The statute of limitations, with respect to false marking claims, is five years – for you obsessive-compulsive personalities, it’s set forth at 28 USC §2462. Suit is barred in respect of any act occurring outside the statute period. The critical question – especially if you’re a “marking troll” – is "when does the statute of limitations begin to run?"
Does it begin, for example, when the particular production run began, or when the false marking first occurred? Well, ponder no more, a court has provided the answer. (Seirus Innovative Accessories, Inc. v. Cabela’s, Inc.)
“The false marking statute requires a fine to be imposed for every offense of marking any unpatented article … [t]hus, a new claim for false marking accrues and resets the limitations period each time an article is falsely marked.” In layperson-speak, an action may be brought, and damages claimed, in respect of all items to which a false marking was applied within the five years preceding the filing of suit.
The next question, of course, is, "what are the appropriate damages?" They are, as the courts currently construe the applicable statute, no more than $500.00 – but possibly only a fraction of a penny – per article. Clearly, the trial court has very broad discretion, as illustrated in a recent case, Presidio Components, Inc. v. American Technical Ceramics Corp.
Presidio sued American Technical for infringement of a patent on electrical capacitors. American Technical responded with various counterclaims, including one for “false marking.” It seems that Presidio’s own capacitors were not covered by its patent. Oops! Further, at some point, Presidio became aware of this fact, but continued to mark at least some of their capacitors, with the number of their patent. Another oops!
The average sales price of the mismarked capacitors was $1.07. The Court fixed the fine at $.35 per unit – for the mathematically challenged reader, that’s about 32% of the sales price. In explaining its decision, the Court wrote, “[i]n determining the amount of the fine, the Court must strike an appropriate balance between enforcing the public policy embodied in the statute and not imposing a disproportionately large fine for relatively small violations.” That certainly clarifies the applicable standard and provides predictability. It was surely a mere coincidence that $.35 per unit was the exact amount of the fine suggested by American Technical’s damages expert.
The Court also applied the $.35 per unit fine to sales of unmarked capacitors, sold by Presidio, where the product advertising for these capacitors bore the improper patent number. A final oops! The total fine came to $228,086.25.
THE LESSON TO BE LEARNED: As we’ve stressed before, make sure your own skirts are clean before pursuing claims against someone else.
The court's standard for determining damages in these cases seems almost unacceptably vague, and even arbitrary. Although the court has purportedly taken into account the degree of seriousness of a violation, it must be remembered that, in cases of so much judicial discretion, the price tag accompanying an adverse judgment could still cripple or destroy a small company for even minor infractions. Perhaps the "intent" prong of the false marking determination formula is meant to correct for this?