In Pequignot v Solo Cup Company, a decision appealed from the District Court for the Eastern District of Virginia, the Federal Circuit affirmed the lower court's decision concerning Solo Cup's improper marking of "unpatented articles." However, Solo Cup's lack of "intent to deceive the public" precluded liability, enabling the Federal Circuit to avoid revisiting the issue of "what constitutes an offense" for purposes of calculating damages. The false-marking statute provides for recovery of damages in the amount of $500 for "every such offense" when an "unpatented article" is marked with the word "patent" or any other word or number importing the same meaning "for the purpose of deceiving the public." The distinction between a rebuttable and an irrebuttable presumption, for purposes of the intent-to-deceive element, in connection with the preponderance-of-the-evidence standard created an escape from liability in the present dispute. All manufacturers who have come under recent attack may not be as fortunate as Solo Cup as to have acted in good faith on advice of counsel in adopting and adhering to the product and packaging marking policies that were called into question.
The record from the lower court established that Solo Cup continued to mark its product with expired patent numbers because wholesale replacement of manufacturing molds each time a patent expired would be costly and burdensome. On advice of patent counsel, Solo Cup adopted and adhered to a policy under which when manufacturing molds required replacement due to wear or damage, new molds would not include the expired patents. Because Solo Cup's manufacturing molds could last for many years, there was often a significant gap in time between when a patent expired and when a manufacturing mold was replaced. Solo Cup also, on advice of patent counsel, adopted and adhered to a policy of marking packaging with a statement "This product may be covered by one or more U.S. or foreign pending or issued patents. For details, contact www.solocup.com." Solo Cup advances two theories as to why these facts did not establish false marking under the statute: (1) a product covered by an expired patent is not "unpatented" as required by the statute; and (2) the fact of patent expiration is insufficient to show an intent to deceive the public. The lower court dismissed Solo Cup's motion to dismiss finding that both marking a product with an expired patent number and marking packaging with the "may be covered" language could constitute false marking. The lower court did grant Solo Cup's motion for summary judgment, finding that Solo Cup lacked an intent to deceive by adopting its product and packaging marking policies. In its decision, the lower court held that false marking combined with knowledge of the falsity creates only a rebuttable presumption of intent to deceive and Solo Cup's evidence satisfactorily rebutted this presumption. Despite having granted summary judgment finding no liability, the lower court also granted summary judgment finding that Solo Cup had committed at most three "offenses" for purposes of the patent-marking statute: one offense when it continued to mark product with each of the two expired patents in question and one additional offense when it marked packaging with the "may be covered" statement.
On the issue of defining "unpatented" for purposes of the patent-marking statute, the Federal Circuit affirmed that products once covered by now-expired patents are "unpatented" within the meaning of the statute. While the Federal Circuit modified some of the lower court's analysis, the outcome of what constitutes "unpatented" did not change. On the issue of "intent to deceive", Pequinot argued at the lower court level that under Supreme Court precedent, intent had been proven if Solo Cup's statements were false and Solo Cup knew they were false. Solo Cup responded that the inference from knowingly false statements is rebuttable with evidence of good faith, such as advice of counsel. The Federal Circuit agreed with Solo Cup's position, finding that the bar for proving deceptive intent is particularly high as the false-marking statute is a criminal one, despite being punishable with only a civil fine. A purpose of deceit, rather than simple knowledge of falsity is required to satisfy this element of the statute. Such a purpose of deceit must be shown by a preponderance of the evidence. As established in the lower court record, "Solo [Cup] acted not for the purpose of deceiving the public, but in good faith reliance on advice of counsel and out of a desire to reduce costs and business disruption." The Federal Circuit agreed that Pequinot provided no credible contrary evidence. Because the Federal Circuit affirmed the lower court's finding of no liability for the lack of intent to deceive, the "for every such offense" element of the patent-marking statute was not examined on appeal.
This decision should begin to slow the tide of false-marking cases brought by plaintiff who has no real interest in the outcome of the dispute beyond the monetary award available under the statute.
Vol. 53, June 2010