Introduction

The Federal Circuit issued a much anticipated decision concerning what must be shown to prove false patent marking claims.  Matthew A. Pequignot v. Solo Cup Company, No. 2009-1547 (Fed. Cir. June 10, 2010).  Prior to this decision, the burdens of proof concerning the "intent to deceive" requirement for false patent marking claims were unsettled.  Now, the Federal Circuit has made it clear that "the bar for proving deceptive intent [ ] is particularly high, given that the false marking statute is a criminal one, despite being punishable only with a civil fine."

The Federal Circuit Decision

The Pequignot v. Solo Cup case was appealed to the Federal Circuit after the district court granted summary judgment in favor of Solo Cup.  The district court found that there was no "intent to deceive," and therefore no violation of the false marking statute, despite the fact that Solo knowingly marked expired patents on plastic cup lids and labeled its product packaging with the following language: "This product may be covered by one or more U.S. or foreign pending or issued patents.  For details contact www.solocup.com."  The district court based its ruling on the fact that Solo had sufficiently rebutted any presumption of an intent to deceive because it provided evidence that it relied in good faith on the advice of counsel and acted out of a desire to reduce costs and business disruption.

On appeal, the Federal Circuit largely agreed with the ruling by the district court, and provided further clarity on the burdens of proof.   Key highlights from the Federal Circuit's decision include:

  1. Expired patent numbers -- The Federal Circuit concluded that "articles marked with expired patent numbers are falsely marked.  That conclusion alone does not, however, decide the question of liability under the statute." 
  2. Presumption of the existence of an "intent to deceive" is rebuttable -- The Federal Circuit agreed with the district court 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 Federal Circuit further agreed "that, without more, when 'the false markings at issue are expired patents that had previously covered the marked products the [ ] presumption of intent to deceive is weaker.'"
  3. Proving the existence of an "intent to deceive" requires a showing of a "purpose" of deceit -- "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."  "Because the statute requires that the false marker act 'for the purpose of deceiving the public,' a purpose of deceit, rather than simply knowledge that a statement is false, is required."  "Thus, mere knowledge that a marking is false is insufficient to prove intent if [a defendant] can prove that it did not consciously desire the result that the public be deceived." 
  4. The burden of proof for showing or rebutting an "intent to deceive" is by a preponderance of the evidence -- The Federal Circuit reiterated "that the burden of proof of intent for false marking is a preponderance of the evidence," and further held that "[r]ebutting the presumption of intent should have no higher a burden of proof than was needed to create the presumption.  Thus, [a defendant's] burden of proof is to show by a preponderance of the evidence [not clear and convincing evidence] that it did not have the requisite purpose to deceive."  
  5. Good faith belief can negate the inference of an "intent to deceive" -- The Federal Circuit firmly established that, because "the required intent is not intent to perform an act, viz., falsely mark a product, but instead intent to deceive the public ... 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." 
  6. May be covered" language suggests no "intent to deceive" -- The Federal Circuit stated that language stating that products "may be covered" by one or more issued or pending patents may not rise to the level of being made for the purpose of deceiving the public.   Because "the 'may be covered' language stated exactly the true situation; [that] the contents of some of the packaging were covered by patents, and the contents of some of the packaging were not covered," there was no false marking.  Moreover,  "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." 

What's Next?

Solo Cup is the second decision in a line of recent appeals addressing key false marking issues.  Also pending before the Federal Circuit is Stauffer v. Brooks Brothers et al., Case No. 08-cv-10369 (S.D.N.Y.), appeal docketed, No. 2009-1428, -1430, -1453 (Fed. Cir. July 7, 2009).  The issues in the Brooks Brothers case have been briefed, but oral argument has not yet been conducted and a decision has not yet issued.  A decision in Brooks Brothers will likely address constitutionality and standing issues under the false marking statute, 35 U.S.C. § 292. 

There is also pending legislation before both the Senate and the House that would amend the text of 35 U.S.C § 292, and eliminate false marking cases brought by qui tam relators, or individuals with no competitive interest. 

Related Articles

Proskauer Client Alert, "Federal Circuit Interprets the False Marking Statute to Impose Fines on a 'Per Article' Basis," January 5, 2010.  To read this article, click: http://www.proskauer.com/publications/client-alerts/federal-circuit-interprets-the-false-marking-statute/

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