Product Patent Markings And Patent Trolls by fgz79053


									Product Patent Markings
      And Patent Trolls

       AASA Marketing Executives Council and
             MEMA Brand Protection Council
                                   July 2010
     Product Patent Markings and Patent Trolls
                  By Sarah L. Bruno and Anthony V. Lupo of Arent Fox LLC

The U.S. Patent Act dates back to 1790. It was enacted in the first session of Congress and the
first patent was issued that same year. Since 1790, there have been many updates and changes in
the U.S. Patent Act. Recently, two significant court cases have cited Section 292 of the Act,
which pertains to false marking with the intent to deceive, and both of these cases highlight the
need for all manufacturers to develop a patent protocol.

The first patent case specifically deals with intentional false marking of a product that did not
meet patent claims, while the second case involves product markings where a patent has
expired. These cases have given rise to concern over patent “trolls” which, under section 292 of
the U.S. Patent Act allows any person to obtain damages with the award evenly split with the
federal government. Manufacturers and patent owners suddenly are concerned that an
unintentional patent error potentially could cost their companies huge sums of money.

Weeding Through the Rulings on False Marking

Recently there has been a lot of buzz about false marking in the patent business. This is due to
the case “Forest Group v. Bon Tool.” The Federal Circuit, on appeal from the U.S. District Court
for the Southern District of Texas, proved that the courts are willing to penalize companies –
quite stiffly – if they mark their products with a false or deceptive patent reference1.

This case created a wave of panic through all manufacturers. An unintentional error, such as
continuing to mark products with an expired patent, could cost companies millions, if not
billions or trillions, of dollars.

Forest Group v. Bon Tool: Patent Mistakes May be Costly

Bon Tool sued Forest Group claiming the company falsely marked its stilts with a patent that no
longer covered the products in order to intentionally deceive the public. Bon Tool cited Section
292 of the Patent Act, which maintains that it is “false marking” to mark as patented an
unpatented article if done with the intent to deceive the public. The Court found that Forest
Group committed false marking for its latest production run because it clearly knew the
commercial product did not meet the patent claims.

The case became notable on appeal as the Federal Circuit held that a $500 maximum penalty
attaches to each individual product that is falsely marked, even if the product is
unintentionally marked with an expired patent. The ruling supplanted the former “per
occurrence” standard – which maintained that the mismarking of multiple articles or an entire
product line as a single statutory violation – with a “per article” standard. While the Federal
Circuit clarified that this $500 penalty is a ceiling and the actual per-product penalty could be as
low as a fraction of a penny, it still intended to create some motivation for false marking
plaintiffs to bring such cases.

    590 F.3d 1295 (Fed. Cir. 2009)

             Product Patent Markings and Patent Trolls
The decision was met with instant reaction throughout the patent world. While it certainly
seems to deter counterfeiters and patent infringers, it also potentially penalizes those companies
that have products unintentionally marked with patents that may have expired.

In this regard, the primary concern was that patent “trolls” – competing manufacturers, for
example – would begin to file suits against patent holders in an effort to profit off of their
competitors’ mistakes. The concern was justified: since the case was decided, more than 250
false marking cases have been filed. Most of these cases have been based on the marking of
products with expired patent numbers.

Pequignot v. Solo Cup Co.: Narrowing the Scope

In June, the Federal Circuit limited the potential reach of the claims under Section 292, which
may serve to deter future suits. In the case “Pequignot versus Solo Cup Co.,” the Court held that
while Section 292 applies to products marked with expired patents, the presumption of intent to
deceive the public is weaker in such cases than in cases involving defendants that used patent
markings on products that actually never were protected by patents2.

The court explained that advice of counsel and commercial reasons for continued marking past a
patent’s expiration date may be considered in assessing whether the defendant had an “intent to
deceive” the public. The court also held that there was no intent to deceive the public when the
patentee included language on packaging stating that the product “may be covered” by patents.

The case was brought by Matthew Pequignot, a patent attorney, in 2007. Pequignot filed a qui
tam suit against Solo Cup, a maker of plastic cup lids, for marking its lids with expired patents. A
qui tam action under Section 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 more than 20 billion articles, Pequignot sought
a damage total exceeding $10 trillion.

In 2009, the U.S. District Court for the Eastern District of Virginia granted Solo Cup summary
judgment3. The Federal Circuit affirmed, holding that, while a product embodying an expired
patent is indeed an “unpatented article” under Section 292(a), a plaintiff must demonstrate that
the defendant intended to deceive the public in order to succeed under Section 292.

In its decision, the Federal Circuit noted that Solo Cup’s actions did not demonstrate intent to
deceive. Evidence of this was that Solo Cup had marked the products with the expired patents
because it was attempting to avoid the cost and disruption of making new molds when each
patent expired and its actions were based upon its counsel’s advice. In addition, Solo Cup
provided evidence that it replaced its molds with new ones that did not include the expired
patent numbers as the older molds wore out.

Solo Cup also established that later – and again based on attorney advice – it had added the
following language to its packaging: “This product may be covered by one or more U.S. or
foreign pending or issued patents. For details, contact” Solo Cup included
this language on all packaging, regardless of whether the products were actually covered by

    No. 2009-1547 (June 10, 2010)
    Pequignot v. Solo Cup Co., 646 F.Supp. 2d 790 (E.D. Va. 2009)

             Product Patent Markings and Patent Trolls
This case is notable because, while it declined to carve out expired patents from the reach of
Section 292, it did serve to limit the scope of the “Forest Group v. Bon Tool” holding. This may
give patent holders some refuge in the event they unintentionally mark a product with patent
information from an expired patent. Further, it seemed notable that Solo Cup acted in reliance
on its counsel’s advice that it was not required to immediately make the change.

Develop a Patent Protocol

AASA member companies which are patent holders should still take steps to ensure that they are
protected from the patent “trolls” that have begun to file actions since the Forest Group holding.
By developing a protocol for monitoring and managing its patent portfolio, a company could
save millions of dollars.

While the protocol should be tailored to meet the needs of each manufacturer, it should function
under the key personnel at an organization. This is not a task to entrust to temporary or short
term employees. In addition, the protocol should contain one or all of the following components:

      Identify one person in the company to be responsible for keeping a list of all patented
       articles and the dates that the patents expire. On an annual basis, this same person
       should go through the list to ensure that all articles are still covered by current patents.
       When a patent expires, the person should be responsible for putting the appropriate
       persons on notice to ensure steps are taken to remove the patent number/reference from
       the appropriate products and molds.

      Work with patent counsel to ensure that all listed patents include at least one claim that
       under a reasonable construction covers the marked product.

      Update patent counsel as to any changes in a product’s design that may need to be
       incorporated into a patent application. Work with counsel to ensure that the redesigned
       product is protected by the patent before marking the product with a patent number.

      Prior to marking any product with a patent number, analyze final product designs with
       patent counsel to ensure the product design is covered by one or more of the claims of
       the patent.

Arent Fox is monitoring this issue and working with its clients to ensure their patents are
managed and protected in accordance with the laws.

About Arent Fox LLP
Arent Fox, AASA legal council and affiliate member, is a premier national law firm, with offices
in New York City, Washington, D.C. and Los Angeles. The firm has long had one of the top
regulatory practices in the world and has served as general counsel for AASA/MEMA for more
than 40 years.

The firm represents numerous automotive suppliers in areas including government relations,
NHTSA compliance, antitrust, intellectual property (including trademark, patent, counterfeiting
and trade secrets), litigation, bankruptcy, environmental, OSHA and transactional matters. For
more information, visit or call 202-857-6000.

          Product Patent Markings and Patent Trolls
About AASA
AASA ( exclusively serves suppliers of aftermarket
components, tools and equipment, and related products. It is a recognized industry change
agent – promoting a collaborative industry environment, providing a forum to address issues
and serving as a valued resource for members. AASA is an affiliate association of the Motor &
Equipment Manufacturers Association (MEMA). "AASA, Leadership in the Global Automotive

About AASA Marketing Executives Council
The MEC focuses on common issues facing aftermarket suppliers including supplier image,
association membership and the AAPEX show among others. For more information on the
MEC, including membership, contact Jack Cameron at 919-406-8856 or

About MEMA
MEMA represents motor vehicle parts suppliers, the nation’s largest manufacturing sector,
employing nearly 686,000 people across the country. Suppliers are also the largest
manufacturing employer in eight states. These jobs contribute to 3.29 million private sector jobs
across the country. Suppliers manufacture the parts and technology used in domestic
production of new cars and trucks produced each year, and the aftermarket products necessary
to repair and maintain more than 247 million vehicles on the road today.

MEMA supports its members through its three affiliate associations, Automotive Aftermarket
Suppliers Association (AASA), Heavy Duty Manufacturers Association (HDMA), and Original
Equipment Suppliers Association (OESA). MEMA represents more than 650 member
companies with global motor vehicle parts sales exceeding $600 billion and 65 percent of North
American automotive supplier sales. For more information on the motor vehicle parts supplier
industry, please visit

About MEMA Brand Protection Council
The MEMA Brand Protection Council (BPC) is a membership peer council of executives
responsible for brand and intellectual property rights protection within their company. The
Council focuses on best practices, solutions and information on counterfeit parts, black- and
gray-marketed products and intellectual property issues. For more information, contact Jack
Cameron, 919-406-8856 or

         Product Patent Markings and Patent Trolls

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