Pequignot v. Solo Cup (Fed. Cir. 2010)

Over the past year, hundreds of companies have been sued for false patent marking. The qui-tam style statute creates a cause of action against manufacturer who, with intent to deceive the public, mark unpatented products as patented. Any person may sue to collect the damages, however, half of the award goes to the Federal Government. Damage awards may be awarded up to $500 per falsely marked article.

35 USC 292(a): Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article the word “patent” or any word or number importing the same is patented, for the purpose of deceiving the public; or Whoever marks upon, or affixes to, or uses in advertising in connection with any article the words “patent applied for,” “patent pending,” or any word importing that an application for patent has been made, when no application for patent has been made, or if made, is not pending, for the purpose of deceiving the public – Shall be fined not more than $500 for every such offense.

Most of the pending false-marking cases have a similar factual underpinning: The product being sold is marked was covered by a patent, and the manufacturer continued to mark the products as patented even with knowledge that the patents had expired. Solo cup made two separate arguments as to why these facts are insufficient to prove false marking: (1) that a product covered by an expired patent is not “unpatented” as required by the statute; and (2) that the fact of patent expiration is insufficient to show an intent to deceive the public.

Unpatented Article: Without question, a patented article is “unpatented” once the associated patents expire.

As the district court pointed out, “[a]n article that was once protected by a now-expired patent is no different [from] an article that has never received protection from a patent. Both are in the public domain.”

The court recognized that expiry dates are often difficult to calculate:

[D]etermining the expiration date of a patent can, at times, be difficult. The date of the patent grant is shown on the first page of a patent, but its term currently also depends on the date it was filed; in 1994, the effective term of a patent changed from seventeen years commencing at issuance to twenty years from filing. Furthermore, the term depends on whether there are patent term adjustments and whether the patent owner has paid maintenance fees. Thus, as with a never-patented article, an article marked with an expired patent number imposes on the public “the cost of determining whether the involved patents are valid and enforceable.”

Solo’s products that were once covered by now-expired patents are therefore “unpatented” within the meaning of the statute.

Rebuttable Presumption of Intent to Deceive: On appeal, the Federal Circuit held that a rebuttable presumption of intent to deceive is created when a manufacturer prints expired patent numbers on its products with knowledge that the patents are expired. However, this level of evidence leaves only a “weak” the presumption of intent that can be easily rebutted.

Here, the Federal Circuit agreed that Solo Cup did indeed rebut the presumption by providing “credible evidence that its purpose was not to deceive the public.” In particular, the court held that rebuttal evidence was provided by Solo Cup’s “good faith reliance on the advice of counsel” (who said that Solo need-not remove the expired patent listing) and “out of a desire to reduce costs and business disruption.”

Holding: No violation.

This decision will put a damper on the false-marking claims. However, some defendants may not have the same advice-of-counsel excuse.

A battle over the false marking statute is rising. The currently pending patent reform bill (S.515) would severely weaken the cause of action. In a recent press release, the Public Patent Foundation (PubPat) has argued that the statute “would eliminate an important method of protecting the public from false and deceitful statements.”

The false patent marking law imposes a fine on companies that label unpatented products as patented “for the purpose of deceiving the public.” Currently, the law allows any citizen to sue false markers on behalf of the federal government and any fine awarded by the court is split between the citizen who brought the case and the government. Such "qui tam" suits, which have been part of our country since its founding and originally derived from custom in England, provide an incentive for citizens to spend time and money to bring such cases so that the government does not have to do so itself. While not burdening government officials, the suits nonetheless also supply the federal government with income. The Senate's proposed amendment to the law would eliminate such citizen suits, allowing only competitors to sue for “competitive injury” from the deceptive labeling. In some markets, there are no competitors, and thus no one would be able to pursue a company for deceitfully marking its products as patented.

"Falsely marking an unpatented item as patented harms the public by misleading consumers, deterring competition, and depriving legitimate patentees of the marketplace distinction they deserve," wrote [Dan] Ravicher. "I respectfully urge [you] to preserve the qui tam provision of the false patent marking statute because it operates to prevent harmful, deceptive acts, without cost to the government, while also containing adequate protections for defendants."

I am at Barnes & Noble in Columbia Missouri drinking a Starbucks Brand latte. My cup is insulated with a removable corrugated cardboard insulator that is marked with U.S. Patent. No. 5,205,473. By my calculation, that patent expires April 27, 2010. (17 years from the April 27, 1993 issue date.) It will be interesting to see how long it takes for the company to remove the patent number once expired (in 2012..).

The ‘473 patent is assigned to LBP Manufacturing of Chicago, but Starbucks could still be liable if it improperly marking its products.

The Marking Requirement: Here is how the marking statute has been interpreted.

• If a patentee sells (or authorizes the sale of) a product that is covered by the patent, the patentee can only collect past-damages for patent infringement if either (1) the product was properly marked as patented or (2) the infringer had actual notice of its infringement and continued to infringe.
• If there is no authorized product covered by the patent, then the patentee can collect past damages (up to six years) even if the infringer had no knowledge of the patent.  Method claims typically do not have a corresponding product. However, there is some debate about the collection of past-damages without notice for method claims when the patent also includes apparatus claims that cover an authorized product.

Thus, the seeming plain language of 35 USC 287 does not apply. Section 287 indicates that “[i]n the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice.”  Courts have held that this section does not apply if the patentee had nothing to mark. 

This background law was described by the Supreme Court in its 1936 case captioned Wine Ry. Appliance Co. v. Enter. Ry. Equip. Co., 297 U.S. 387 (1936).  In that case the court held that “issuance of a patent and recordation in the Patent Office constitute notice to the world of its existence.”  Interpreting a precurser to today’s marking statute, the Supreme Court wrote that “[p]enalty for failure [to mark] implies opportunity to perform.”

Marking Products as Patented: Many manufacturers mark their products as patented by listing the associated patent number on the product or its packaging. The marking serves as constructive notice to potential infringers — allowing a patentee to collect damages for infringement even if the infringer had no actual knowledge of the patent. There have also been a few cases where marking was important to support a plaintiff’s willful infringement allegations. From a non-rights-based perspective, marking a product as patented may create additional consumer goodwill by suggesting that the marked product is innovative and that the design is the valuable property of the manufacturer. The markings may also tend to deter would-be competitors.

Marking is not without risk. The Patent Act provides a cause of action against those who “falsely claim that their products are patented.” The false-marking cause of action is termed a qui tam action because the action may be taken by any private individual on behalf of the government. A successful false-marking claimant must prove two elements: first, that an unpatented article has been marked as patented; and second that the marking was done with intent to deceive the public. Clontech Labs. Inc. v. Invitrogen Corp., 406 F.3d 1347, 1352 (Fed. Cir. 2005).

Rather than calling for damages or compensation, the false-marking statute calls for a fine of “not more than $500 for every … offense.” 35 U.S.C. 292. In the recent case of Forest Group v. Bon Tool, the Federal Circuit held that the “offense” relates to each article that has been falsely-marked. Thus, the fine against a manufacturer that sells a batch of 1,000 tubes of lip-gloss would have an upper limit of $500,000.

Patent Reform: In her recent article, Professor Winston (Catholic U) has argued that the rules of false-marking should be shifted to place more of a burden onto the patentee to avoid false marking. Winston would ease the proof necessary for to prove “intent to deceive the public.” Some manufacturers are requesting patent reform that goes the other way. I have heard of three potential changes being suggested: (1) clarifying that the listing of expired patents is not actionable; (2) limiting the standing to only particular individuals who have been harmed (such as competitors) or otherwise eliminating qui tam enforcement; and (3) overruling the Forest Group decision as a way to limit damages.

The Harm of False-Marking: I am working on a project to understand how the false-marking fine should be calculated. Notably, the fine could be based on any of (1) compensation for the harm caused to the public by the false-marking; (2) disgorgement of the false-marker’s profits due to the false-marking; or (3) punitive damages based on the culpability.

Related Posts:

• False Marking Lawsuits
• Forest Group Decision
• Constitutionality of the False Marking Statute
• Patent Marking

Simonian v. Blistex, Ciba, Pfizer, 3M, Edgecraft, Darex, Cisco, Bunn-O-Matic, Oreck, Novartis, Merck, etc. (N.D. Ill. 2010)

Thomas Simonian is a self-described “individual living in Geneva, Illinois.” In a series of at least 27 complaints filed in the past few days, Simonian has raised the stakes of the Federal Circuit’s false marking jurisprudence. Most of the complaints assert false marking claims based on the continued marking of products with now-expired patents. However, a few cases focus on marked products that are allegedly not covered by the patent rights. For instance, in Simonian v. 3M, the plaintiff asserts that the 3M patent requires a “hook portion” but that the marked 3M “Command Strips” do not include that feature.

The cases were filed by the Chicago-based law firm of Vanek, Vickers & Masini.

• Simonian Cases: Simonian v. Blistex, Inc.(Blistex); Simonian v. Ciba Vision Corporation (Clear Care); Simonian v. Hunter Fan Company (thermostat); Simonian v. Mead Westvaco Corporation (envelopes); Simonian v. Fiskars Brands, Inc. (Fiskars scissors); Simonian v. Pfizer, Inc. (Pfizer); Simonian v. Pella Corporation (Pella windows); Simonian v. 3M Company; Simonian v. The Quigley Corporation; Simonian v. Edgecraft, Corp.; Simonian v. Tru Fire Corporation; Simonian v. Darex, LLC; Simonian v. Cisco Systems, Inc.; Simonian v. Novartis Pharmaceuticals Corp.; Simonian v. Bunn-O-Matic Corporation; Simonian v. Kimberly-Clark Corporation et al; Simonian v. Merial L.L.C. et al; Simonian v. Weber-Stephen Products Co.; Simonian v. Oreck Corporation et al; Simonian v. BP Lubricants USA, Inc.; Simonian v. Irwin Industrial Tool Company; Simonian v. Novartis Animal Health US, Inc.; Simonian v. Novartis Consumer Health, Inc.; Simonian v. Monster Cable Products, Inc.; Simonian v. Global Instruments, Ltd. et al (Riddex); Simonian v. Merck & Co., Inc. et al; Simonian v. Advanced Vision Research, Inc.
• Other Recent False Marking Cases: O’Neill v. Roche Diagnostics Corporation; Akbar v. Proctor & Gamble Co.; Josephs v. Federal-Mogul Corporation; Josephs v. Sigma-Aldrich Corporation; Seirus Innovative Accessories, Inc. v. Cabela’s, Inc.; Yarbough v. S.C. Johnson & Son, Inc. et al.

Duhn Oil Tool, Inc. v. Cooper Cameron Corp (Fed. Cir. 2010) (nonprecedential)

In a rare appeal from the Eastern District of California, the Federal Circuit has vacated the lower court’s order of preliminary injunctive relief. Duhn Oil’s patent covers a “frac mandrel” or tool for isolating the head of an oil or natural gas well. Cooper Cameron’s version is alleged to infringe when its lockscrews are engaged during installation.

Appellate Jurisdiction over Preliminary Injunction Orders: As an initial matter, the parties argued over whether the court held jurisdiction over the interlocutory appeal since the defendant (Cameron) had previously volunteered to halt the uses covered by the preliminary injunction. On appeal, the Federal Circuit found jurisdiction clearly granted by 28 U.S.C. § 1292 as interpreted by the Federal Circuit. “[I]f the district court’s order expressly grants an injunction, the order is appealable under § 1292(a)(1), without regard to whether the appellant is able to demonstrate serious or irreparable consequences.” Quoting Cross Med. v. Medtronic, 424 F.3d 1293 (Fed. Cir. 2005).

When does an order become an injunction?: A court must make particular findings before it can order preliminary injunctive relief. However, the court has much more leeway when making orders that relate more to the court proceedings such as orders for discovery, preservation of evidence, compelling witnesses, etc. This case raises, but does not answer the question of where the line is drawn between ordinary orders and preliminary injunctions.

Based on its opinion, the district court clearly believed that it had not issued a preliminary injunction. The opinion expressly held that “issuance of a preliminary injunction at this time would not be a measured and appropriate exercise of equitable discretion on the present evidentiary record.” Although it generally denied relief, the court did make a series of orders relating to Cooper Cameron’s “accounting practices.” These accounting practices primarily included maintaining specific evidence regarding equipment orders, items sold, and installation instructions given. The order also granted Duhn the right to photograph newly installed equipment. In addition, the court ordered that Cameron “provide instructions to its frac mandrel customers, which unambiguously state that the lockscrews are not to be engaged during installation or use of the frac mandrel.”

The Federal Circuit focused on the final requirement that Cameron provide installation instructions to its customers and classified that requirement as an injunction because it “specifically imposed . . . an affirmative obligation on Cameron . . . to prohibit Cameron from further allegedly infringing uses.”

The lower court had not intended to issue preliminary injunctive relief and had not specifically found either a likelihood of success on the merits nor irreparable harm absent injunctive relief. Therefore, the injunction was vacated on appeal.

In this case, there were insufficient grounds for the court to enjoin Cameron. A preliminary injunction requires the moving party to show both likelihood of success on the merits, and irreparable harm unless the injunction issues. The district court identified “strongly conflicting evidence” about the possible frequency of Cameron’s future infringement, and the absence of “a sufficient showing for injunctive relief of the scope and of the nature, [sic] including the notice requirement that Plaintiffs are seeking.” Duhn identifies no irreparable harm that it would suffer without the court’s order, and does not cross-appeal the denial of the broader injunctive relief it proposed. For these reasons alone, the injunction was improper. Therefore, we decline Cameron’s invitation to address invalidity and noninfringement in the first instance.

Vacated and Remanded.

Notes & Cases On Point:

• “[F]or purposes of appeal, requiring a party to do or refrain from doing something that is an integral part of the very matter in litigation….” Moore’s Federal Practice, ¶ 65.21 (1989). Quoted in NTN Bearing Corp. of Amer. v. U.S., 892 F.2d 1004, 1005-06 (Fed. Cir. 1989) (ITC’s stoppage of the collection of import duties was an injunction) and Norcal/Crosetti Foods Inc., v. U.S., 963 F.2d 356, 358 (Fed. Cir. 1992) (lower court’s requirement of marking of imported produce was an injunction).
• Types of non-injunctive orders include for the purposes of Section 1292(a) include “temporary restraining orders, orders regulating procedural matters, and security orders.” Wright & Miller, 16 Fed. Prac. & Proc. Juris. § 3922 (2d ed.) (Orders Not Constituting Injunctions). Wright and Miller reluctantly offer the definition of a Section 1292(a)(1) “injunction” as embracing “orders that are directed to a party, enforceable by contempt, and designed to accord or protect ‘some or all of the substantive relief sought by a complaint’ in more than temporary fashion.”
• Holmes v. Bendix Corp., 713 F.2d 792 (Fed. Cir. 1983) (“an appellant from an interlocutory adverse Rule 56 decision must point out something he said or did to alert the court that it would be passing indirectly on the availability of injunctive relief. Otherwise, the congressional care in allowing appeals from interlocutory decisions denying injunctive relief, and not allowing them for appeals from summary judgments, or from declaratory judgments (unless disposing of the whole case), is made meaningless.”).
• Woodard v. Sage Products, Inc., 818 F.2d 841 (Fed. Cir. 1987) (“an interlocutory appeal under section 1292(a)(1) requires (a) that the order be injunctive in nature, (b) that it cause a serious, if not irreparable, consequence, and (c) that the order can be effectually challenged only by immediate appeal.”)