Marking Products With Now-Expired Patents Is False Marking If Done With Intent to Deceive Public

The Federal Circuit continues to refine the law regarding false marking claims filed under 35 U.S.C. § 292. On June 10, 2010, the Federal Circuit issued its ruling in Pequignot v. Solo Cup Co., 2009-1547 (Fed. Cir. June 10, 2010). In this case, the Federal Circuit considered marking with now-expired patents, the use of "may be covered by one or more of the following patents" language, and the requisite level of intent required to prove a false marking claim.

Section 292 of the Patent Act provides that a person who falsely marks an unpatented article as being patented, where the false patent marking was done with an intent to deceive the public, "[s]hall be fined not more than $500 for every such offense." 35 U.S.C. § 292(a) (emphasis added). The recent resurgence of false marking claims is a result of the Federal Circuit's ruling in The Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295, 1304 (Fed. Cir. 2009), in which the Court held that the penalty under § 292 must be assessed on a per article basis with the district court setting the amount of the penalty anywhere from a fraction of a penny to $500 per falsely marked article. The Federal Circuit in Solo Cup did not reach the fine issue since it entered summary judgment for Solo Cup, but did include a footnote commenting that Pequignot's request that a damages award of $500 per article be applied would result in an award to the United States of approximately $5.4 trillion, which "would be sufficient to pay back 42% of the country's total national debt."

Pequignot challenged Solo Cup's continued marking of cup lids with expired patents and Solo Cup's use of the "may be covered by one or more U.S. or foreign pending or issued patents" language on Solo Cup's packaging for various products. Solo Cup obtained the advice of counsel with regard to both of these markings. Further, the molds for making the cup lids last between 15-20 years. Each time Solo Cup replaced a mold, it did not include the then expired patent markings on the new mold. In August 2009, the district court had granted summary judgment to Solo Cup on Pequignot's false marking claim finding no intent to deceive the public.

Marking with Expired Patents

Importantly, in Solo Cup, the Federal Circuit ruled that a now-expired patent is "unpatented" for purposes of the false marking statute. Solo Cup had argued that a product that was once covered by a now-expired patent is not "unpatented" and thus could not violate the false marking statute. The Court found that many of the public policy considerations that apply to marking with inapplicable patent numbers also apply for marking with expired patents. The Court noted that determining the expiration date of a patent can be difficult. The Court held that "articles marked with expired patent numbers are falsely marked."

During oral argument, the judges had asked at what point after expiration does a false marking claim arise. This question goes more to intent to deceive the public, which will be discussed below. However, it is clear that a patentee cannot continue to mark its products with expired patents indefinitely as Solo Cup's counsel had argued during oral argument.

Marking with "May Be Covered" Language

The Court's discussion regarding the "may be covered" notice was not as detailed, perhaps because the parties agreed that the contents of some of the packaging containing the "may be covered" language were "unpatented," "as those products had never been protected by any patent or pending patent application." The undisputed evidence was that Solo Cup placed the markings on its packing based on its attorneys' advice. Solo Cup's attorney testified that she believed the language was not false marking. Moreover, Solo Cup removed the language from its packaging during the case. Solo Cup argued that the "may be covered" language was not false - "the contents of some of the packaging were covered by patents, and the contents of some of the packaging were not covered." The Court held "it is highly questionable whether such a statement could be made 'for the purpose of deceiving the public,' when the public would not reasonably be deceived into believing the products were definitely covered by a patent."

It appears that a key issue with regard to Solo Cup's use of the "may be covered" language was that the packaging was true; in other words, depending on the product placed in the packaging, it was covered by one or more patents. Moreover, the packaging does not appear to have included any patent numbers. The district court had "reasoned that, because this was an issue of first impression, [Solo Cup's] counsel's advice was reasonable." The Federal Circuit did not comment on this reasoning. It would seem unwise for a company to include on a product that it "may be covered by one or more of the following patents" and then include a laundry list of patents, unless that product changed to include coverage for all of the listed patents.

Burden of Proof for Proving Intent to Deceive Public

The case, however, was decided on the issue of intent to deceive the public. In reviewing whether Solo Cup's false marking was done with intent to deceive the public, the Court noted that "[t]he bar for proving deceptive intent here is particularly high, given that the false marking statute is a criminal one, despite being punishable only with a civil fine." Moreover, a false marking plaintiff must prove that the defendant had "a purpose of deceit, rather than simply knowledge that a statement is false ..." The Court found that "mere knowledge that a marking is false is insufficient to prove intent if Solo Cup can prove that it did not conscientiously desire the result that the public be deceived."

The Court also held that "the combination of a false statement and knowledge that the statement was false creates a rebuttable presumption of intent to deceive the public, rather than irrebuttably proving such intent."

The Court found that Solo Cup "provided credible evidence that its purpose was not to deceive the public with either the expired patent markings or the 'may be covered' language" and affirmed the district court's summary judgment for Solo Cup based on a failure to show the requisite intent of deceiving the public.

With regard to the burden of proving intent, the Federal Circuit clarified that the preponderance of the evidence standard applies, which is less than the criminal beyond a reasonable doubt standard. Likewise, Solo's burden of proof to rebut the presumption of intent is also under a preponderance of the evidence standard. The Court found that Solo Cup acted not for the purpose of deceiving the public but in good faith based upon the advice of counsel and based upon business costs and business disruption. The Court held that "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 Court made clear that blind assertions of good faith are not sufficient and in this case, it was Solo's reliance on the advice of counsel and evidence of its true intent to reduce costs and business disruption that successfully rebutted the presumption for both the expired patents and the "may be covered" language. The Court also noted that "Solo did not state on its packaging that any product was definitely covered by a patent, and it provided the consumer with an easy way to verify whether a specific product was covered; the consumer could 'contact www.solocup.com' for details."

The Federal Circuit's ruling makes clear that continuing to mark products with expired patents can create liability under the false marking statute. Moreover, the Court's ruling makes clear that to rebut a finding of intent to deceive the public, a patentee must do more than simply assert that its actions were done in good faith. Whether or not such evidence will require the advice of counsel and/or the business justifications, which motivated Solo Cup's decisions, remains unclear.