NEW YORK, March 22 (Reuters Legal) - A ruling by a federal
appeals court last week that made it harder to cash in on
expired patents appears already to have reduced a flood of
opportunistic patent lawsuits to a trickle.
Under patent law, individuals can sue companies for selling
products displaying patent numbers that have expired and split
any penalties with the government. Under a ruling March 15 by
the U.S. Court of Appeals for the Federal Circuit, plaintiffs
in these so-called false-marking suits must now show there was
deceit or fraud on the part of the companies.
Since March 16, the day after the ruling, only one new
false-marking suit has been filed, according to an analysis of
court filings on Westlaw, down from several cases a day before
The decision was a reprimand to district courts that have
allowed such cases to proliferate, said David Leichtman, an
intellectual property expert and partner in the New York office
of Robins, Kaplan, Miller & Ciresi. Leichtman said it is too
early to say if the ruling will lead lawyers to stop filing new
cases, but "it certainly should slow them down."
The Federal Circuit ruling grew out of a suit brought by a
Chicago patent attorney against BP Lubricants for selling
bottles of Castrol oil carrying expired patent numbers.
Such cases have abounded since 2009, when the Federal
Circuit ruled that a penalty of up to $500 applies to each item
sold with an expired patent number.
After the 2009 decision, lawyers and individuals began
scouring stores and the Internet in search of products with
expired patent numbers. The task was fairly easy because
patents expire after 20 years, and the U.S. Patent office
assigns numbers in chronological order. Any mark below a
certain number signifies an expired patent.
JUDGE FINDS FALSE-MARKING STATUTE UNCONSTITUTIONAL
The March 15 ruling by the Federal Circuit, a specialized
patent appeals court, follows a move in the same direction last
month by U.S. District Judge Dan Polster of the Northern
District of Ohio, who found the false-marking statute to be
unconstitutional because it effectively privatized U.S. law
enforcement. The Ohio ruling did little, however, to slow the
number of false-marking suits, especially in plaintiff-friendly
venues such as the District of East Texas, according to an
analysis of Westlaw data.
Typical of these kinds of cases was one filed on March 9
against Park Tool USA, a small Minnesota company that makes
bicycle tools, including a plastic brush used to clean gears
whose patent expired in 2008. Park Tool was sued by Patent
Group LLC, a Texas-based entity that has brought dozens of
John Krawczyk, a product manager at Park Tool, said the
patent was still marked on the product only because the company
is using the same molding that it used 20 years ago. "There's
no intent to deceive on our part," he said.
Within 24 hours of learning about the lawsuit, Park
received proposals from four different law firms offering to
defend the company. "Things seem to have developed into quite
the cottage industry," Krawczyk said.
Leichtman, the New York patent expert, said last week's
ruling is a clear signal that the Federal Circuit wants to cut
back on this type of lawsuit. He said the current law gives
law-enforcement powers to patent attorneys who are seeking to
make a profit without regard to who they are suing. "The
United States wouldn't try to put a company out of business
because they falsely marked a paper cup or a Frisbee,"
The cost of defending a false marking suit is typically
$30,000 to $50,000 according to Steve Williams, a partner at
Kennedy Clark & Williams in Dallas, whose firm has defended
several such suits. Most suits result in settlements that can
be worth hundreds of thousands of dollars.
Last week's ruling is: In Re BP Lubricants USA INC, U.S.
Court of Appeals for the Federal Circuit, No. 960.
(Reporting by Jeff Roberts of Reuters Legal)