False Marking: Lobbying against the Senate Bill

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A battle over the false marking statute is rising. The currently pending patent reform bill (S.515) would severely weaken the cause of action. In a recent press release, the Public Patent Foundation (PubPat) has argued that the statute “would eliminate an important method of protecting the public from false and deceitful statements.”

The false patent marking law imposes a fine on companies that label unpatented products as patented “for the purpose of deceiving the public.” Currently, the law allows any citizen to sue false markers on behalf of the federal government and any fine awarded by the court is split between the citizen who brought the case and the government. Such "qui tam" suits, which have been part of our country since its founding and originally derived from custom in England, provide an incentive for citizens to spend time and money to bring such cases so that the government does not have to do so itself. While not burdening government officials, the suits nonetheless also supply the federal government with income. The Senate's proposed amendment to the law would eliminate such citizen suits, allowing only competitors to sue for “competitive injury” from the deceptive labeling. In some markets, there are no competitors, and thus no one would be able to pursue a company for deceitfully marking its products as patented.

"Falsely marking an unpatented item as patented harms the public by misleading consumers, deterring competition, and depriving legitimate patentees of the marketplace distinction they deserve," wrote [Dan] Ravicher. "I respectfully urge [you] to preserve the qui tam provision of the false patent marking statute because it operates to prevent harmful, deceptive acts, without cost to the government, while also containing adequate protections for defendants."

38 thoughts on “False Marking: Lobbying against the Senate Bill

  1. You legal geniuses with no sympathy for people buying coffee because of a patent number have cmpletely issed the point. The buyer of the cup sleeves at Starbucks [sic] is the one being duped, to the detriment of other sleeve manufacturers. Why not just stick a 7-digit number on any old product? Beats paying filing fees, prosecution costs, maintenance. This comment may be protected under US patent 9,746,835

  2. Pong,

    I will put the ball back into your court (perhaps DA will let you make a brief re-appaerance in the virtual world, without getting paddled, that is):

    What (constiutionally) prevents the US from writing a law that “transfers its sovereign injury?”

    “Transfers” in quotes as the injury itself is not transfered – teh US still collects its half for its injury.

  3. Hi Ping, Pong here. (Been wanting to do that for a while).

    As for, “…by writing a law that does that?”, I guess I should have asked, “how can the US [constitutionally] transfer its sovereign injury? ”

  4. But how can the US transfer its sovereign injury?

    just an observation: …by writing a law that does that?

  5. Hudson, thanks. But, “and the qui tam nature of the enforcement scheme implies harm to the sovereign interests of the US.”

    Unlike other qui tam statutes (such as the False Claims Act) where a private person stands in the shoes of the US regarding the public’s pecuniary (money) injury, in 292 the relator stands in the shoes of the US regarding an injury against its sovereignty.

    I don’t question that a pecuniary/monetary interest can be validly transferred via legislation to a private person.

    But how can the US transfer its sovereign injury? Does the 292 relator have standing under Article III on this basis? Or only if s/he has also been personally harmed?

  6. Consumers do not meet the Lanham Act standard because they do not suffer competitive injury from those from whom they purchase goods. The legislative history to the Lanham Act, as well as the entire body of prudential standing jurisprudence under the Lanham Act, makes plain that the statute was intended to remedy only competitive harms.

    The false marking statute, on the other hand, is intended to remedy more than harm to competitors. The language of the statute itself refers to deception upon the public, and the qui tam nature of the enforcement scheme implies harm to the sovereign interests of the US. See Forest Group opinion.

  7. Hudson, thanks much for the link. But the qualifying phrase “any person who believes… likely damaged” is beside the point. Any number of consumers could easily meet that burden, yet we do not allow them to even try.

    And as for your comment, “The Lanham Act is intended to remedy competitive harms, not all harms.” This begs the question. Do you posit that the false marking statute was intended to remedy some harm not tied to competition?

  8. The Lanham Act is intended to remedy competitive harms, not all harms. As a result, the doctrine of prudential standing acts to bar customers from bringing suit against the companies from whom they purchase goods as customers cannot suffer a competitive injury. See, e.g., link to law2.fordham.edu). Unlike the Lanham Act’s qualifying phrase “who believes that he or she is or is likely to be damaged by such act,” the false marking statute has no such qualifier.

  9. “No consumers are injured by false advertising? Is that your position? Help me out here.”

    My point is that 292 just says “any person” period without limitation. There is nothing else to construe. The fact that the Lanham Act uses additional language following “any person” requires a different construction. Whether the courts have construed that language (in the Lanham Act) correctly or logically is beside the point.

    What is confusing about the bare words “any person”?

  10. DA writes, “Look at the language you’ve conspicuously failed to “bold”… That is the (stark) contrast to 292 and the quite obvious explanation of the differences in case law interpretation. ”

    Come again? The reason consumers are not allowed standing in LA cases (despite “any person”) is because of the language I did not bold – that the any persom must believe they are likely to be harmed?

    No consumers are injured by false advertising? Is that your position? Help me out here.

  11. Lionel Hutz wrote, “False marking should be enforced primarily by a loss of constructive notice by the patentee. ”

    Wish I’d thought of that. It seems like a perfect reciprocal result.

    Properly mark and you get constructive notice. Improperly mark (even with no intent to deceive), and you lose the constructive benefit notice.

  12. “What do the courts say about this? Has there ever been consumer-standing found under the LA? Serious question – I’ve looked but can’t find one;”

    Look at the language you’ve conspicuously failed to “bold” in your post (following “by any person”).
    That is the (stark) contrast to 292 and the quite obvious explanation of the differences in case law interpretation.

  13. Hudson writes, “The Senate bill, however, turns false marking enforcement on behalf of the public into what is essentially a private cause of action for unfair competition (already provided for under the Lanham Act and at common law). In markets and industries where there is little competition, or where competitors fail to comply with their own marking obligations, there will be ineffective enforcement.”

    Hmm… your second sentence above already attended to by another poster, I’ll focus on your first.

    You mention the Lanham Act. Have you ever noted that the LA uses very similar language regarding who may sue a company for false advertising? It says that the false advertiser “shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”

    What do the courts say about this? Has there ever been consumer-standing found under the LA? Serious question – I’ve looked but can’t find one; seems to be limited to corporations only despite the “by any person” language.

    The proposed Senate amendment would seem to bring false patent marking on par with all of our LA jurisprudence.

    And please, anyone feel free to dispute this, but IMHO false advertising of the sort covered under the LA can much more easily be shown to directly mislead and harm consumers (but they can’t sue) than can false patent markings.

  14. False marking should be enforced primarily by a loss of constructive notice by the patentee.

    Marking with an expired patent has zero negative consequences for anyone. I would not even call it false marking. I have seen old industrial pieces marked with 6 digit patent numbers. Nobody believes those are still good.

    Moreover, actual false marking does little harm to the public either. It’s easy enough to determine that a patent does not cover a product.

    If someone were to slap 500 patents on a product and half of them did not apply, that would be an issue. But if it’s only one or two, that’s easy enough to check out.

    Regardless, loss of notice rights should be sufficient to deter false marking.

  15. In markets and industries where there is little competition, or where competitors fail to comply with their own marking obligations, there will be ineffective enforcement.

    In such markets, there is even less harm than the usual nebulous marketing advantage of having your product marked as “patented”. Not only is nobody buying Starbucks coffee for the patented cup insulator anyway, but it’s even less of a big deal when it’s not happening often enough to bug your direct competitors (or you have none), and when your competitors level the playing field by acting similarly.

    Besides, people who buy things just because they’re “patented” need to learn that some patents are only skin deep.

  16. Neither the Federal Circuit nor the proposed Senate bill change what has always been the case — that marking an unpatent article as patented is wrongful conduct. The Forest Group v. Bon Tool only addressed how penalties for such offenses should be computed, and the new Senate bill merely evicerates the enforcement scheme applicable to such offenses.

    Should driving with an expired licenses be excused as just “incorrect driving?” Like a driver’s license, a patent is a privilege (literally, a “private law”) which imposes certain obligations on the holder. When these obligations are disregarded, enforcement can serve as a deterrent (both specifically to the offender and to others — e.g., speed traps, sobriety checkpoints, etc.), but only when it’s effective.

    Prior to The Forest Group v. Bon Tool, and as specifically pointed out by the Fed. Cir., the prospect of a $500 fine is little incentive for a qui tam relator to enforce the law. That said, the per article fine must not be disporportionate. Within those bounds, as in many other areas of the law, judges exercise discretion in setting the appropriate per article fine.

    Regardless of Mr. Ravicher’s affiliations or personal interests, his points have not been refuted. If one accepts (as even the current version of the Senate bill does) that marking an unpatent article as patented is wrongful conduct, then the question becomes: how do you fashion a fair and effective enforcement scheme. Under the current qui tam enforcement scheme, per-article fines provide adequate incentive for enforcement (with the benefit shared with the government), and judicial discretion assures that offenders will not be fined disporportionately. The Senate bill, however, turns false marking enforcement on behalf of the public into what is essentially a private cause of action for unfair competition (already provided for under the Lanham Act and at common law). In markets and industries where there is little competition, or where competitors fail to comply with their own marking obligations, there will be ineffective enforcement.

  17. Kittlepops: the label of “False” marking comes directly from the statute. And I don’t think “false” connotes anything stronger than “incorrect”.

    Pong & Others: Ravicher’s comments on the policy behind 292 come nearly directly from the CAFC in Clontech and Forest Group.

    The current senate bill is a knee-jerk reaction that is simply overkill. When a few district courts start giving tiny damages awards, when the CAFC tightens up the availability of the intent inference (Pequignot, forthcoming), and when companies start getting vigilant about their marks (the intent of the statute, ironically), these cases will all but go away on their own.

    EM

  18. “False” marking. “Inequitable” conduct. Why does patent law sensibilization what usually turn out to be mistakes? What is wrong with calling it something like “incorrect” marking? “False” seems too strong a word to assume in all cases.

  19. “Falsely marking an unpatented item as patented harms the public by misleading consumers, deterring competition, and depriving legitimate patentees of the marketplace distinction they deserve,” wrote [Dan] Ravicher.”

    Really? REALLY?

    Prove it.

    Period.

  20. “”http://en.wikipedia.org/wiki/Code_of_Hammurabi”

    Take a look at the laws they used to have.

    Check out the last one:

    If a judge tries a case, reaches a decision, and presents his judgment in writing; and later it is discovered that his decision was in error, and it was his own fault, he shall pay twelve times the fine set by him in the case and be removed from the judge’s bench.

    Talk about patent reform. That one law would probably reform the entire legal system.

  21. the current false marking statute seems to be another nanny govt. type of law that our esteemed Congress once deemed necessary to shelter the sheeple, but squealling campaign donors > everything.

  22. I can’t help myself.

    I can’t believe this great man is the reason that I see.
    A screen with total access right here in front of me.
    But now we “STATE A LICENSE” that made a coup`e’tat
    all never would have surfaced without it bwhaaahaahhaaaa.

  23. How is a cardboard sleeve protected by a US patent to a valve timing adjusting apparatus of an internal combustion engine?

  24. Interesting comment from Znutar, to one in Europe who observes the EPO feeling its way into the 21st century on the 101, inherent patentability, issue. I for one am very thankful that it was not politicians taking a snapshot, who wrote the rule but, rather, the experts in the EPO’s Technical Boards of Appeal, free from Binding Precedent and free from the supervision of any court, who are doing a good job of keeping the EPO’s 101 rule in line with GATT-TRIPS “all fields of technology” (in the 18th century they used to call technology the “useful arts” and a science graduate at Oxford University is still a BA, whether he’s useful or not) and the basic understanding that a patentable invention is something that has technical character (101) and solves an objective technical problem (103).

    “So, go on, tell me what’s “technical” I hear you cry. Answer: when you have assimilated the DG3 jurisprudence you’ll know, with a high degree of legal certainty.

    At the margin, the cutting edge, there always will be a degree of doubt, of course. Just as with any patent claim, a “puzzle at the margin” is not enough to invalidate the whole claim.

    But that’s what we all want, isn’t it, so the patent system is able to “go with the flow” of what, moving forward, constitutes the consensus informed view of what is “technology”.

    I find it ironic that US commentators like Randall Rader assert that Europe’s view of patentability is so 19th century.

    I wonder what useful guidance Bilski will deliver.

  25. “…harms the public by misleading consumers…”

    Where are those mislead consumers? I’m willing to bet that virtually no consumer takes note of patent numbers on packaging, and those that do are patent attorneys, or professional inventors, by day, not ordinary folks trying to decide between two competing products. Ordinary folks look at price, ingredients, where it was made, etc. Patent marking serves a notice function to competitiors, and any competitor that would opt to not enter the marketplace due to a patent number on an existing product without even considering whether the patent was still in force doesn’t stand a chance, anyway. Qui tam is an excuse for ambulance chasers.

    Real patent reform would start with a clear rule on patentable subject matter in this age of information processing. I believe in an expansive view, but I’d accept a restrictive view, as any clear rule would be so superior to the double-speak that keeps coming out of the courts and BPAI. Not really sure Congress is capable of forming a clear rule, either, but one can hope. At least the job belongs to Congress.

  26. Perhaps speed limits should only apply to those who are actually injured by excess speed.

    I tried that Friday when I was pulled over doing 80 through the school zone near me. I even suggested that the fine go to the school, but he wouldn’t listen.

  27. PM The indicated opposer of this legislation is one of the leading attorneys among the more than 100 reported pending new “false marking” lawsuits who are seeking 50% of any and all recoveries for themselves and/or their firms from such litigation

    Surprise, surprise.

    Thanks for the info, Paul.

  28. The indicated opposer of this legislation is one of the leading attorneys among the more than 100 reported pending new “false marking” lawsuits who are seeking 50% of any and all recoveries for themselves and/or their firms from such litigation, under a statute which currently allows nothing to be awarded to anyone actually injured by false marking, and does not even require the attorneys to represent anyone but themselves.

  29. While I strongly disagree with false marketing, if you’re stup id enough to buy something because it is patent protected (rather than buy the off brand specifically because the other is patent protected) you get 0 sympathy from me.

    Yet, I rather like the current statute because all I have to do to make $$$ is find some mismarked products. Incompetence makes this world go around, surely I can find some.

  30. The “Design Patents and Repair Parts” article has vanished into the ether, taking TheTwoBobs with it.

  31. Max, you underestimate the ability of the American patent community to make a mountain out of any molehill.

    I quote General Heller:
    “The patent system is under attack. It is clear, Dennis that you have chosen sides in this war.”

  32. Dennis, I can’t think of a more trivial detail in the corpus of patent law than “patent marking”. Yet now you write:

    “A battle over the false marking statute is rising”

    I venture to suggest that there is only one country in the world where such a “battle” is imaginable, and I look forward to your further reports on this battle. Might it take some years, do you think? What does this tell us about the prospects for amending any provision of US patent law that is more problematic than “patent marking”?

    Just out of marginal interest, can any reader dig up and quote those statistics about the number of lawyers, per head of population, in various countries around the world?

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