How to Report False Patent Marketing

The reason for the recent increase in false patent marketing cases since December of 2009 was a decision by the U.S. Federal Court of Appeals. There, the Federal Circuit Court interpreted the false patent marketing statute to require statutory penalties of up to $500 to be imposed on a per item basis rather than per offense. Instead of plaintiffs collecting a portion of the $500 total judgment, successful litigants could collect an amount based on the number of items that were marketed displaying the false patent. This created a potential exposure of more than $10 trillion for the disposable cup manufacturer Solo Cup, who was accused of falsely marketing a huge number of cup lids displaying the number of two patents that had expired.

In the Solo Cup case, the court held that many of the same rules apply to both marketing a product with an expired patent number and products that are falsely marketed with fictitious patent numbers. The court also ruled that the combination of a false statement, such as a fictitious or expired patent number, and knowledge that the statement was false create a the presumption of the intent to deceive the public. Since this ruling, plaintiffs have filed a number of false patent marketing cases in federal courts across the United States.

Facts obtained under the Freedom of Information Act have shown that the average settlement amount for more than 100 of these lawsuits has been slightly more than $50,000. A district court in Los Angeles awarded a competitor more than $3.3 million in penalties under the false marketing statute and unjust enrichment damages.

The Federal Circuit has issued further decisions that impact the false patent marketing statute. In Stauffer v. Brooks Brothers, the court reversed a trial court's decision that injury was required to bring a false marketing suit. Because of this, members of the public were allowed to maintain suit and recover penalties in false patent marketing cases. This applies even when the plaintiffs are not competitors of the defendant and were not injured by the defendant falsely marketing a patent.

During the 111th Congress, a law was introduced to amend the false marketing statute in order to slow the number of false patent marketing suits that were making their way through the courts. The new amendment would require that the plaintiff in a false marketing suit must have suffered an injury as a result of the marketing violation. This would effectively eliminate the ability of third parties to bring suit in a false patent marketing case. If enacted, this new requirement would apply to all cases filed on or after the date of the bill's enactment. The bipartisan manager's amendment to the Senate version of the Patent Reform Act was released on March 4, 2010. It contains the Patent Lawsuit Reform Act of 2010, which would also limit the damages available in false patent marketing offense to a single fine of no more than $500.