News + Events
Federal Circuit’s False Marking Ruling Provides New Relief to Defendants
June 11, 2010
On June 10, 2010, the Court of Appeals for the Federal Circuit issued its opinion in Pequignot v. Solo Cup Company, holding that Solo was not liable for false patent marking under 35 U.S.C. § 292, because Solo did not mark “for the purpose of deceiving the public.” In a decision that may stem the recent flood of false patent marking lawsuits, the Federal Circuit held that proof of intent to deceive the public was tantamount to a “criminal” intent requirement, and any presumption supporting an “intent to deceive” was rebuttable with proofs meeting the lesser “preponderance of evidence” standard. Importantly, the Federal Circuit ruled that in this case, where advice from counsel was sought, received, and followed, there was no intent to deceive as a matter of law.
1. The Tide of False Marking Claims Following Forest Group
Under 35 U.S.C. § 292, any person may sue for the statutory penalty of up to $500 for each unpatented article that is falsely marked with the word “patent” and/or a patent number, where such marking is done for the purpose of deceiving the public. In the recent Forest Group decision, discussed earlier here, the Federal Circuit found that the penalty of up to $500 should be assessed for each falsely marked article – expanding the potential qui tam recovery often into the many millions of dollars. As a result of the expanded recoveries offered by that ruling, new false marking lawsuits numbering into the hundreds have been brought in recent months.
2. Does Marking a Product With an Expired Patent Constitute False Marking?
This issue has been at the center of the false marking debate for some time. In Pequignot, the Federal Circuit held that an article once covered by a now-expired patent is “unpatented.” The Court affirmed the District Court’s reasoning that an article protected by a now-expired patent is no different from an article that never received patent protection – both are in the public domain. Therefore, marking an article with an expired patent number could give rise to liability under § 292 if the requisite level of intent to deceive the public is proven.
3. The Law of Intent Under Pequignot
The Federal Circuit’s Pequignot decision now draws a strong line with respect to the intent element of a false marking claim. Specifically, the Federal Circuit held that the bar for proving deceptive intent under § 292 is “particularly high,” and explained that mere knowledge that a marking is false is insufficient to prove intent if the defendant establishes other, innocent, reasons for the patent marking. For example, in this case, marking a product with an expired patent was ongoing – not to deceive the public – but to exhaust the life on otherwise expensive molding equipment. Furthermore, the Circuit Court affirmed the District Court’s holding that the presumption of intent to deceive is weaker when the expired patents previously covered the marked products, and noted that a party’s good faith belief is relevant to determining whether it acted with the intent to deceive.
4. The Importance of Counsel’s Opinion in Negating Intent
In Clontech Labs. v. Invitrogen Corp., the Federal Circuit held that “the inference of intent to deceive cannot be defeated with blind assertions of good faith where the patentee has knowledge of mismarking.” This would seem to create a problem for the defendant here because it allegedly knew about the wrongfully marked cup lids. This difficulty, however, was rebutted by the existence of the opinion of counsel reflecting the good faith basis of the marking and thus negating – as a matter of undisputed fact – any claim of intent to deceive the public. Because Solo developed its marking policy based on the advice of counsel, and there was no evidence that Solo had not followed the policy, the Federal Circuit found that Solo had overcome the Clontech presumption of intent to deceive:
Solo has rasied more than blind assertions of good faith. Instead, Solo has cited the specific advice of its counsel, along with evidence as to its true intent, to reduce costs and business disruption. Moreover, the policy Solo adopted conforms with its stated purpose. Rather than continuing to manufacture mold cavities with the expired patent markings, Solo took the good faith step of replacing worn out molds with unmarked molds. Solo also provided unrebutted evidence that it implemented and followed the policy.
The decision in Pequignot applies a very strict standard for intent and recognizes the potential immunity conferred by an opinion of counsel to defeat claims of bad intent. Although the flood of false marking lawsuits may persist for some time, findings of misconduct will likely be uncommon as a result of this ruling.
Note: Troutman Sanders LLP and Howrey LLP were counsel to Solo Cup in the District Court.