July 2010
Mere Knowledge of False Marking Insufficient to Irrebuttably Prove Intent to Deceive Under 35 U.S.C. § 292
| Judges: Rader, Lourie (author), Gajarsa |
| [Appealed from E.D. Va., Judge Brinkema] |
In Pequignot v. Solo Cup Co., No. 09-1547 (Fed. Cir. June 10, 2010), the Federal Circuit affirmed the district court’s grant of SJ because Matthew A. Pequignot could not show that Solo Cup Company (“Solo”) had the requisite intent to falsely mark its products. The Federal Circuit held that articles marked with expired patent numbers are “unpatented” under 35 U.S.C. § 292, and mere knowledge that a patent marking is false is insufficient to prove intent under § 292 if a party can prove that it did not consciously desire that the public be deceived.
Solo, a manufacturer of disposable tableware, owned U.S. Patent Re. 28,797 (“the ’797 patent”) and U.S. Patent No. 4,589,569 (“the ’569 patent”). The ’797 patent covered a plastic cold drink cup lid and issued in 1976; the ’569 patent covered a plastic hot drink cup lid and issued in 1986. Solo uses thermoforming stamping machines that contain “mold cavities” to produce cup lids and, after the ’569 patent and the ’797 patent issued, Solo added the patent numbers to the mold cavities so that each cup lid would be marked with the appropriate patent number. The molds can last fifteen to twenty years and sometimes longer.
Under § 292, “[w]hoever marks upon . . . in connection with any unpatented article, the word ‘patent’ or any word or number importing that the same is patented, for the purpose of deceiving the public; . . .
[s]hall be fined not more than $500 for every such offense.” The statute provides for qui tam actions, meaning that any person may sue for the penalty, in which case the person suing receives half of any recovered fines and the government receives the other half.
The ’797 patent expired in 1988, and in June 2000, Solo became aware that it was marking its products with an expired patent number. Outside IP counsel advised Solo to remove the number, if possible, but if not, Solo should not further use any unintentional falsity in its product literature. As a result of this advice, Solo developed a new policy: when mold cavities needed to be replaced due to wear or damage, the new molds would not include the expired patent number. Solo indicated to its attorneys that a wholesale replacement of the molds would be costly and burdensome, and Solo’s attorneys concluded that Solo’s policy was permissible under § 292. When the ’569 patent expired in 2003, Solo adopted the same policy for the markings of the expired ’569 patent number.
In 2004, out of concern that Solo was not providing adequate notice under the patent-marking statute, 35 U.S.C. § 287, Solo’s outside counsel advised Solo to include on its packaging the following language: “This product may be covered by one or more U.S. or foreign pending or issued patents. For details, contact www.solocup.com.” Following this advice, Solo added the “may be covered” language on packaging used for both patented and unpatented products.
In September 2007, patent attorney Pequignot brought a qui tam action under § 292, alleging that Solo had (1) falsely marked its products with the ’797 and ’569 patent numbers despite knowing that the patents were expired, and (2) falsely marked its packages with the “may be covered” language despite knowing that the products were not covered by any pending or issued patents. Pequignot accused Solo of falsely marking over 21 billion cup lids and sought an award of $500 per article.
The district court found Solo did not have the requisite intent to deceive and granted SJ to Solo. The district court also granted SJ to Solo on the meaning of the term “offense” in § 292, finding Solo had committed at most three “offenses”: two when it decided not to immediately stop marking the lids when each patent expired, and one when it decided to add the “may be covered” language to its packaging. Pequignot appealed.
On appeal, Solo argued that the legislative history of § 292 supports an interpretation of “unpatented article[s]” that excludes products previously covered by a patent that has since expired. The Federal Circuit rejected this argument, noting that the legislative history of a statute need not be consulted when the statute is unambiguous. Reasoning that an article that was once protected by a now-expired patent is no different from an article that has never received patent protection, the Federal Circuit agreed with Pequignot that products marked with expired patent numbers are “unpatented” under the statute.
“[M]ere knowledge that a marking is false is insufficient to prove intent if Solo can prove that it did not consciously desire the result that the public be deceived.” Slip op. at 13.
Addressing intent, the Federal Circuit agreed with the district court’s conclusion that, under Clontech Laboratories, Inc. v. Invitrogen Corp., 406 F.3d 1347 (Fed. Cir. 2005), the combination of a false statement and knowledge of the falsity merely creates a rebuttable presumption of intent to deceive rather than irrebuttably proving intent outright. The Court explained that the bar for proving deceptive intent is particularly high since the false-marking statute is a criminal one, despite being punishable with only a civil fine. Further, the Court noted that the statute specifically requires that the false marker act “for the purpose of deceiving the public,” not with mere knowledge of falsity, and under United States v. Bailey, 444 U.S. 394, 404 (1980), a person who causes a particular result is said to act purposefully if he “consciously desires” that result. Thus, the Federal Circuit held that “mere knowledge that a marking is false is insufficient to prove intent if [a party] can prove that it did not consciously desire the result that the public be deceived.” Slip op. at 13.
Next, the Federal Circuit concluded that Solo had successfully rebutted the presumption with respect to the expired markings. According to the Federal Circuit, because intent to deceive need only be shown by a preponderance of the evidence, a higher burden should not be required for rebutting the presumption, and, thus, Solo needed to show by a preponderance of the evidence that it did not have the requisite intent. The Court noted that the Clontech presumption of intent is weaker when the false markings are expired patents that previously covered the marked products. The Federal Circuit agreed with the district court that Solo’s actions in connection with the expired patent markings were not for the purpose of deceiving the public, but in good-faith reliance on the advice of counsel and out of a desire to reduce costs and business disruption. The Court rejected Pequignot’s argument that good-faith reliance on advice of counsel cannot excuse liability, and noted Solo’s implementation of its mold-replacement policy.
“Solo’s leaving the expired patent numbers on its products after the patents had expired, even knowingly, does not show a ‘purpose of deceiving the public.’” Slip op. at 15.
The Federal Circuit also found Solo rebutted the presumption of intent to deceive in connection with the “may be covered” language. The Federal Circuit reasoned that the language was truthful and provided a way for the consumer to verify if products were covered by a patent. The Court also noted that the language would not deceive the public into believing the products were definitely covered by a patent, that Solo had added the language based on reasonable advice of counsel, and that the language was added to all packaging for logistical and financial reasons.
Regarding Pequignot’s appeal of the interpretation of “offense,” the Court noted its recent holding in Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009), that every falsely marked product constitutes an “offense” under § 292. However, the Court vacated the district court’s determination on the meaning of the term “offense” as moot.
