Judge Rader announces new patent attorney troll career path

[MYK]

Damn it, I want in on the land rush.  Can I start filing suits once I get my Section 711 license?

Why wait that long?  Pro-se with no connection to a legal degree could cut and paste one of these.  There's almost no expense that I can see to the plaintiff in these cases, unless they want to go take defendant corp's depo.  Meanwhile the corp's got to disrupt its business, dig out old files for the last X years, gather data, etc.

I am so there, dude.  Rushes off to see if Microsoft forgot to take an expired patent number off any of its CD labels.

[DogDayPM 9er9er9er]

Today's a New Milestone Day.  100 false marking cases filed this year.

That consortium of 3 Chicago law firms working together is responsible for 37 of them.

Justin Gray has a collated list available.  http://www.grayonclaims.com/false-marking-case-information

[DogDayPM 9er9er9er]

I think as of Monday we're over 200 companies defending false marking lawsuits (the majority on the basis of failing to remove old patent numbers from packaging). 

Here's a bright spot, though.  Linked below is HyCite v. Regalware (SaladMaster).  If the facts are as alleged, this is a case for false marking that appears to actually have some merit (although there are a number of counts not relating to false marking as well).

https://www.docketnavigator.com/document/order/07bc0baf-d2db-a9b4-011f-33cd719b74fc

[Robert K S]

Pequignot v. Solo Cup just issued.  It will probably effectively end the run on qui tam false marking cases filed started by The Forest Group v. Bon Tool, as it raises the bar for proving false marking.

Here is the statue:

-------

35 U.S.C. 292 False marking.

(a) Whoever, without the consent of the patentee, marks upon, or affixes to, or uses in advertising in connection with anything made, used, offered for sale, or sold by such person within the United States, or imported by the person into the United States, the name or any imitation of the name of the patentee, the patent number, or the words "patent," "patentee," or the like, with the intent of counterfeiting or imitating the mark of the patentee, or of deceiving the public and inducing them to believe that the thing was made, offered for sale, sold, or imported into the United States by or with the consent of the patentee; or Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article the word "patent" or any word or number importing the same is patented, for the purpose of deceiving the public; or Whoever marks upon, or affixes to, or uses in advertising in connection with any article the words "patent applied for," "patent pending," or any word importing that an application for patent has been made, when no application for patent has been made, or if made, is not pending, for the purpose of deceiving the public - Shall be fined not more than $500 for every such offense.

(b) Any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.

-------

Solo Cup had marked some of their cup lids with numbers of expired patents, and then received wrong advice from their legal counsel as to whether that was appropriate or not.  The Solo Cup defense in the appeal hinged on the words "for the purpose of deceiving the public".   The highlights:

"The 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. ...we agree with [Defendant-Appellee] Solo [Cup] that it successfully rebutted the presumption [of deceptive intent].  It 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 Pequignot raised no genuine issue of material fact showing otherwise. ...in civil cases, intent to deceive often requires clear and convincing evidence... we have stated that the burden of proof of intent for false marking is a preponderance of the evidence... Rebutting the presumption of intent should have no higher a burden of proof than was needed to create the presumption. Thus, Solo’s burden of proof is to show by a preponderance of the evidence that it did not have the requisite purpose to deceive. ...there was no genuine issue of material fact that 'Solo acted not for the purpose of deceiving the public, but in good faith reliance on the advice of counsel and out of a desire to reduce costs and business disruption.' ...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. ... [Plaintiff-Appellant] Pequignot raised no genuine issue of material fact re-garding the 'may be covered' language that would have precluded summary judgment. We therefore agree with the district court’s conclusion that summary judgment in favor of Solo was appropriate."

My take: This should make it very easy indeed for future false markers to mount defenses, which apparently need only be minimally evidenced to be adequate.

[DogDayPM 9er9er9er]

Well.... defanged might be a bit strong.  I read it over lunch.  I was kind of thinking they might draw back a little from Invitrogen's somewhat self-contradictory holdings in the area of intent to deceive, but they didn't. 

I've also never been a fan of the "expired" is equivalent to "false marking" camp, but the CAFC's older and wiser heads don't agree with me. 

P.S. Over 80 new suits have been filed since my 3/31 post below.

[DogDayPM 9er9er9er]

Here's a thought dealing with that rebuttable presumption/burden shift once a defendant is shown to have knowledge of the falsity of the marking.  So, I guess to shift the burden (to show knowledge of the falsity) all you need do is show that the patentee was aware that the patent had expired and was aware that the patent # is being marked on product.

So for purposes of when the patentee "knows" its expired patent marking is a false marking, does that start today?  I.e., were expired markings = false markings only once controlling authority/CAFC said so?  Or were they always false markings even though the question hadn't really come up?

[klaviernista]

*Guess which district, you get three guesses, and the first 2 don't count.

I'm late to the discussion, but I'm guessin your referring to the land of BBQ, chili, high school football, and the rootinest, tootinest hawt sawc around!  Yee haw.

[Robert K S]

defanged might be a bit strong.

How does the false marking statue have any meaning any more?

It's open season.  False mark whatever you want.  Just send an e-mail to your attorney: "Is it okay if I put these expired patent numbers on my product?  Oh, yeah, most of 'em were never even my patents."

Attorney reply: "Would you be doing it to deceive the public?"

"Naw!  Of course not!  Just an aesthetic touch to the packaging.  Looks so much prettier with all the numbers all over it."

"Well, then, you're free and clear.  You'll just want to print out these e-mails for future reference."

Done deal.  False mark all you want.  Deceive the public all you want, just as long as you can say you didn't want to deceive the public.

[DogDayPM 9er9er9er]

@RKS - surely no federal district court judge would fail to see through such a sham. 


@Klav' - Yee Haw indeed!

[Robert K S]

surely no federal district court judge would fail to see through such a sham

Let's hope, but IMO Solo pulled one over on them with their "evidence" of bad counsel.  What kind of attorney says "Go ahead and put expired patent numbers on the product"?

Anyway, the point remains.  All you have to do is show that you were false marking in order to save money, and you're exempted from the statute.  That's a toothless statute.

It seems to me that, starting with the axiom that there exists a probability of the public being deceived by a falsely marked product, any knowledgeable false marking is necessarily done with the intent to deceive.

I would be in favor of an amendment to the statue to strike the "for the purpose of deceiving the public" language and adding a grace period exemption of some reasonable term (5 years?) for companies to continue to produce falsely marked goods so long as it can be shown that the markings at one time would not have been false (i.e., the patents were valid, enforceable and belonged to the marker) and it would have been prohibitively expensive to discontinue the false marking (e.g., the costs of retooling the manufacturing process to remove the false mark would have been a substantial percentage of the expected profit margin of the product).  That's win-win.  The public is protected from deception, and businesses are not burdened with a false marking trap.

[DogDayPM 9er9er9er]

Let's hope, but IMO Solo pulled one over on them with their "evidence" of bad counsel.  What kind of attorney says "Go ahead and put expired patent numbers on the product"?

From what I understand, it doesn't seem to me like it was a case of pulling one over. 

Put yourself back several years in time.  No one had been found liable for leaving old numbers on product.  No companies are policing their packaging, looking for old patent numbers^1,2.  Didn't what their lawyer tell them boil down to - "as you replace worn out dies, replace them with new ones not having the patents"?  Given the history, what reasonable lawyer would tell them they needed to pay to replace all 1500 dies immediately?  Would you give that sort of advice?  I know that I would not have.


¹I picked up from a pharmacy an OTC product just last week that's marked with a patent expired in 1998.  Guess what the copyright date on this package art is?  1994.  Hasn't been updated in 16 years.  Not sure why, but it probably has to do with its being a small niche product that's more or less "orphaned" by the marketing dept, and if marketing has abandoned a product NO ONE looks at package art.
²I betcha they are now in view of these lawsuits.   

[DogDayPM 9er9er9er]

I would be in favor of an amendment to the statue to strike the "for the purpose of deceiving the public" language and adding a grace period exemption of some reasonable term (5 years?) for companies to continue to produce falsely marked goods so long as it can be shown that the markings at one time would not have been false (i.e., the patents were valid, enforceable and belonged to the marker) and it would have been prohibitively expensive to discontinue the false marking (e.g., the costs of retooling the manufacturing process to remove the false mark would have been a substantial percentage of the expected profit margin of the product).  That's win-win.  The public is protected from deception, and businesses are not burdened with a false marking trap.

That's an interesting proposed amendment.  But I get stuck a bit with the public protection aspect, since if expired markings are deceptive to the public, then it's probably closer to say that the public can only be deceived for the set allowed period.

I do like your grace period concept overall, though.  As it stands now it is somewhat of a catch 22.  The only way to get the damages you're entitled to is to mark your product and be certain there is no un-marked product until after the patent expires.  Then the day the patent expires, if you're making marked product, bang! you're liable for false marking.  If you're making a million units a week, even if it's not a tooling issue but just packaging marked with patent numbers, you can't control inventories that tightly. 

[Robert K S]

Put yourself back several years in time.  No one had been found liable for leaving old numbers on product.  No companies are policing their packaging, looking for old patent numbers.

I wouldn't say "no companies".  The responsible ones, the ones with good counsel, understood the statute and what false marking meant (or at least what they thought it meant--we now know it means something different), and periodically reviewed marking policy to ensure compliance.

Didn't what their lawyer tell them boil down to - "as you replace worn out dies, replace them with new ones not having the patents"?

The attorney's exact words, as represented by Solo Cup in court and as found in the CAFC opinion, were, "When a patent expires you don't have to take the old number off. However, I’m going to do a little research to see if the situation is different when adding an already expired number to a product. My gut feel[ing] is that as long as the patent claims would have covered the product, there isn't a problem."

The advice that came back as a result of the "research" was, "Best case scenario is to remove the number, if possible.  If not, it is important that Solo not further any unintentional falsity in product literature or the like."  Product literature!

I believe the case indicates that Solo Cup did ultimately remove the false marking the next time they replaced their molds--an act of good faith that the judges commented on as factoring into their finding of no intent to deceive.

Given the history, what reasonable lawyer would tell them they needed to pay to replace all 1500 dies immediately?  Would you give that sort of advice?  I know that I would not have.

Given what I thought I knew about the statute at the time, my advice would have been not to false mark so as not to jeopardize the company.  Period.  As I see it, it's the attorney's job to give advice based on the law, not based on the exigencies of practical economies, and the manager's job to evaluate that legal advice in light of the practical economies, weigh risk, and follow the law to the degree deemed within the company's risk comfort zone.  (At $500 per offense, the potential liability should have been outside the comfort zone even of BP.)  The attorney often doesn't have complete information with regards to the "practical economies" side of things and so it is a terrible mistake for a lawyer to tailor legal advice based on unknown variables that have nothing to do with the law.  (Naturally, this statement is true more so in the case of outside counsel, and less so in the case of in-house counsel that are intimately involved with management and oversight.)

Given what I know about the law now, in light of the CAFC's ruling about the meaning of the statute and in particular the deceptive intent language therein, my advice would probably be that as long as the company makes a good faith effort to replace the molds with correctly-marked molds as they become worn out and can document that good-faith effort, there is virtually no risk of liability, even if they continue to produce falsely marked products for decades.

Bottom line--marking is both a privilege and a responsibility.  It's a privilege because you get to boast that your product has been certified as novel and non-obvious in order to create an impression in the consumer of superiority of your product over the competitor's, and puts infringers on notice.  It's a responsibility because if you ever expect to reap damages from infringers it behooves you to mark your products correctly to provide this notice, and if you want to avoid liability from qui tam false marking suits it behooves you to ensure that your marks are not false.  I believe that companies enjoy the privileges of marking in exchange for the responsibilities of marking, just as they enjoy the privileges of patent (monopoly) in exchange for the responsibilities of patent (disclosure), and it should be a relatively simple component of any company's intellectual property policy to ensure that products are correctly marked and that the marking stays true as patents expire--responsibility cannot be abrogated just because a mold has been made.  As for managing inventories, it's not a matter of things turning on a dime--it's a matter of using a little foresight and phasing in a marking adjustment just as any other product revision would be phased in, so that hopefully all of the products and packages being manufactured by deadline-day are in compliance.

This CAFC decision actually throws a lot more uncertainty into the mix, rather than adding certainty.  It makes it less certain whether or not false marking will create a liability (prior to the decision I would have said "definite yes") and it makes it less certain for the consumer whether a mark is false or not (companies have been given carte blanche to continue marking in perpetuity so long as the false marking is "in good faith").

I picked up from a pharmacy an OTC product just last week that's marked with a patent expired in 1998.  Guess what the copyright date on this package art is?  1994.  Hasn't been updated in 16 years.

I hope you checked the expiration date before putting it in your mouth.

[DogDayPM 9er9er9er]

The responsible ones, the ones with good counsel, understood the statute and what false marking meant... ...and periodically reviewed marking policy to ensure compliance.

I'd be interested to know if you have first hand knowledge of this (but no, not asking for particular details).  I'm looking at some 300+ companies already in suit, and (going on just a SWAG) I figure that's under 5% of the companies having expired markings. 

The attorney's exact words, as represented by Solo Cup in court and as found in the CAFC opinion, were, "When a patent expires you don't have to take the old number off. However, I’m going to do a little research to see if the situation is different when adding an already expired number to a product. My gut feel[ing] is that as long as the patent claims would have covered the product, there isn't a problem."

The advice that came back as a result of the "research" was, "Best case scenario is to remove the number, if possible.  If not, it is important that Solo not further any unintentional falsity in product literature or the like."  Product literature!

Thanks for the quotes. I'm guessing the "research" amounted to not finding much, except that CAFC Arcadia case, which (in dicta) said expired DNE false marking, and London and following, where "offense" is not "per item marked".

Given what I thought I knew about the statute at the time, my advice would have been not to false mark so as not to jeopardize the company.  Period.  As I see it, it's the attorney's job to give advice based on the law, not based on the exigencies of practical economies, and the manager's job to evaluate that legal advice in light of the practical economies, weigh risk, and follow the law to the degree deemed within the company's risk comfort zone.  (At $500 per offense, the potential liability should have been outside the comfort zone even of BP.)  The attorney often doesn't have complete information with regards to the "practical economies" side of things and so it is a terrible mistake for a lawyer to tailor legal advice based on unknown variables that have nothing to do with the law.  (Naturally, this statement is true more so in the case of outside counsel, and less so in the case of in-house counsel that are intimately involved with management and oversight.)

Agree with the inside/outside distinction and also with provision of advice based on the law.  But with what was available in the case law, my advice in 2007 may well have been that the risks were relatively low vs. (otherwise) unnecessary replacement cost, given case law regarding "offense" (not per item) and the one CAFC case touching "expired".  Presented with Solo's issue, I'm guessing I would have said, "no need to toss out working molds, but any replaced mold should be non-marked".  And fundamentally, I think that in 2007 we would have differed on the "expired = false" part of the equation.  Certainly over the years as I've reviewed package revisions, for anything expired I've always instructed deletion.  Not from any fear of the false marking statute but just because I want the packaging to be correct.  I do think expired numbers should come off.  I guess that sounds inconsistent - I don't think there should be liability under the false marking statute but I also think that, presented with the opportunity, old patents should come off.  But as the CAFC has told us, you have the law on your side of that equation and I am on the wrong side of it and will just have to suck it up and learn to like it.   
 

Given what I know about the law now, in light of the CAFC's ruling about the meaning of the statute and in particular the deceptive intent language therein, my advice would probably be that as long as the company makes a good faith effort to replace the molds with correctly-marked molds as they become worn out and can document that good-faith effort, there is virtually no risk of liability...

I see what you're saying about "no [legal] liability" but disagree that the statute won't continue to drive behavioral change in light of all these cases filed.  Consider that these litigations are nearly pain free for the plaintiff and quite burdensome on the defendant corp who will still have to disrupt business to get enough info to file their answer (and pay counsel), then disrupt business still further (and pay more counsel) getting through discovery and document production (assuming the judge doesn't rule for them on motions to dismiss, which have been rare so far).  Just getting up to motions for summary judgment (where you finally get to rebut that presumption) can easily be $500K.  But I'm not saying one should feel sorry for the corps, what I'm saying is that given the ease with which these kinds of cases are filed, any company that doesn't get in gear fixing their markings will find themselves maybe not legally liable for a penalty, but still at risk of facing and resolving a number of suits at $500K a pop. 

[DogDayPM 9er9er9er]

...and it should be a relatively simple component of any company's intellectual property policy to ensure that products are correctly marked and that the marking stays true as patents expire--responsibility cannot be abrogated just because a mold has been made.  As for managing inventories, it's not a matter of things turning on a dime--it's a matter of using a little foresight and phasing in a marking adjustment just as any other product revision would be phased in, so that hopefully all of the products and packages being manufactured by deadline-day are in compliance.

(Was running over-length in the post above).  I agree that the IP dept can review all product markings and set up a database with any sort of pre-expiration alarm system desired.  So the knowledge should be fairly easily gotten at.  But I still have trouble with the idea of "phasing in a marking adjustment just as any other product revision would be phased in, so that hopefully all of the products and packages being manufactured by deadline-day are in compliance".  You can't phase it in running up to the deadline date, of course, at least not if you're putting the product out the door.  So maybe you need to work out a system where you have enough inventory to embargo any pre-expiration non-marked product until after expiration.  But to say it only requires a little foresight to work out the details I think is true only for product lines with just one or just a few SKUs. 

Consider a product like J&J's Band-Aid brand bandages.  Let's say the product is covered by a patent relating to the adhesive used.  Now, let's say J&J have approximately 30 SKUs (bandage sizes, package counts, various multi-packs, club (Costco) packs, waterproofs, Scooby-Doo, Sesame Street and/or SpongeBob Square Pants overprints, etc.) and so have 30 separate packaging elements all being marked with the patent.  J&J's various manufacturing facilities order packaging with a target of having not more than 6 weeks inventory per SKU, and the packaging vendor is similarly instructed.  But various monthly unit sales fluctuate a fair bit not only from SKU-to-SKU but also as between J&J and its competitors such as 3M and the in-store brands depending on who's pushing shelf-talkers and coupons or retailer incentives, etc.  Note also that within J&J, any proposed packaging change takes from day 1 approximately 5 months to get to the vendor for printing.  Should J&J learn how to get it right?  And will they?  Sure, and sure.  All I'm saying is, look at a solitary product in hand and it seems like it should be a simple thing.  But sometimes it's not so simple.  (Yeah I know, cry me a river.  )

I hope you checked the expiration date before putting it in your mouth.

Ha, good point.  I just checked it and it's good through 2014, so I'm assuming the product itself is recently made. It's just the packaging no one's looked at in years. 

And thanks much for all the good discussion!