, far less than the cost of a real patent or maintenance fees. Genuine “bad actors” have claimed non-existent patent coverage to fool competitors and investors.  There are inequities in falsely claiming “patented” or “patent pending” status while thousands were spent by competitors to become legitimate IP holders. There is also some anecdotal evidence of entrepreneurship classes suggesting that “patent pending” is a cheap way of getting “free” protection. 

Risk has shifted to many for the violations of a few; nevertheless, false marking does exist and any freedom to operate study must account for it. Claims of pending status should be scrutinized; including USPTO PAIR checks for weak or even defective applications cleverly designed to “legally” claim pending status. The “Wayback Machine” can add value testing for timely filing. 

IAM’s for legitimate patent holders must have IP management disciplines in order. The ability to demonstrate policy, practice, and action aimed at removing outdated numbers would likely go a long way toward a defense, especially given the focus on proving “intent.” Perhaps the “troll rate” to settle will be less in such cases. New software to manage IP notices is also available. Cooperation from production managers, engineers, and literature teams is essential, but not always a given. Checking thousands of drawings can be a challenge if marking records have not been separated. Setting up quality assurance gates will also reduce risk. As Wrigley suggests, large organizations should be able to show the process steps to remove outdated notices. It cuts both ways, but legitimate errors can occur. 

A suit can mean layoffs or the end to bonuses while the company defends; so, informed cooperation is a realistic expectation. Education is a good place to start. An expiring patent should automatically trigger a routine series of steps that purge the notice from its associated products and literature.  When everyone implements these disciplines, discovery of false marking will also be automatic, so get started today.  And soon, the economic lives of the new “deputies” will also expire.

© 2010 AmiCOUR IP Group, LLC.