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Lid Blown Off Patent False Marking Claim
June 16, 2010
The Federal Circuit blew the lid off a plaintiff's false patent marking suit in the most recent patent case1 interpreting the patent false marking statute. Solo Cup ("Solo") recently found itself the target of a potential $10.8 trillion judgment for continuing to mark approximately 21 billion coffee lids for years after knowing the lids were no longer covered by any existing patents.2 The Federal Circuit, however, issued Solo a reprieve by finding that Solo's actions did not constitute "false marking" as Solo did not have the requisite intent to deceive.3 Paramount to the Court's decision was that Solo relied on their patent counsel's advice in developing and following a policy for patent marking that also satisfied Solo's business needs. As such, patent owners that wrestle with the decision of how to mark their patented product(s) should contact patent counsel in order to develop a prudent patent marking policy. Failure to do so could be costly, as damages can be assessed at up to $500 per article falsely marked.
Marking Products with Expired Patent Numbers May Give Rise to Liability
On appeal, the Federal Circuit was faced with two questions: (1) whether a product marked after the expiration of a patent is an "unpatented article" under the false marking statute; and (2) whether Solo provided enough evidence to rebut the presumption of intent to deceive. Despite Solo's public policy arguments to the contrary, the Federal Circuit emphatically established that marking products with expired patents can give rise to liability when intent to deceive can be shown. The Federal Circuit went on to state, however, that the presumption of intent to deceive established by its previous precedent is weaker in situations "when 'the false markings at issue are expired patents that had previously covered the marked products' . . . ."4 The Federal Circuit also stated that the patent false marking statute is a criminal statute, and therefore, Solo must act with a purposeful intent rather than with mere knowledge that the public might be deceived.5 The Federal Circuit continued by noting that case law did not equate knowledge with intent; rather, precedent merely provided for a rebuttable presumption.
Reasonable Reliance on Advice of Counsel Overcomes Presumption of Intent to Deceive
When ruling in Solo's favor, the Federal Circuit commented that "Solo acted 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 [minimize] business disruption."6 The record showed that counsel advised Solo that continuing to mark products with expired patent numbers was not actionable so long as they did not manifest a specific intent to deceive the public. Furthermore, Solo showed that they had other legitimate business reasons for not removing the marks immediately upon expiration of the patent (e.g., increased costs and downtime) and that they had a policy of removing the marks whenever they replaced worn out or damaged molds. According to the record, Solo provided unrebutted evidence that it implemented and followed its policy. As such, Solo provided more than blind assertions of good faith and successfully overcame the presumption of intent to deceive.
Patent Holders Should Develop Patent Marking Policies with Counsel
The Federal Circuit's decision in Solo Cup does not mean businesses can continue to mark products with expired patent numbers merely because it is inconvenient or expensive to remove the markings. Instead, the Federal Circuit ruled that having a good faith reliance on counsel's advice, having legitimate business reasons for mismarking, and following a reasonable phase out policy can all be helpful in overcoming the presumption of intent to deceive the public. The following guidelines, therefore, should be considered when meeting with patent counsel in developing a marking policy.
For existing product lines and patents:
- Determine whether any product redesign, update, or modification is still covered by one or more claims of all applicable patents. If the redesigned product is not covered by one or more claims of one of the patents, immediately discontinue patent marking of product line.
- Periodically review all patent numbers on every product to ensure expired patents are no longer marked. If a patent is expired, discontinue marking the product with this patent as quickly as possible. If removing a marking is difficult, consider placing a sticker or other marking on the packaging indicating that the listed patent has expired.
- Instruct manufacturing to update, retool or revise manufacturing or labeling equipment upon notice that a patent number can no longer appear on housings, labels, casings, or the like for a particular product – and have systems in place to make certain the markings have been changed or updated on the products before shipment.
In existing litigation:
- If a patent has an adverse claim construction or summary judgment ruling, analyze all product lines marked with that patent number with counsel. If the product no longer falls within the claim construction ruling, discontinue marking the product line with the patent.
- When defending a patent suit, obtain an opinion as to whether the patent holder's products comply with the false marking statute. If so, file or amend counterclaims to assert a claim under the statute. A successful claim could provide a windfall from any damages assessed, or provide additional leverage in settlement negotiations.
For new product designs or inventions:
- Communicate to patent counsel the commercial embodiments of your product and update counsel as to any changes in the product's design that may need to be incorporated into a patent application. If patents claims covering the product have not issued, your patent counsel may still be able to claim commercial embodiments using the same application or a continuation of your pending application.
- Analyze final product designs with patent counsel to compare all applicable issued patent claims with your commercial embodiment prior to marking. If the final product design is not covered by one or more claims of the patent, do not mark the product with the patent number.
Once a patent issues with one or more claims covering a commercial product line – after the final review of counsel, mark the product line according to the statute, i.e., with patent or pat. and the patent number.
By taking prudent steps to mark products wisely with appropriate patent numbers, relying on opinions of counsel with regard to marking, and creating, adopting, and following prudent patent marking guidelines, it is likely false marking penalties from inadvertent mistakes can be avoided. Moreover, as the facts of the Solo Cup case suggest, a little investment up front in sound advice can literally save trillions.
2 35 USC 292(a): Whoever marks upon . . . 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; . . . Shall be fined not more than $500 for every such offense.
3Despite the U.S. government being eligible for half of the judgment, the court notably conceded the chance to reduce the national debt by some 42% based on this one qui tam action. See Solo Cup, 2010 U.S. App. LEXIS 11820 at 6-7 n.1.
4 Id. at 19 (quoting Pequignot v. Solo Cup Co., 646 F. Supp. 2d 790, 797 (E.D. Va 2009)).
5 Id. at 17.
6 Id. at 19.