Client Alert

The false marking statute, 35 U.S.C. § 292, establishes a penalty of up to $500 per offense for falsely marking an "unpatented article" as patented "for the purpose of deceiving the public."  In Pequignot, the Federal Circuit affirmed the Eastern District of Virginia's grant of summary judgment of no liability for false marking where Solo Cup Co. falsely marked over 21 billion cup lids with expired patents for nearly 20 years.

In doing so, the Federal Circuit held that: (1) marking products with an expired patent is false marking under section 292; and (2) even when a false marking plaintiff establishes facts sufficient to create a presumption of intent to deceive, that presumption is rebuttable by a preponderance of the evidence and is weakened when the marking involves expired patents.  The decision promises to impact a large number of pending litigations across the country - since December 2009, over 150 new false marking suits have been filed in the U.S., most of which involve marking with expired patents.

Marking With Expired Patents Is False Marking Under 35 U.S.C. § 292
The Federal Circuit rejected Solo Cup's argument that marking with an expired patent was not false marking.  The court held that a product covered by an expired patent is "unpatented" under section 292 because it is in the public domain, notwithstanding Solo Cup's legislative history argument to the contrary.  The court also reasoned that public policy supports this holding because marking with expired patents "imposes on the public the cost of determining whether the involved patents are valid and enforceable."  (internal quotation marks and citation omitted).

"Particularly High" Bar Exists For Showing Intent To Deceive, Particularly For Expired Patents
The Federal Circuit clarified the standard for proving the "intent to deceive the public" under section 292.  As a preliminary matter, the court reaffirmed its prior holding in Clontech Laboratories, Inc. v. Invitrogen Corp., 406 F.3d 1347, 1352 (Fed. Cir. 2005), that the "fact of misrepresentation coupled with proof that the party making it had knowledge of its falsity is enough to warrant drawing the inference that there was fraudulent intent."  However, Pequignot clarifies that the Clontech "inference" is actually a presumption and establishes four limitations that weaken the presumption, particularly in the context of marking with an expired patent:

• The Clontech presumption is rebuttable given the criminal nature of the statute, which requires a "particularly high" bar for proving intent. 
• A patent owner accused of false marking may rebut the presumption of intent to deceive under the relatively low preponderance of the evidence standard.
• The presumption of intent to deceive is "weaker" when the marking involves expired patents. 
• Evidence of good faith is relevant and may be used to rebut a presumption of intent to deceive.  In Pequignot, the evidence included advice from counsel that Solo Cup's policy for replacing its expired patent markings over time complied with the statute.  In addition, the court was persuaded by evidence that Solo Cup's intent in phasing out the markings over time was not to deceive but to reduce costs and avoid business disruption.

Markings That Products "May Be" Patented Are Likely Not False MarkingThe court also affirmed summary judgment of no deceptive intent with regard to Solo Cup's use of language that products "may be covered by one or more U.S. or foreign pending or issues patents" on packages for a variety of products, some of which were not patented.  The court found no deceptive intent because the language "stated exactly the true situation," making it "highly questionable whether such a statement could be made 'for the purpose of deceiving the public[.]'"  The court further reasoned that Solo Cup had not intended to deceive because it used the language on the advice of outside counsel for purposes of notifying potential infringers, and alternative packaging was inconvenient from a logistical and financial perspective.

The "cottage industry" of false marking litigation spawned by the Federal Circuit's holding in Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009), is likely not going to disappear in light of Pequignot.  By holding that marking with an expired patent is false marking under section 292, the Federal Circuit has given many of these suits a chance of surviving until at least the summary judgment stage.  However, Pequignot increases the standard for intent to deceive.  False marking plaintiffs can still rely on knowledge to create a presumption of intent, but the Federal Circuit has provided patent owners with powerful tools to overcome the presumption, even at the summary judgment stage.  The presumption is weakened in cases involving expired patents, and a patent owner may rebut the presumption if a preponderance of the evidence suggests a lack of intent to deceive.

If you have any questions or wish to discuss how this decision will impact your company, please contact your attorney at Brinks Hofer Gilson & Lione.

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