(CN) – The Federal Circuit paved the way for higher fines against companies that falsely mark their products. A three-judge panel vacated a single $500 fine against a stilt company that had marked its stilts as patented when they weren’t, saying patent law clearly imposes a fine for each falsely marked item.
William Armstrong and Joe Lin invented a type of spring-loaded parallelogram stilt that’s commonly used in construction. The stilt has a floor platform, extendable vertical supports and a leg strap supported by a “resiliently lined yoke.”
Lin sold the stilts through his company, Forest Group Inc., and Armstrong created Southland Supply Co., which sold stilts under a license from Forest.
One of Southland’s customers, Bon Tool, began buying identical replicas from a foreign supplier.
In December 2005, Forest sued Bon Tool for patent infringement and lost, mainly because the replicas didn’t have a “resiliently lined yoke.”
Bon Tool filed counterclaims, accusing Forest of falsely marking its S2 model stilts with the patent, even though it knew that the stilts also lacked the special yoke.
That knowledge was later reinforced on Nov. 15, 2007, when a judge dismissed Forest’s patent claims against another company, again because the disputed stilts lacked the yoke.
In the Bon Tool dispute, a federal judge in Texas fined Forest $500 for a single offense of false marking, because the company had placed at least one order for the S2 stilts after the Nov. 15 ruling.
The judge ruled for Forest on the remaining counterclaims.
On appeal, the Federal Circuit agreed that Forest lacked the requisite knowledge to falsely mark its stilts until the Nov. 15 order.
But the court vacated the fine, saying the “plain language of the statute does not support the district court’s penalty of $500 for a decision to mark multiple items.”
The law “clearly requires that each article that is falsely marked with intent to deceive constitutes an offense,” Judge Kimberly Moore wrote.
She told the lower court to recalculate the fine and held that Bon Tool wasn’t entitled to attorney fees.