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Federal Circuit Holds that Solo’s Marking of Lids after Patent Expiration Did Not Violate False Marking Statute
By Ian B. Brooks – Edited by Matt Gelfand

Pequignot v. Solo Cup Co., No. 2009-1547 (Fed. Cir. June 10, 2010)
Slip Opinion

On June 10, 2010, the Federal Circuit affirmed the judgment of the U.S. District Court for the Eastern District of Virginia, which had entered summary judgment in favor of Solo for “false marking” related to Solo’s practice of marking expired patents on its beverage cup lids.

The Federal Circuit held that a product embodying an expired patent is indeed an “unpatented article” under 35 U.S.C. § 292(a), but a plaintiff must demonstrate that the defendant intended to deceive the public in order to succeed under § 292. The court stated that a rebuttable presumption is created when a plaintiff shows that the defendant knowingly made false statements; a defendant may rebut this presumption if it shows by a preponderance of the evidence that it did not intend to deceive the public. The court also noted that the presumption is weaker in cases where the markings are for expired patents that once covered the marked products. Solo, which had relied on advice of counsel and weighed the high costs of removing the markings, was able to rebut Pequignot’s evidence that it intended to deceive. Finally, the Federal Circuit vacated the district court’s construction of “offense” under § 292, which was at odds with its decision in Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009).

Dabney Carr at Virginia IP Law provides an overview of the case. Patently-O and Daily Herald provide background on the case and other cases that have recently been filed claiming violations of § 292. A chart of false marking cases and their status is available at Gray on Claims.

In 1976 and 1986, the Patent Office granted Solo U.S. Patent Re. 28,797 (“the ‘797 Patent”) and U.S. Patent 4,589,569 (“the ‘569 Patent”), respectively, covering plastic drink cup lids. Solo added these patent numbers to the mold cavities used to produce its lids. As part of its thermoforming process, Solo stamped the respective patent number on each manufactured lid. After expiration of the ‘797 Patent in 1988, Solo continued to mark the lids. Solo became aware of the expired patent in 2000 and sought the advice of counsel regarding the marking. Counsel advised Solo that it would be best to remove the marking, but that it was not a necessity. Further, counsel advised Solo to ensure no falsity in product literature. Solo then implemented a policy where it would replace damaged or worn molds with new molds that did not contain the patent number. Citing high cost and potential disruption to business, Solo indicated to counsel that it would not perform a wholesale replacement of all molds. Counsel agreed that Solo’s policy of replacing the molds would be sufficient under § 292. When the ‘569 Patent expired in 2003, Solo implemented the same policy. Solo’s counsel also advised the company to place language on its products’ packaging to indicate that its products “may be covered” by patents and to contact Solo for details.

In 2007, patent attorney Matthew Pequignot brought a qui tam action under § 292. Pequignot alleged “that Solo had falsely marked its products with the ‘797 and ‘569 patent numbers for the purpose of deceiving the public, despite knowing that those patents had expired . . . [and] that Solo had marked its packages with the ‘may be covered’ language despite knowing that the products were not covered by any pending or issued patents.” Slip Op. at 5. A qui tam action under § 292 allows any person to obtain damages against a defendant with the requirement that the person evenly split the award with the Federal Government. With a maximum damage award of $500 per article on a total of over twenty billion articles, Pequignot sought a damage total exceeding $10 trillion.

In holding as it did, the court reasoned that Solo acted in good faith by seeking advice of counsel, and that it had been driven by a desire to avoid high costs and business disruption. The court additionally reasoned that by adding to the “may be covered” language to its products’ packaging, Solo had acted in good faith to provide a truthful representation of the patent coverage for its products.

This case is one in a series of recent cases raising false marking claims, and it highlights the potentially high stakes from falsely marking products — the maximum potential damage award against Solo was enormous. However, the court’s decision creates a high bar for plaintiffs seeking to obtain a favorable decision in such cases, at least when the defendant has acted in good faith.

Ian Brooks is a 3L at the Harvard Law School.

Posted On Jun - 14 - 2010 Comments Off

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