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Published: Saturday, 9/18/2010

Patent litigation trend ensnares Ohio Art

BY JON CHAVEZ
BLADE BUSINESS WRITER
William C. Killgallon, chairman of the tiny Bryan toy maker, says the company didn't mean to violate patent laws. William C. Killgallon, chairman of the tiny Bryan toy maker, says the company didn't mean to violate patent laws.
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Ohio Art Co.'s Etch A Sketch drawing toy, which recently turned 50 years old and has had roles in two Disney animated films, is now the star of a federal lawsuit that alleges the toy maker has been placing expired U.S. patent numbers on its most famous product and should be fined.

The case, which seeks a jury trial before Judge James Carr in U.S. District Court in Toledo, alleges that all red Classic Etch A Sketch models are falsely marked with “3,760,505” — the number of a patent that expired Sept. 25, 1990.

As a result, the plaintiffs argue, the Bryan company should be fined up to $500 for each such toy it has on the market — potentially tens of thousands, or even millions, of dollars.

William C. Killgallon, chairman of the tiny northwest Ohio toy maker, said the company didn't mean to violate patent laws.

“What Ohio Art has done is unintentional, and our counsel is in communication with the court and the plaintiff,” he said.

It is uncertain how many of the drawing toys on the market have the expired patent number. The backs of Classic Etch A Sketch toys at a local Toys ‘R' Us store prominently displayed the expired patent number. At a local Meijer store, however, Classic Etch A Sketch toys did not have the patent number. but a smaller travel version of the toy had the expired number printed on the packaging.

The lawsuit is part of a broader trend of more than 360 such cases filed throughout the country since 2009 after a federal appellate court's rulings in two cases involving “false marking.”

“False marking is if you assert something is patented and it isn't. Then you're liable for damages,” said David Murray, a Michigan patent attorney and law professor at the University of Toledo.

In the past when a company was found guilty of false marking, the courts usually fined it $500, he said.

But in a 2009 decision against Forest Group Inc., a company that makes stilts for construction workers, the U.S. Circuit Court of Appeals in Washington said the law's wording states that a plaintiff “may collect up to $500 for each falsely marked product distributed.”

It ruled that a lower court erred in limiting damages to $500 total.

That meant that Forest Group, which falsely marked a million products with expired patent numbers, could face a liability of $500 million.

“What's happened now is … lawyers are out there just running around looking for products with expired patents,” Mr. Murray said.

The plaintiffs typically seek damages, attorney's fees, and fines. The law requires that fines, if granted, be evenly split between the federal government and plaintiffs.

A ruling in December against Brooks Brothers added fuel to the fire. The retailer challenged the right of a private patent attorney to sue it for using expired patent numbers on its bow ties. The appellate court ruled that the New Jersey attorney, Raymond Stauffer, had the right to sue.

The Ohio Art lawsuit was filed Feb. 17 in Pennsylvania by David Oberdick and Tony Thompson, of the Pittsburgh law firm Meyer, Unkovic & Scott.

The case was transferred July 30 to U.S. District Court in Toledo and has moved forward despite motions by Ohio Art in April and August that it be dismissed. The company argued that the Pittsburgh attorneys had no right to sue it.

The Etch A Sketch turned 50 years old this month. The patent litigation centers on teh Classic model. The Etch A Sketch turned 50 years old this month. The patent litigation centers on teh Classic model.
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“It's an unfortunate situation. The December federal court decision really opened up Pandora's box,” Mr. Killgallon said.

The Williams County company has not admitted in its court filings that the patent is expired, but U.S. Patent Office records show the Etch A Sketch patent was granted on Sept. 25, 1973, and expired in 1990.

Patents, which in almost all cases cannot be renewed, had a 17-year duration at that time (now it's 20 years). Obtaining a patent can cost $7,500 to $12,000, depending on the complexity of the case.

The plaintiffs, who filed the lawsuit against Ohio Art under the name FLFMC LLC, declined to comment about the case. Their suit alleges Ohio Art should be fined for “deceiving the public.”

Only the full-sized red Etch A Sketch Classic model, which sells for about $12, is involved in the case. Ohio Art also makes a variety of smaller and different versions of the drawing toy.

Martin Adelman, a law professor at George Washington University in Washington, said the real question is how the courts will decide to determine false markings, whether they were intentional or deceptive, and whether they will allow plaintiffs law firms to collect money for finding expired patents still in use.

“I actually think the federal circuit court will fix this — but I can't be sure,” he said.

The appellate court in the Forest Group case did state in its ruling that fears of huge fines were overblown, because violators could be fined much less than $500 for each offense.

Toledo patent lawyer Don Fraser said the law is pretty clear that once the patent expires, the patent holder is obligated to remove the patent number from the product so that none reaches the market with the patent number still on it. That might include removing products with an expired patent number from retailers' shelves.

Few companies, he said, intentionally leave a patent number on products to be deceptive and discourage competitors. “It's not with malice that most people do this. They just forget, or in some case it's expensive to delete a number from a mold,” he said.

Martin Killgallon, Ohio Art vice president of marketing, said that several years ago the company removed the patent number from all packaging on the Classic Etch A Sketch. The number, though, remains on the toy itself.

However, Mr. Murray said the question probably will be asked why Ohio Art went nearly two decades without removing the number on the toy.

“There is the issue of intent to deceive,” he said.

On the other hand, he said, anyone who knows about patents would see a number like on the Etch A Sketch and realize that it is long expired. Thus, the company isn't really deceiving anyone wishing to copy the product.

Contact Jon Chavez at:

jchavez@theblade.comor 419-724-6128.



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