Solo Cup Puts The Lid On

False Patent-Marking Case

 

By Tom Tuytschaevers, a member of our Patent Practice Group

 

T

he Federal Circuit now holds that marking a patent number on a product, while knowing the patent does not cover the product, is a violation of the false marking statute, unless the accused party can prove that it had a good faith belief that its action was appropriate.  This fact-specific defense provides limited comfort to manufacturers.

Marking an article with a patent number is appropriate when the article is actually covered by the patent, and is desirable for the patent owner because it opens the door to pre-litigation infringement damages.  However, an inaccurate patent-marking on a product can lead to liability under 35 U.S.C. § 292, which provides: 

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 that the same is patented for the purpose of deceiving the public . . . [s]hall be fined not more than $500 for every such offense.

Further, “Any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.”

This penalty-sharing provision provided inspiration to a patent lawyer named Matthew Pequignot, who suddenly saw a great future in plastics, specifically the lids that Solo Cup manufactures for plastic cups. Solo uses molds to make these lids.  Each mold stamps patent numbers into each lid, and can last up to 20 years. 

Solo found the cost and disruption of replacing the molds to be prohibitive, so it decided to continue using the molds until they otherwise needed to be replaced, even though it knew that the patents had expired.  

Over its lifetime, a mold can make millions of lids.  Indeed, Pequignot estimated that Solo had made over 21 billion falsely marked lids after the Solo patents expired.

Recent decisions have brought the false-marking statute to life.  In Forest Group v. Bon Tool Co., Forest Group continued to mark its products with a patent number even after it learned that the patent did not cover the product.  The Federal Circuit held that each such product was a falsely marked article, and each a separate offense for purposes of computing the fine. 

And earlier in the Pequignot proceedings, as described in a previous article, the trial court ruled that imprinting a plastic lid with an expired patent is also a false marking.  Taken together, these rulings exposed Solo to enormous liability under the false marking statute.

Under the false-marking statute, it was of course not enough that Pequignot had convinced the trial court that Solo’s markings were false.  In order to pin liability on Solo, Pequignot was required to prove the company’s “purpose of deceiving the public.”

No doubt to Pequignot’s surprise, the trial court did not buy the argument that Solo’s deceptive purpose was evident from the fact that the company marked the lids with the patent numbers even when it knew that the patents no longer covered the lids.  Pequignot appealed. 

In its recent ruling, the Federal Circuit held that a party’s knowledge that a statement is false does not conclusively prove an intent to deceive.  Rather, such facts merely create “a rebuttable presumption of intent to deceive the public.”  Further, this presumption is a weak one when the “false markings at issue are expired patents that previously covered the marked products.” As such, Solo’s fate rested on whether it could rebut Pequignot’s charge. 

The presumption of a purpose to deceive the public cannot be rebutted by a simple assertion that the accused party did not intend to deceive.  Rather, that party must prove that it did not consciously desire the result that the public be deceived.  As the appellate court explained, “a good faith belief that an action is appropriate, especially when it is taken for a purpose other than deceiving the public, can negate the inference of a purpose of deceiving the public.”
 
The Federal Circuit concluded that Solo had successfully rebutted Pequignot’s presumption by showing that it had relied on the advice of its counsel, and by providing evidence that its actual intent in continuing to use the molds was to reduce costs and business disruption.  Solo’s attorney had urged it to remove the patent numbers, if possible. However, because the replacement of all the molds would have been “costly and burdensome,” the attorney advised that Solo could use the existing molds until they needed to be replaced due to wear or damage. 

Lessons to Draw

In view of the statute and recent court decisions, manufacturers should be diligent to avoid marking products with the number of a patent that does not contain, or no longer contains, a claim that covers the product.  Such diligence should include seeking, and adhering to, the advice of a patent attorney before marking a patent number on a product. 

Vigilance is also warranted when a patent expires or is invalidated, or if the product changes such that the claims no longer cover the product.  Continued patent marking in these circumstances will lead to a presumption of false marking with intent to deceive the public, and exposure to liability under the false marking statute. 

In Pequignot, the manufacturer was let off the hook because its reliance on an opinion of counsel suggested that there was no intent to deceive the public.  The cost and disruption of eliminating inappropriate patent markings were significant factors, but these facts provide limited guidance in other scenarios.

Although Solo Cup dodged a possibly monumental penalty, false marking remains a highly risky behavior.  That risk is best illustrated by the explosion in false patent-marking cases, which the statute permits anyone to initiate.  Over 200 such cases have been brought so far in 2010, whereas only 11 were brought in 2008, before Mr. Pequignot had his initial success.