United States Court of Appeals for the Federal Circuit
2009-1044
THE FOREST GROUP, INC.,
Plaintiff-Appellee,
v.
BON TOOL COMPANY,
Defendant-Appellant,
and
CIBON INDUSTRIAL
and SHANGHAI HONEST TOOL CO., INC.,
Defendants.
Kristin K. Tassin, Dry & Tassin, P.L.L.C., of Houston, Texas, argued for plaintiff-
appellee. Of counsel was Cheri Duncan, Cheri Duncan Attorney at Law, of Houston,
Texas.
Richard A. Ejzak, Cohen & Grisgy, P.C., of Pittsburgh, Pennsylvania, argued for
defendant-appellant. With him on the brief was Alicia M. Passerin.
Carl S. Kravitz, Zuckerman Spaeder LLP, of Washington, DC, for amicus curiae
Paul Hletko.
Appealed from: United States District Court for the Southern District of Texas
Judge Nancy F. Atlas
United States Court of Appeals for the Federal Circuit
2009-1044
THE FOREST GROUP, INC.,
Plaintiff-Appellee,
v.
BON TOOL COMPANY,
Defendant-Appellant,
and
CIBON INDUSTRIAL
and SHANGHAI HONEST TOOL CO., INC.,
Defendants.
Appeal from the United States District Court for the Southern District of Texas in case
no. 05-CV-4127, Judge Nancy F. Atlas.
___________________________
DECIDED: December 28, 2009
___________________________
Before RADER, PLAGER, and MOORE, Circuit Judges.
MOORE, Circuit Judge.
Bon Tool Company (Bon Tool) appeals a final decision from the United States
District Court for the Southern District of Texas. After a bench trial, the district court
found that the Forest Group, Inc. (Forest) falsely marked its stilts with intent to deceive
the public, and the district court fined Forest $500 for a single decision to falsely mark.
The district court also determined that U.S. Patent No. 5,645,515 (the ’515 patent) was
not invalid, that Bon Tool did not infringe the ’515 patent, and that Forest had not
violated the Lanham Act. The court declined to find the case exceptional or award
attorney fees. For the reasons set forth below, we affirm in part, vacate in part, and
remand.
BACKGROUND
William Armstrong and Joe Lin are the named inventors on the ’515 patent,
which claims an improved spring-loaded parallelogram stilt of the type commonly used
in construction. See ’515 patent fig.1. The claimed stilt contains a floor platform, a
shoe platform, and extendable vertical supports that can be used to move the shoe
platform to different heights. These platforms and supports are pivotally connected in a
parallelogram configuration. A leg support is attached to the side of the rear vertical
support and is attached to the shoe platform by a clamp, referred to in the ’515 patent
as a yoke (50). The patent discloses improvements in the design of the yoke structure
and the design of the strap for attaching the leg support to a user’s leg. The
independent claims of the ’515 patent require a “resiliently lined yoke.”
2009-1044 2
Mr. Lin and Mr. Armstrong each formed a company for selling stilts covered by
the ’515 patent. Mr. Lin created Forest, and Mr. Armstrong created Southland Supply
Company (Southland). 1 Southland sold stilts to Bon Tool, a tool reseller. Bon Tool later
stopped purchasing from Southland and started purchasing stilts from a foreign
supplier, Shanghai Honest Tool Co., Ltd. (Honest Tool), which manufactured identical
replicas of Southland’s stilts without a license from Forest.
In December 2005, Forest sued Bon Tool for infringement of the ’515 patent.
Bon Tool counterclaimed alleging false marking pursuant to 35 U.S.C. § 292, a Lanham
Act violation pursuant to 15 U.S.C. § 1125, and seeking a declaratory judgment that the
1
Both Mr. Lin and Mr. Armstrong assigned their rights to Forest. Southland
sold stilts under a license from Forest.
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’515 patent was invalid. In February 2007, the district court issued its claim
construction. The district court construed the term “resiliently lined yoke” to mean “a
yoke or clamp lined with a material that is capable of being elastically or reversibly
deformed,” and the court concluded that the claim term required a lining distinct from
the yoke itself. On August 3, 2007, the district court concluded that Forest presented no
evidence that the yoke in Bon Tool’s stilts had a separate lining as required by the
court’s claim construction and granted summary judgment of noninfringement in favor of
Bon Tool. The district court then held a bench trial on Bon Tool’s counterclaims.
The district court found that Forest falsely marked its S2 stilts with its ’515 patent
number after November 15, 2007 and assessed Forest a $500 fine for a single offense
of false marking. 2 The district court found that Forest had the requisite knowledge that
its S2 stilt was not covered by the ’515 patent after a district court in a related case
granted summary judgment of noninfringement. In 2001, Forest had accused Warner
Manufacturing Company (Warner) of selling stilts that infringed the ’515 patent. In
2003, Warner asserted that its stilts did not infringe because they did not include a
“resiliently lined yoke.” Warner filed a declaratory judgment action in 2005 in the United
States District Court for the District of Minnesota seeking a judgment of
noninfringement. On March 30, 2007, the district court construed the term “resiliently
lined yoke” in a manner nearly identical to the construction in the present case. On
2
Mr. Lin testified that he instructed his manufacturer to remove the patent
marking from this order of stilts, however, the district court did not find his testimony
credible. The court noted the absence of any documents, phone records, emails or
letters to support Mr. Lin’s claim that he instructed the manufacturer to stop marking the
S2 stilts. The court further found it incredible that Lin would not have checked the new
parts to ensure that they did not contain the patent number had he instructed the
manufacturer to stop marking.
2009-1044 4
November 15, 2007, the district court granted summary judgment of noninfringement in
favor of Warner because Warner’s stilts did not have a resiliently lined yoke as defined
by the court.
By the time Warner was granted summary judgment, Forest had hired new
patent counsel, who advised Forest to modify its stilts to include a resilient lining. The
district court considered the evidence relating to Forest’s alleged intent to deceive and
found that Forest knew as of November 15, 2007—the date of the summary judgment of
noninfringement in the Warner case—that its S2 stilts were not covered by the ’515
patent. The district court found that Forest placed at least one order to its manufacturer
for additional S2 model stilts marked with the ’515 patent number after November 15,
2007 and fined Forest $500 for a single offense of false marking.
The district court granted summary judgment for Forest on Bon Tool’s remaining
counterclaims, deciding that Forest did not violate § 43 of the Lanham Act and that the
’515 patent was not invalid. Further, the district court found that the case was not
exceptional and denied claims for attorney fees by both parties. Bon Tool appeals. We
have jurisdiction pursuant to 35 U.S.C. § 1295(a)(1).
DISCUSSION
Bon Tool appeals the district court’s decision on three grounds. First, Bon Tool
asserts the district court erred when it concluded that Forest did not have the requisite
knowledge to falsely mark prior to November 15, 2007. Second, Bon Tool argues that
the district court erred in its interpretation of the false marking statute, 35 U.S.C. § 292,
when it determined that the statute provided for a penalty based on each decision to
mark rather than on a per article basis. Third, Bon Tool argues that the district court
2009-1044 5
clearly erred in finding the case not exceptional and abused its discretion in denying
attorney fees.
I. False Marking—Knowledge
The two elements of a § 292 false marking claim are (1) marking an unpatented
article and (2) intent to deceive the public. See Clontech Labs. Inc. v. Invitrogen Corp.,
406 F.3d 1347, 1352 (Fed. Cir. 2005). “Intent to deceive is a state of mind arising when
a party acts with sufficient knowledge that what it is saying is not so and consequently
that the recipient of its saying will be misled into thinking that the statement is true.” ld.
(citing Seven Cases of Eckman's Alterative v. United States, 239 U.S. 510, 517–18
(1916)). A party asserting false marking must show by a preponderance of the
evidence that the accused party did not have a reasonable belief that the articles were
properly marked. Id. at 1352–53. An assertion by a party that it did not intend to
deceive, standing alone, “is worthless as proof of no intent to deceive where there is
knowledge of falsehood.” Id. at 1352.
The district court found that Forest had the requisite knowledge to falsely mark
by November 15, 2007 when it received the second summary judgment determination.
Bon Tool claims that the district court clearly erred because Forest had the requisite
knowledge at a much earlier date. We review a finding of false marking after a bench
trial for clear error. Id. at 1353. Under a clearly erroneous standard of review, we
reverse where after review we are “left with the definite and firm conviction that a
mistake has been committed.” Id. (quoting United States v. U.S. Gypsum Co., 333 U.S.
364, 395 (1948)).
2009-1044 6
The district court did not clearly err in finding that Forest lacked intent to deceive
prior to November 15, 2007. The district court found that Forest genuinely believed its
stilts were covered by the ’515 patent prior to this date. The district court noted that the
patent application was written by experienced patent counsel who had an exemplar of
the stilt on which Messrs. Lin and Armstrong sought the patent. The court further noted
that neither Mr. Lin nor Mr. Armstrong had “strong academic backgrounds” or “in-depth
appreciation of patent law” and that Mr. Lin was not a native English speaker. Forest
Group, 2008 U.S. Dist. LEXIS 57134, at *15 n.5. Based on the facts in this case, the
district court did not clearly err in finding that Forest did not have the requisite
knowledge that its own S2 stilts did not fall within its patent claims until November 15,
2007. No doubt the quantum of proof regarding Forest’s knowledge in this case is quite
high. We do not suggest that multiple claim constructions or summary judgments are
required before the requisite knowledge for false marking can be found. Even if we
would have found such knowledge at an earlier date, we cannot conclude that the
district court’s fact finding on this issue was clearly erroneous.
II. False Marking—Offense
Bon Tool argues that the district court misinterpreted 35 U.S.C. § 292 when it
assessed only $500 in penalties against Forest for a single “decision to mark its stilts
after it knew the stilts did not meet all the claims of the ’515 Patent.” See Forest Group,
2008 U.S. Dist. LEXIS 57134, at *21. Statutory interpretation is a question of law that
we review de novo. Fina Tech., Inc. v. Ewen, 265 F.3d 1325, 1327 (Fed. Cir. 2001).
Section 292 provides a civil penalty for false marking of goods. It states in relevant part:
Whoever marks upon, or affixes to, or uses in advertising in connection
with any unpatented article, the word “patent” or any word or number
2009-1044 7
importing that the same is patented, for the purpose of deceiving the
public . . . Shall be fined not more than $ 500 for every such offense.
35 U.S.C. § 292(a) (2006).
The 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. The statute prohibits false
marking of “any unpatented article,” and it imposes a fine for “every such offense.” Id.
(emphasis added). The statute requires a fine to be imposed for every offense of
marking any unpatented article. The act of false marking is the offense punished by the
statute. The phrase “for the purpose of deceiving the public” creates an additional
requirement of intent but does not change the relationship between the act of marking
an article and the penalty. We conclude that the statute clearly requires that each
article that is falsely marked with intent to deceive constitutes an offense under 35
U.S.C. § 292.
Forest would like us to hold, as the First Circuit did a century ago in London v.
Everett H. Dunbar Corp., 179 F. 506 (1st Cir. 1910), that the false marking statute
should be interpreted to impose a single fine for continuous false marking. However,
the statute at issue in London differs from the current statute in critical ways. The
London court interpreted false marking language from the Patent Act of 1870, which
stated in relevant part that “if any person . . . shall in any manner mark upon or affix to
any unpatented article the word ‘patent,’ or any word importing that the same is
patented, for the purpose of deceiving the public, he shall be liable for every such
offense to a penalty of not less than one hundred dollars.” Patent Act of 1870, ch. 230,
2009-1044 8
§ 39, 16 Stat. 198, 203 (emphasis added). The First Circuit noted that the statute’s
$100 minimum penalty would make application on a per article basis inequitable:
Patented articles are so varied in kind and in value that, if we construe the
statute to make each distinct article the unit for imposing the penalty, the
result may follow that the false marking of small or cheap articles in great
quantities will result in the accumulation of an enormous sum of penalties,
entirely out of proportion to the value of the articles, while the marking of
expensive machines used in limited numbers may result in the infliction of
penalties which are comparatively slight in relation to the pecuniary value
of the articles.
London, 179 F. at 508. The court concluded that “[i]t can hardly have been the intent of
Congress that penalties should accumulate as fast as a printing press or stamping
machine might operate.” Id. The London court therefore decided that the continuous
false marking of multiple articles should constitute a single offense subject to a distinct
penalty. Id.
In 1952, several decades after London, Congress changed the $100 minimum
fine to a maximum fine of $500, with the explanation that courts had been interpreting
the $100 as a maximum fine. 35 U.S.C. § 292 (1952); 1952 U.S.C.C.A.N. 2394, 2424.
Both the statutory language and the underlying policy rationale supporting the London
court’s interpretation changed. Under the current statute, district courts have the
discretion to assess the per article fine at any amount up to $500 per article. Congress’
affirmative change of the statute’s penalty from a minimum to a maximum fine
eliminated the policy consideration expressed by the court in London of not imposing
disproportionate fines for the false marking of small and inexpensive articles.
Although a number of district courts followed London, imposing fines for
continuous marking of multiple articles, they have generally done so without analyzing
the effect of the 1952 amendment on the false marking statute. See, e.g., A.G. Design
2009-1044 9
& Assocs., LLC v. Trainman Lantern Co., No. C07-5158RBL, 2009 U.S. Dist. LEXIS
8320, at *9–10 (W.D. Wash. Jan. 23, 2009) (finding the marking of up to 15,000 lanterns
over two years as constituting a single “offense”); Undersea Breathing Sys., Inc. v.
Nitrox Techs., Inc., 985 F. Supp. 752, 782 (N.D. Ill. 1997); Sadler-Cisar, Inc. v.
Commercial Sales Network, Inc., 786 F. Supp. 1287, 1296 (N.D. Ohio 1991); Joy Mfg.
Co. v. CGM Valve & Gauge Co., 730 F. Supp. 1387, 1399 (S.D. Tex. 1989); Precision
Dynamics Corp. v. Am. Hosp. Supply Co., 241 F. Supp. 436, 447 (S.D. Cal. 1965). But
see Enforcer Prods., Inc. v. Birdsong, No. 1-93-CV-1701-CC, slip op. at 20–21 (N.D.
Ga. Nov. 29, 2005) (fining defendants $50 for each product or product packaging falsely
marked).
Recognizing that a single $500 fine for false marking on many occasions “would
eviscerate the statute,” a number of courts adopted a time-based approach to § 292.
Icon Health & Fitness, Inc. v. Nautilus Group, Inc., No. 1:02 CV 109 TC, 2006 WL
753002, at *16 (D. Utah Mar. 23, 2006) (imposing a penalty for each week that false
marking occurred); see also Brose v. Sears, Roebuck & Co., 455 F.2d 763, 766 n.4 (5th
Cir. 1972) (noting that a court could limit the fine to each day, week, or month the
articles were produced); Krieger v. Colby, 106 F. Supp. 124, 131 (S.D. Cal. 1952)
(concluding that each day products were falsely marked constituted a separate offense).
These cases fall in line with several early false marking cases, in which penalties were
imposed for each day that products were falsely marked. See, e.g., Hoyt v. Computing
Scale Co., 96 F. 250, 251 (S.D. Ohio 1899); Hotchkiss v. Samuel Cupples Wooden-
Ware Co., 53 F. 1018, 1021 (E.D. Mo. 1891). Although these time-based penalties
were creative attempts to reconcile the statute’s language with opinions such as
2009-1044 10
London, this time-based approach does not find support in the plain language of § 292.
Section 292 clearly requires a per article fine.
Policy considerations further support the per article interpretation of § 292. The
marking and false marking statutes exist to give the public notice of patent rights.
“Congress intended the public to rely on marking as a ‘ready means of discerning the
status of intellectual property embodied in an article of manufacture or design.’”
Clontech Labs., 406 F.3d at 1356 (quoting Bonito Boats, Inc. v. Thunder Craft Boats,
Inc., 489 U.S. 141, 162 (1989)). Acts of false marking deter innovation and stifle
competition in the marketplace. 7 Donald S. Chisum, Chisum on Patents
§ 20.03[7][c][vii] (2009). If an article that is within the public domain is falsely marked,
potential competitors may be dissuaded from entering the same market. False marks
may also deter scientific research when an inventor sees a mark and decides to forego
continued research to avoid possible infringement. See Bonnie Grant, Deficiencies and
Proposed Recommendations to the False Marking Statute: Controlling Use of the Term
‘Patent Pending’, 12 J. Intell. Prop. L. 283, 283 (2004). False marking can also cause
unnecessary investment in design around or costs incurred to analyze the validity or
enforceability of a patent whose number has been marked upon a product with which a
competitor would like to compete. Cf. Clontech Labs., 406 F.3d at 1356 n.6 (“In each
instance where it is represented that an article is patented, a member of the public
desiring to participate in the market for the marked article must incur the cost of
determining whether the involved patents are valid and enforceable.”).
These injuries occur each time an article is falsely marked. The more articles
that are falsely marked the greater the chance that competitors will see the falsely
2009-1044 11
marked article and be deterred from competing. See Lans v. Digital Equip. Corp., 252
F.3d 1320, 1327 (Fed. Cir. 2001) (“In sum, knowledge of the patentee’s identity
facilitates avoidance of infringement with design changes, negotiations for licenses, and
even early resolution of rights in a declaratory judgment proceeding.”). This court’s per
article interpretation of § 292 is consonant with the purpose behind marking and false
marking.
Forest’s proposed statutory construction—that the statute imposes a single $500
fine for each decision to falsely mark—would render the statute completely ineffective.
Penalizing those who falsely mark a mere $500 per continuous act of marking, which
act could span years and countless articles, would be insufficient to deter in nearly all
cases. 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.
Forest argues that interpreting the fine of § 292 to apply on a per article basis
would encourage “a new cottage industry” of false marking litigation by plaintiffs who
have not suffered any direct harm. This, however, is what the clear language of the
statute allows. Section 292(b) provides that “[a]ny person may sue for the penalty, in
which event one-half shall go to the person suing and the other to the use of the United
States.” 35 U.S.C. § 292(b). As noted by Forest, an amicus brief was filed in this case
by an individual who created a holding company to bring qui tam actions in false
marking cases. Commentators have discussed a surge of such actions in recent years,
noting the possible rise of “marking trolls” who bring litigation purely for personal gain.
See Donald W. Rupert, Trolling for Dollars: A New Threat to Patent Owners, 21 No. 3
2009-1044 12
Intell. Prop. & Tech. L.J. 1 (2009) (citing five false marking cases filed since 1997); A.
Justin Poplin, Avoiding False Patent Marking Claims, Law360, October 9, 2009,
http://www.law360.com/articles/116798 (“Sensing a new source of revenue, individuals
have begun suing large corporations for false patent marking when an expired patent
number appears on a product.”).
Rather than discourage such activities, the false marking statute explicitly permits
qui tam actions. By permitting members of the public to sue on behalf of the
government, Congress allowed individuals to help control false marking. The fact that
the statute provides for qui tam actions further supports the per article construction.
Penalizing false marking on a per decision basis would not provide sufficient financial
motivation for plaintiffs—who would share in the penalty—to bring suit. It seems
unlikely that any qui tam plaintiffs would incur the enormous expense of patent litigation
in order to split a $500 fine with the government. Forest’s per decision construction is at
odds with the clear language of the statute and, moreover, would render the statute
completely ineffective.
This does not mean that a court must fine those guilty of false marking $500 per
article marked. The statute provides a fine of “not more than $500 for every such
offense.” 35 U.S.C. § 292(a) (emphasis added). 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. In the case of
inexpensive mass-produced articles, a court has the discretion to determine that a
fraction of a penny per article is a proper penalty.
2009-1044 13
We hold that the plain language of 35 U.S.C. § 292 requires courts to impose
penalties for false marking on a per article basis. In this case, the district court found
that Forest falsely marked its stilts after November 15, 2007. The district court did not,
however, determine the number of articles falsely marked by Forest after November 15,
2007 or the amount of penalty to be assessed per article. Therefore, we vacate the
$500 fine imposed by the district court and remand to the district court for
determinations consistent with this opinion.
III. Attorney Fees
We review a denial of attorney fees under 35 U.S.C. § 285 for an abuse of
discretion, but the antecedent determination of whether the case is exceptional is a
question of fact that we review for clear error. Forest Labs., Inc. v. Abbott Labs., 339
F.3d 1324, 1328 (Fed. Cir. 2003). The prevailing party must prove the case is
exceptional by clear and convincing evidence. Id. at 1327. The district court found the
case not exceptional and denied Bon Tool’s request for attorney fees. Bon Tool argues
that the denial of attorney fees was an abuse of discretion based on Forest’s filing of a
frivolous lawsuit and because of alleged litigation misconduct. The alleged misconduct
relates to: (1) concealing evidence, including the late production of the patent counsel
opinion letter and alleged concealment by Forest of the addition of a flexible liner to the
SS stilts; (2) obstructing discovery, including last-minute cancellation of depositions of
Mr. Lin and his wife; and (3) Mr. Lin allegedly falsely testifying about attempts to remove
the ’515 patent number from the S2 stilts. The district court saw fit to sanction Forest
for discovery abuses alleged by Bon Tool. However, the district court still found that
Bon Tool did not prove the case exceptional by clear and convincing evidence, noting
2009-1044 14
that Bon Tool had been largely unsuccessful in its counterclaims. Forest Group, 2008
U.S. Dist. LEXIS 57134, at *26.
As to the frivolous lawsuit claim, this issue relates directly to the district court’s
finding that Forest had a reasonable belief that its products (and therefore the exact
replicas sold by Bon Tool) were covered by the ’515 patent until November 15, 2007.
Based on this fact finding, the district court found that the case was filed by Forest in
good faith in December 2005. By November 2007, as noted by the district court, Forest
was no longer pursuing claims against Bon Tool and was instead only defending
against counterclaims. Further, although Bon Tool did not infringe the ’515 patent, the
district court did not find the patent invalid. The district court’s finding that the case was
not exceptional was not clearly erroneous.
We have considered the parties’ other arguments in this case and find them to be
without merit.
CONCLUSION
For the foregoing reasons, we hold that the district court did not clearly err in
finding that Forest had the requisite knowledge to falsely mark as of November 15,
2007. Because the district court’s construction of the statute was wrong, we vacate the
district court’s award of $500 in penalties for a single offense of false marking and
remand to the district court for recalculation of fines under 35 U.S.C. § 292 consistent
with this opinion. Finally, we affirm the district court’s denial of attorney fees.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED
2009-1044 15