No $5.4 Trillion Bounty for False Patent Marking Bounty Hunter

Bounty hunters make their living by capturing fugitives from justice for a monetary reward (bounty).  A more recent, modern day version of the bounty hunter is one who pursues patentees for false patent marking under 35 U.S.C. § 292.  The recent Federal Circuit case of Forest Group, Inc. v. Bon Tool Co. has made such false patent marking bounty hunting lucrative by saying that each falsely marked item is an “offense” under 35 U.S.C. § 292, and thus subject to a penalty of “up to $500,” with the bounty hunter getting half of the awarded penalty and the federal government the other half.  As a result, a rash of such cases (upwards of at least 100 at the moment) have been filed by such modern day bounty hunters as qui tam actions against various patentees alleged to be falsely marking their products.

In Perquignot v. Solo Cup Co., the stakes were truly mind-boggling:  about $10.8 trillion in total.  Approximately $5.4 trillion of that bounty would be the federal government’s share which the Federal Circuit characterized as “sufficient to pay back 42% of the country’s total national debt.”  High stakes indeed!  But unfortunately for the bounty hunter (Pequignot) in Perquignot, the Federal Circuit affirmed a district court grant of summary judgment that there was no “deceptive intent” on the part of the patentee (Solo Cup), thus no approximately $5.4 trillion bounty was owed.

Solo Cup produced cup lids using thermoforming stamping machines that contain mold cavities.  These mold cavities embossed Solo Cup’s patent numbers on these lids.  Naturally, over time, these marked patents would expire, but the mold cavities might last 15-20 years or potentially beyond the life of each marked patent.  That left a thorny and potentially expensive question:  What to do about the expired patent numbers on those mold cavities.

Solo cup consulted with its outside intellectual property counsel on what to do about this problem.  Outside counsel recommended as the “best case scenario” to “remove the number, if possible,” but if not, “it is important that Solo [Cup] not further unintentional falsity in product literature or the like.”  Based on that advice, Solo Cup developed a policy under which, when mold cavities needed to be replaced due to wear or damage, the new molds would not include the expired patent numbers.  But because, as noted, the mold cavities might last many years, Solo Cup continued to use those molds imprinted with expired patent numbers to avoid undue burden and cost.  Later, in 2004, outside counsel advised (and Solo Cup included) on its packaging 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.”

Even though Solo Cup implemented this advice based on outside counsel, the district court ruled and the Federal Circuit agreed that this didn’t negate the false marking of the molded cup lips which contained expired patent numbers.  In this portion of the Federal Circuit opinion, you could almost hear Pequignot salivating over his prospective bounty.  But the Federal Circuit brought Pequignot dreams (and bounty) abruptly to a halt:  “That conclusion alone does not, however, decide the question of liability under the statute.”

Instead, as noted by the Federal Circuit, 35 U.S.C. § 292 requires that the false marking be “for the purpose of deceiving the public.”  Pivotal to this aspect of false patent marking was the 2005 Federal Circuit case of Clontech Labs., Inc. v. Invitrogen Corp. The district court interpreted Clontech as holding that false marking, combined with knowledge of the falsity, “merely creates a rebuttable presumption of intent to deceive.”  The Federal Circuit in Pequignot agreed:  “under Clontech and under Supreme Court precedent, 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 noted that the bar for proving “deceptive intent” under 35 U.S.C. § 292 “is particularly high, given that the false marking statute is a criminal one, despite being punishable only with a civil fine.”  Thus, mere knowledge of the false marking by the patentee was not enough to show such “deceptive intent.”

The Federal Circuit also agreed that Solo Cup had “successfully rebutted the presumption” of “deceptive intent” by providing “credible evidence” that Solo Cup’s purpose in falsely marking “was not to deceive the public” with regard to either the expired patent markings or the “may be covered” language on its cup lids.  Because the burden of proof for “deceptive intent” in false patent marking was earlier held to be by preponderance of the evidence in Bon Tool, the Federal Circuit in Perquignot held that rebutting that presumption must also be governed by a preponderance of the evidence standard.  And unlike “blind assertions of good faith” which Clontech held were insufficient, Solo Cup had done more to rebut the presumption of “deceptive intent”:

Solo [Cup] has cited the specific advice of its counsel, along with evidence as to its true intent, to reduce costs and business disruption. Moreover, the policy Solo [Cup] adopted conforms with its stated purpose. Rather than continuing to manufacture mold cavities with the expired patent markings, Solo [Cup] took the good faith step of replacing worn out molds with unmarked molds. Solo also provided unrebutted evidence that it implemented and followed the policy.

Pequignot had also appealed the district court’s interpretation of “for every such offense” in 35 U.S.C. § 292 which was admittedly at odds with the subsequent interpretation of this phrase in Bon Tool.  But because the Federal Circuit affirmed the district ruling that Solo Cup “had no intent to deceive the public,” the “offense” issue was deemed moot.

So there you have it.  No false patent marking bounty of approximately $5.4 trillion for Pequignot.  No “pot of gold at the end of the rainbow.”  Oh well, there’s always the state lottery to fall back on.

© 2010 Eric W. Guttag
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