Federal Circuit Authorizes Qui Tam False Marking Cases

In a decision interpreting the false marking section of the Patent Act, 35 U.S.C. § 292, the Federal Circuit authorized so-called “quit tam” suits against defendants who falsely mark their goods with an intent to deceive, and held that "the statute's plain language requires the penalty to be imposed on a per article basis." The decision, Forest Group, Inc. v. Bon Tool Company, No. 2009-1044, ___ F.3d ___ (Fed. Cir. 2009)  (Rader, Plager, Moore, JJ.), held that the district court erred when it assessed only $500 in penalties against Forest where the evidence supported a decision that multiple articles were falsely marked with an intent to deceive. In dicta, the court noted that “Congress’ interest in preventing false marking was so great that it enacted a statute which sought to encourage third parties to bring qui tam suits to enforce the statute.”  Slip Op. at 12.

A writ of qui tam is a common law writ given to private individuals who assist prosecution, permitting them to receive all or any part of the penalty imposed.  Judge Moore, who authored the panel’s unanimous decision, reasoned that “[b]y permitting members of the public to sue on behalf of the government, Congress allowed individuals to help control false marking.”  Slip Op. at 13.

Allegations of infringement in the case were based on U.S. Patent No. 5,645,515 (the ’515 patent), which includes claims covering spring-loaded parallelogram stilts of the type commonly used in construction. Following a claim construction and summary judgment order resulting in a determination of non-infringement, the district court held a bench trial on the defendant’s false marking counterclaims. The district court found that Forest falsely marked its stilts with its ’515 patent number after a summary judgment order of noninfringement was entered in an unrelated case pending in the District of Minnesota against another defendant, Warner Manufacturing Company, and assessed Forest a $500 fine for a single offense of false marking.  The court found that the summary judgment order of non-infringement in the Warner case provided Forest with knowledge that its own articles were not covered by the ‘515 patent.  Slip Op. at 4.

In reversing the district court’s construction of § 292, the Court held that “[t]he plain language of the statute does not support the district court’s penalty of $500 for a decision to mark multiple articles. Instead, the statute’s plain language requires the penalty to be imposed on a per article basis” and reversed on that basis for a calculation of the penalty on a per-article basis. The statute provides a fine of “not more than $500” for each offense. Slip Op. at 8. “By allowing a range of penalties, the statute provides district courts the discretion to strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties for small, inexpensive items produced in large quantities.” Slip. Op. at 13.