Wednesday, October 6, 2010

"False Marking" Revisited by the Federal Circuit

On June 10, 2010, the United States Court of Appeals for the Federal Circuit issued a widely anticipated decision in Pequignot v. Solo Cup Co., No. 2009-1547 (Fed. Cir. June 10, 2010). The Solo court held that marking a product with the number of an expired U.S. patent can create liability for false patent marking. The court also held that knowingly marking a product with an expired patent number creates a presumption of intent to deceive the public. Along with the Federal Circuit’s recent decision in Forest Group, Inc. v. Bon Tool Co., the Solo decision highlights the need for care in marking products with a patent number.
The false marking statute, 35 U.S.C. § 292, provides a penalty for marking an unpatented product with a patent number. The statute allows any person to sue for the penalty, with half of any recovery going to the government. In the recent Forest Group case, the Federal Circuit clarified that this statute provides a potential penalty of up to $500 for each item marked with a false patent number.
The Forest Group decision led to a spate of false marking lawsuits, the most closely watched of which has been the Solo case. In Solo, the product at issue was a disposable cup lid for beverages—a mass-produced item. The defendant, Solo, had sold the lids for years, and had marked the lids with a patent number. After the relevant patents expired Solo continued to mark the lids as patented, eventually selling billions of the lids so marked.
The plaintiff, Pequignot, sued for false marking under Section 292 and, under the Forest Group case, claimed damages of $500 for every lid that Solo had marked after expiration of the patent. As the Federal Circuit noted, based on the billions of lids that Solo had sold, the total damages provided under the statute theoretically could have run into the trillions of dollars.
The Federal Circuit reviewed several issues on appeal. First, the court considered whether Solo’s marking of the lids with an expired patent number in fact could constitute false marking. The Federal Circuit answered this question in the affirmative, reasoning that products that are no longer patented are "unpatented" and within the purview of Section 292: "Solo's products that were once covered by now-expired patents are therefore 'unpatented' within the meaning of the statute."
Second, the court held that where the manufacturer marks a product with a patent that the manufacturer knows has expired, there arises a presumption of an intent to deceive. Specifically, the court held that "the combination of a false statement and knowledge that the statement was false creates a rebuttable presumption of intent to deceive the public." Because Solo had known that the patents were expired, the court held that Solo was presumed to have acted with intent to deceive.
Solo had obtained an opinion of counsel, however, that stated the acceptability of continuing to mark the patent number. Solo also had instituted a policy of replacing its lid molds having expired patent numbers with lid molds without patent numbers as the molds needed replacement. Based on these factors, the court found that Solo had rebutted the presumption of intent to deceive.
Third, Solo had included the following marking on packages for both patented and non-patented products: "This product may be covered by one or more U.S. or foreign pending or issued patents. For details, contact" The court found that this notice helped to rebut the presumption of intent to deceive. Some of Solo's products indeed were covered by patents, and some were not. "Thus," reasoned the court, "it is highly questionable whether such a statement could be made 'for the purpose of deceiving the public,' when the public would not reasonably be deceived into believing the products were definitely covered by a patent." With respect to the link to Solo's website, the court noted: "Solo did not state on its packaging that any product was definitely covered by a patent, and it provided the consumer with an easy way to verify whether a specific product was covered; the consumer could 'contact' for details."
Solo emphasizes the need for caution when marking products with a patent number. If the patent in question has expired, under Solo this may constitute actionable "false marking." Companies that engage in patent marking are encouraged to contact a Fitch Even attorney for further guidance in this area.

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