Federal Circuit Decides Important False Patent Marking Issue

June.11.2010

The Federal Circuit handed down its decision in Pequignot v. Solo Cup Co. (No. 2009-1547, Fed. Cir. June 10, 2010) which brings some clarity, after the Forest Group decision from last December, to the issue of false patent marking under 35 U.S.C. 292. Section 292 is the section of the U.S. Patent code that prohibits falsely marking a product with a U.S. patent number. Section 292 assesses a maximum $500 fine for marking an unpatented article, for purposes of deceiving the public, with an indication, such as the word "patent" or a patent number, that the article is covered by a U.S. patent. 35 U.S.C. § 292(a), ¶ 2. This section permits private parties to enforce the fines, with any recovery being split 50–50 between the recovering party and the United States. In Forest Group, the Federal Circuit held that under the false marking statute, each separate product that was falsely marked constituted a separate offense. This decision raised the specter of potentially massive liability in situations where a large number of articles were falsely marked.

In Pequignot, the plaintiff Pequignot, a patent attorney, brought a qui tam action against Solo Cup, alleging that it had falsely marked over 21 billion plastic cup lids. The plaintiff sought a fine of $500 per offense, which amounted to a total of over $10.8 trillion. According to the Court, the U.S. Government's 50% share of this fine would be enough to retire 42% of the U.S. national debt. Solo Cup was accused of committing two acts of false marking. First, it marked its lids with the number of a patent it knew to be expired. Second, it marked a number of its product packages with the statement, "this product may be covered by one or more U.S. or foreign pending or issued patents. For details, contact www.solocup.com." This statement was placed on some products that Solo Cup knew were not covered by any patent (and on others that were covered by valid patents). 

Solo Cup conceded both that the markings were false and that it knew they were false when the markings were placed on unpatented products. However, Solo Cup contended that it lacked any intent to deceive the public, as required by Section 292. Solo Cup contended that it had marked the plastic cup lids with a known expired patent because it was expensive to replace the molds (which bore the patent number) used to fabricate the plastic lids. Solo presented evidence that it had relied on the advice of counsel in placing the false markings on its products. As to the "may be covered" statement, Solo Cup argued that its intent in placing this statement on its packaging was to give notice to others that Solo Cup had patents, in an effort to comply with the requirements of the marking statute, 35 U.S.C. 287, and also to provide a low-cost way of marking a large number of products without having to create separate notices for each product. The district court accepted Solo Cup's reasoning and granted summary judgment of no intent to deceive.

The Federal Circuit affirmed the finding of no intent to deceive. In doing so, it made several significant conclusions as to what must be shown to support a false marking claim and to defend against such a claim. First, the Federal Circuit held that a product that is covered by an expired patent is "unpatented" within the meaning of the false marking statute and, thus, marking a product with a patent known to have expired is false marking. Second, the Court held that intent to deceive under the false marking statute need only be proven by a preponderance of the evidence. However, it also held that the bar for proving deceptive intent is "particularly high" and requires a showing that the false marker had a "purpose of deceit, rather than simply knowledge that the marking statement is false." Thus, when a plaintiff shows that a mark is false and that the marking party knew it was false when made, that creates a rebuttable presumption of intent to deceive.

This presumption may be rebutted by a showing, again by a preponderance of the evidence, that the falsely marking party did not intend to deceive the public by the false marking. Addressing the facts of this case, the Court held that when the mark is for an expired patent, the presumption of intent to deceive is weaker, because the products were once covered by a patent. The Court further held that Solo Cup's desire to reduce costs and avoid business disruptions by replacing its molds before they had worn out, coupled with its reliance on advice of counsel, was sufficient to rebut the presumption. The fact that Solo Cup did replace its molds with unmarked molds when they finally did wear out also demonstrated a lack of intent to deceive. Lastly, the Court held that it was "highly questionable" whether the "may be covered" statement could be made for the purpose of deceiving the public, when this statement stated exactly the true situation (some products were covered, others were not), and, thus, "the public would not reasonably be deceived into believing that the products were definitely covered by a patent."