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You Did Everything Right, Except the Very Last Step - And It Cost You Millions
R. Joseph Trojan
Trojan Law Offices
You are an orthopedic startup company with an innovative prosthetic device for hip replacements. You have done everything right. You obtained a strong patent with broad scope to protect your invention. You obtained FDA approval for your device, and sales in the first two years are strong.
With the growing popularity of your device, the infringement begins. You find out that Copycat Orthopedics Corporation is making what you consider to be an identical device. You remember seeing representatives from Copycat come over to your booth at a trade show over a year ago. They were showing quite an interest in your product. There was talk of Copycat becoming a distributor. They were such nice guys. You had no idea they were pumping you for information.
You call them up, but they refuse to take your call. Your patent attorney sends a cease-and-desist letter to Copycat. The company responds by claiming your patent is invalid and that the slight modifications that Copycat has made to your invention takes Copycat’s product outside the scope of your patent. Copycat refuses to stop making your invention. You have no choice. You file suit.
Two years of bitter litigation later, you are vindicated. The federal court finds Copycat’s invalidity arguments to be meritless. A jury finds the Copycat product to be infringing. The judge issues an injunction, and a judgment is entered for millions of dollars in damages. Copycat appeals.
Copycat’s argument on appeal is that it did not know the product was patented until Copycat received your cease-and-desist letter. You knew that you needed to put your patent number on the product because your patent attorney told you so when you received your patent. When you told your patent attorney that it was not practical to put the number directly on the prosthetic device, he assured you that you could put it on the packaging.
You put your patent number on the brochure that you gave out to doctors and that you distributed at trade shows. The brochure was just like packaging, you reasoned. Both advertise the product in their own way. It was the same thing in your mind.
When the Court of Appeals heard your case, the three-judge panel agreed that the patent was still valid and infringed by Copycat. They agreed that the injunction should remain in place. But they also unanimously reversed your multimillion dollar verdict. Neither your product, nor its packaging, had a patent number on it. The brochure was not good enough.
The law is clear: The device itself—or where impractical, the packaging—must be marked with the patent number if you want damages to start accruing from the date of the first sale of the infringing device. If you had properly marked the product with the patent number, then the law presumes that Copycat knew of your patent rights and would be liable from the sale of the very first infringing device. Liability would attach, even if Copycat could prove that it never actually knew about your patent.
But because you failed to properly mark the device with the patent number, you can only collect damages from the date that Copycat had actual knowledge of the patent. The Court of Appeals in your case concludes that the only evidence of actual knowledge of the patent was from the date that Copycat received your attorney’s cease-and-desist letter. Your multimillion dollar verdict is reduced to the sale that occurred after receipt of the cease-and-desist letter.
You are furious because you are sure that Copycat looked at your brochure at the trade show. But you have no proof that Copycat actually saw the patent number. To compound the problem, there was an earlier version of the brochure that you had before the patent issued. You did not want to throw away those old brochures without the patent number because it would be wasteful.
The CEO of Copycat claims that he may have seen a brochure at the trade show, but he does not remember seeing a patent number on it. Did he see the old brochure? You have no way of proving he did or did not. Without a patent number on the product or packaging, Copycat had the right to assume it could copy a competitor’s product. Free competition is the default assumption in our capitalist economy. The exclusive monopoly granted by a patent is the exception.
You did everything right except that last step of properly marking your patent number. It seemed like such an insignificant thing to worry about at the time your patent issued. It is a mistake that costs your company millions.
This is not a hypothetical case. While I have taken some literary license by embellishing the facts in order to better illustrate certain legal principles, a patent for a prosthetic hip was the subject of a patent infringement case in 1995. In that case, the penalty for failing to mark was not as dramatic as I have described because most of the infringement occurred after the cease-and-desist letter was sent to the infringer. As a result, a $24.7 million judgment was only reduced by $1.3 million. But if the cease-and-desist letter had not been sent early in that case, the entire judgment could have been wiped out.
Marking your products properly is that final, but critical, step in the patenting process. Failing to do it properly is a costly mistake that can be easily avoided. If your products are not being properly marked with their patent numbers, then do it now—unless the money just isn’t important to you.
R. Joseph Trojan is a registered patent attorney and intellectual property trial lawyer with 18 years of experience. He supervises a staff of five intellectual property attorneys in Beverly Hills, CA. He can be contacted at Trojan@biomedlawyers.com.
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