Raising the Bar to Plead False Marking
In re BP Lubricants (decided 3/15/11)By: Michael A. Albert
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What This Means to You
- A plaintiff must now provide evidence of deliberate, deceptive "false marking" by a defendant.
- Stay tunned for the outcome of pending Congressional action and Federal Circuit cases which may further resitrict the application of the statutory fine of up to $500 for each unit of falsely-marked product.
- In the meantime, patent owners should verify parent markings at key junctures in product lifecycle, includin when products or packaging are modified.
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Overview
False marking cases have become common in the past couple of years since the US Court of Appeals for the Federal Circuit (Federal Circuit) held that the statutory fine of up to $500 could be assessed for each unit of falsely-marked product.
Due to the onslaught of false marking cases, the Federal Circuit–as well as Congress–have recognized the need for some clarification. As a start, a recent Federal Circuit case, In re BP Lubricants, clarified the test for determining if a complaint alleging false marking of a patent number on a product meets the pleading requirements of Rule 9(b) of the Federal Rules of Procedures, which states:
In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.
The court established a heightened bar for pleading such claims, requiring facts amounting to an objective indication the defendant was aware of the falsity of the marking.
Case Background
In In re BP Lubricants, the plaintiff alleged that defendant BP continued to mark its CASTROL product with a design patent number even after that patent’s expiration date, thereby deceiving the public into believing the product was still under patent. The plaintiff further alleged “upon information and belief” that BP, being a sophisticated company experienced with patents, knew or should have known the patent had expired.
The district court denied BP’s motion to dismiss, holding that plaintiff had sufficiently alleged the “who, what, where, when and how” to allow the case to proceed to the discovery phase.
In an unusual move, the Federal Circuit stepped in to consider whether the motion to dismiss should have been granted, and to harmonize the inconsistent case law among various district courts regarding the standard for pleading false marking.
Decision Analysis
The Federal Circuit reversed the district court’s denial of the motion to dismiss, and held that Rule 9(b) – which applies a heightened pleading standard to claims of fraud – applies to false marking cases.
In reaching its decision, the court rejected the theory that a false statement inherently shows an intent to deceive. The Federal Circuit held that the bar for proving deceptive intent in false marking cases is “particularly high”, and a plaintiff must allege specific facts sufficient to show deliberate deception.
To meet this new standard, plaintiffs will need to allege facts amounting to an objective indication that the defendant was aware the patent marked on its product had expired, and that its patent marking was thus false. Such evidence could, for example, consist of showing that the defendant revised its packaging after expiration of the patent but without removing the expired patent number, or that the defendant sued a third party for infringement of the patent after the patent’s expiration.
Takeaways
The Federal Circuit has raised the bar for pleading false marking. Plaintiffs seeking to assert such claims will need some evidence of deliberate, deceptive conduct by the defendant. Neither the falsity of the statement nor the sophistication of the defendant will suffice alone to meet this test.
Congressional action is pending to severely restrict the application of this statute, and pending Federal Circuit decisions may further affect its scope.
For their part, patent owners should make sure the markings on their products or packaging are correct, and should take particular care to revisit this issue when their product or packaging changes, or when they assert the patent against third parties.
