Pequignot v. Solo Cup Company
Federal Circuit Holds That False Marking Statute Applies to Marking With Expired Patents, But Affirms Summary Judgment That Manufacturer Lacked Intent to Deceive the Public
The Federal Circuit held in Pequignot v. Solo Cup Co., No. 2009-1547 (June 10, 2010), that the false marking statute, 35 U.S.C. § 292, applies to products marked with expired patents, although the presumption of intent to deceive the public is weaker in such cases than in cases involving marking with patents that never covered the product. In addition, the court held that advice of counsel and commercial reasons for continued marking past a patent's expiration date, e.g., the desire to avoid the cost and disruption of changing molds or product packaging to remove expired patent numbers, may be considered in assessing intent to deceive the public. Finally, the court found no intent to deceive the public when the patentee included language on packaging stating that the product "may be covered" by patents.
Solo Cup, a maker of plastic cup lids, continued to mark its products with patent numbers even after the patents had expired. Solo Cup argued that its actions were based on a desire to avoid the cost and disruption of making new molds when each patent expired and on counsel's advice that it didn't have to stop marking right away. As molds wore out, Solo Cup replaced them with new ones that did not include the expired patent numbers. Later, and again based on attorney advice, Solo Cup added the following language to its packaging: "This product may be covered by one or more U.S. or foreign pending or issued patents. For details, contact www.solocup.com." Solo included this language on all packaging, regardless of whether the products were actually covered by patent.
Pequignot filed a qui tam suit for false marking, seeking $5.4 trillion ($500 per falsely marked article) for Solo Cup's alleged false marking. The district court granted summary judgment in favor of Solo Cup, finding that Solo Cup lacked a purpose to deceive the public. The Federal Circuit affirmed, holding that:
1. The false marking statute covers products marked with expired patent numbers, not just products that were never covered by the patent (i.e., products that never embodied the referenced patent).
2. The combination of a false statement and the defendant's knowledge that the statement was false creates a rebuttable presumption of a purpose to deceive the public, but not an irrebuttable presumption. The defendant may still show, by a preponderance of the evidence, that it did not consciously intend to deceive the public.
3. The presumption of intent to deceive is weaker in the case of expired patents that previously covered the marked products. The court of appeals "agree[d] with the district court's statement that, without more, when 'the false markings at issue are expired patents that had previously covered the marked products, the ¼ presumption of intent to deceive is weaker.'"
4. Solo Cup incontrovertibly established that it lacked a purpose to deceive the public when it continued to mark with expired patent numbers. The evidence showed that it simply desired to avoid the cost and disruption of changing its molds once the patents expired and relied in good faith on advice of counsel that it was not required to immediately make such a change.
5. Solo Cup's use of language that its products "may be covered" by patent also was not actionable. In dictum, the court deemed it "highly questionable" whether such language could be "for the purpose of deceiving the public ¼ when the public would not reasonably be deceived into believing the products were definitely covered by a patent." In any event, Solo Cup established that it lacked the requisite intent to deceive: it relied on advice of counsel in including that language, and it provided consumers with an easy way to verify whether specific products were actually covered by patent.
In Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (2009), the Federal Circuit held that Section 292's fine of "up to $500 per offense" required an assessment of a penalty on a "per falsely-marked article" basis. Although Bon Tool further stated that “this does not mean that a court must fine those guilty of false marking $500 per article marked” and noted that a district court may discretion to determine that a fraction of a penny would be reasonable, Bon Tool revitalized Section 292 and led to a wave of patent marking lawsuits. Indeed, since Bon Tool, over 250 false patent marking cases have been filed across the country. Most of these cases have been based on the marking of products with expired patent numbers. Although Solo Cup declined to carve out expired patents from the scope of Section 292, the Federal Circuit’s affirmance of summary judgment for the defendant confirms that plaintiffs in such cases face a tall hurdle in trying to establish that such markings were intended to deceive the public. In particular, Solo Cup permits a defendant to rebut the presumption of a purpose to deceive the public with evidence that its continued marking of a product after patent expiration was driven by commercial reasons or reasonable reliance on advice of counsel. Solo Cup also suggests that plaintiffs are unlikely to succeed on claims based on markings that a product “may be covered” by patents.