What is a False Marking Claim?
For over 150 years, American patent laws have allowed individuals to sue manufacturers who falsely mark their products as being patented when they are not. The law allows anyone to bring a suit against a manufacturer whose products are falsely marked. The false marking statute was originally designed to prohibit manufacturers from falsely claiming that their product was covered by a patent, since doing so could have the effect of stifling innovation or dissuading others from making cheaper reproductions of unpatented products. Recently, this statute has been interpreted by some American courts to apply to patented products whose patents have expired.
False marking lawsuits are usually brought by individuals who claim to be suing on behalf of the United States government. In such suits, the government is entitled to half of the money recovered in the form of a statutory fine or penalty, while the person bringing the suit is allowed to keep the other half. Currently, an individual filing a claim does not need to show that he was harmed at all by the false marking or that he suffered a financial injury. In fact, he does not even need to allege that he ever purchased the product. Rather, a plaintiff is only required to claim that the product is falsely marked. Under the false marking statute, the court may fine the company up to $500 for each article that the court determines was falsely marked.
Explosion of False Marking Claims
In December 2009, the Federal Circuit Court, which hears appeals on issues involving patents in the United States, determined that the false marking law requires a court to impose a penalty for every individual item sold with false patent markings. Since this decision, individuals have sued a variety of companies, including generic drug companies, seeking substantial penalties against manufacturers whose products are marked with expired patent numbers. As of early March 2010, there have been over 75 false marking lawsuits filed in the United States, and the number is expected to rise.
Drug manufacturers are an attractive target for false marking claims because there are often millions of prescriptions filled for a successful product, and plaintiffs in such cases seek a penalty for each bottle or package that was labeled with an expired patent number. Although it is very unlikely that anyone has been actually harmed or deterred from introducing a competing product, plaintiffs continue to file these suits to obtain a portion of the statutory penalty.
Both brand and generic drug manufacturers have been targeted by false marking suits, since brand drugs and “authorized generics” may be labeled with patent numbers and generic drugs are sometimes covered by manufacturing or process patents. To reduce the likelihood of false patent marking lawsuits, generic drug manufacturers who purchase product lines from innovator manufacturers should be vigilant to ensure that only current patents appear on product labeling. All manufacturers should also develop procedures to remove patent markings from their products when patents have expired or been successfully challenged.
The Future: An Important Case Will be Heard in April, and U.S. Congress is Considering Changing the Law.
In April the Federal Circuit Court will entertain oral argument to determine whether an individual can successfully file a false marking claim against a plastic cup manufacturer accused of 21 billion acts of false marking arising out of expired patent numbers that were molded into its cups. A decision in this case is expected to better define the liability of manufacturers for false marking claims based on expired patent numbers appearing on their products or packaging. Although it is likely to be at least several months before the court releases its decision, parties involved in false marking lawsuits will be closely watching this case.
In addition to this court case, members of the United States Senate have proposed changing the false marking law to require that a party suffer a “competitive injury” before filing a suit for false marking. If enacted into law, the statute would make it much more difficult for plaintiffs to successfully file false marking lawsuits. Although this new law would be a welcome limit on false marking claims, it is part of a comprehensive patent reform bill that is currently being considered by Congress, and it is uncertain if and when it will become law.
Conclusion
Although manufacturers may be able to defeat false marking claims in court, litigation is often an expensive and lengthy process. Having procedures in place to remove patent markings as patents expire or are found to be invalid is the best way to avoid a false marking suit and the possibility of substantial fines that a court can impose under the false marking statute.
Introduction to a New INNsight Column
Each month, attorneys from Duane Morris LLP, an international law firm with a focus on generic drugs, will be writing a column for GenericsWeb INNsight highlighting new and important legal developments affecting generic drug companies doing business in the U.S. or considering entering the American marketplace. Future columns will report on regulatory developments from the FDA, proposed legislation, intellectual property cases, and other court decisions that impact the generic pharmaceutical industry. If you have comments on this article or would like to suggest a topic for a future column, please contact Alan Klein at AKlein@duanemorris.com.
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