Pequignot v. Solo Cup Company, No. 1:2007cv00897 - Document 207 (E.D. Va. 2009)
Court Description: MEMORANDUM OPINION. Before the Court are the parties' cross-motions for summary judgment. For the reasons stated in open court, as supplemented by this Memorandum Opinion, defendant's motion has been granted, and plaintiff's motion has been denied. See Memorandum Opinion for details. Signed by District Judge Leonie M. Brinkema on 8/25/2009. (rban, )
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IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT II FOR THE AUG 2 5 2009 Alexandria Division MATTHEW A. PEQUIGNOT, CLERK, U.S. DISTRICT COURT ) ) Plaintiff, L OF VIRGINIA ALEXANDRIA, VIRGINIA ) v. ) l:07cv897 (LMB/TCB) ) SOLO CUP COMPANY, ) ) Defendant. ) MEMORANDUM OPINION Before the Court are the parties' judgment. cross-motions for summary For the reasons stated in open court, by this Memorandum Opinion, as supplemented defendant's motion has been granted, and plaintiff's motion has been denied. I. A. Background. Introduction. Plaintiff Matthew Peguignot oui tarn action under 35 U.S.C. Company plates, ("Solo"), ("Pequignot") has brought this § 292 against defendant Solo Cup a manufacturer of disposable cups, and utensils. bowls, Section 292 prohibits false patent marking done "for the purpose of deceiving the public," and imposes a maximum fine of $500 for each "offense," half of which goes to the plaintiff and half to the United States. that Solo has 1. violated § 292 Pequignot claims in three manners: Solo has marked billions of plastic cold drink cup lids with Reissue Patent No. 28,797 (the "'797 patent"), knowing that it expired on June 8, 1988. despite 2. Solo has marked billions of plastic hot drink cups with Patent No. "Traveler" 4,589,569 for (the "'569 patent") despite knowing that it expired on October 24, 3. lids Solo has marked packages for certain cups, 2003. bowls, and utensils with the phrase "This product may be covered by one or more U.S. details, or foreign pending or issued patents. For contact www.solocup.com.rrl despite knowing that the products were not covered by any pending or issued patents. Solo concedes these facts as alleged, but contends that it is not liable under § 292 because it did not act "for the purpose of deceiving the public." Both parties have moved for summary judgment on two issues: (1) deceive, and (2) whether Solo acted with intent to what constitutes an "offense" for the purpose of assessing the statutory fine.2 xThis opinion will use the term "'may be covered' language" to refer to this phrase. 2The Court previously denied two motions to dismiss by Solo. First, claim, in denying a motion to dismiss for failure to state a the Court ruled that knowingly marking a product that is not protected by a current or pending patent with an expired patent number, or with the "may be covered" language, is a false marking and can violate § 292 if intent to deceive is proven. Peouianot v. Solo Cup Co.. 540 F. Supp. 2d 649 (E.D. Va. 2008) ("Pecruianot I"). Next, in denying a motion to dismiss for lack of subject matter jurisdiction, the Court held that despite not alleging any injury to himself, Pequignot has standing to pursue this suit on the United States' behalf as a oui tarn relator, and allowing him to sue does not violate the Take Care Clause of the Constitution. Peouicmot v. Solo Cup Co., No. l:08cv897, 2009 WL 874488, II") . 91 U.S.P.Q. 2d 1493 (E.D. -2- Va. Mar. 27, 2009) ("Peguignot B. Drink Cup Patents. The cup lids at issue in the '797 and X569 patents produced by thermoforming stamping machines. "mold base" that cavity contains contains contains between 16 and 128 three parts, one of which, the patent engravings. Each machine has a "mold cavities." the Every time are A "inner ring," the machine cycles - generally every four to six seconds - each mold cavity produces a lid. The cavities can last 15 to 20 years, 1. The The '797 Patent. '797 patent, drink cups, and sometimes longer. which applies issued on May 4, 197 6. to certain lids for cold Shortly afterwards, Solo added the patent number to the inner rings of the mold cavities that produce these items. The patent expired on June 8, that Solo was aware of time, Steven Smith, At that who had been hired in April 2000 as Solo's on some of Solo's lids. noticed the *797 patent number Solo lacked in-house patent counsel; Smith contacted Robert Diehl, Wallenstein & Wagner, counsel, There is no evidence the expiration until June 2000.3 Director of Product Development, accordingly, 1988. an associate with Solo's outside intellectual property who informed him that the number reflected an expired 3Pequignot acknowledges that claims under § 292 are subject to a five-year statute of limitations, Arcadia Mach. & Tool inc. v. Sturm, Ruaer & Co.. 786 F.2d 1124, 1125 (Fed. Cir. 1986), and that he cannot sue based on any markings that occurred before September 5, 2002. -3- patent. A month later, Solo should use lids. Diehl responded that take there was the patent has to mark new cavities', just did." but Diehl answered, the old number off. research to see if long as Smith asked, are we wrong in doing so? "When a patent expires you don't have However, I'm going to do a little My gut feel [sic] Diehl e-mailed Smith the next day, liability for the offender. or However, lintent to deceive the public' the number, if possible. that the like. for telling him, "The create it appears liability hinges Best case scenario is to If not, further any unintentional it is important that falsity in product literature If you want to discuss, These e-mails the is I'll have a more definitive answer false marking of a product with a patent number does Solo not think we the patent claims would have covered the product, you soon." remove I *'No need the situation is different when adding an there isn't a problem. on for the "[n]o need to mark the new expired." already expired number to a product. as asking him whether the number if it built new mold cavities cavities because to Smith e-mailed Diehl, please give me a call." in 2000 are the only documentary evidence of legal advice Solo received on marking products with expired patent numbers. Linda Kuczma, Solo, However, according to testimony by Smith and a Wallenstein & Wagner partner who also advised Solo had regular meetings and phone calls with Wallenstein & Wagner attorneys regarding intellectual property, -4- and discussed the expired patent issue further orally. Kuczma, 2000, shortly after Solo, According to Smith and the exchange between Smith and Diehl based on Wallenstein & Wagner's advice, in developed a policy under which it would not immediately replace the mold cavities containing the X797 patent. Rather, under the policy, when cavities needed to be replaced due to wear or damage, the new cavities would not include the expired patent marking. Because the cavities can last many years, cavities Solo continues to use today that imprint the expired patent numbers.4 According to deposition testimony, in two primary factors. was permissible under § First, 292. this policy was grounded Solo's attorneys believed that it Second, it was commercially difficult and costly to replace all of the cavities at once. Solo estimates that it would have cost over $500,000 to replace all of the inner rings - the parts containing the patent engravings and $1.5 million to replace the cavities in their entirety.5 According to Solo, these figures represent only the costs of the replacement parts and not the potential costs of 4The parties dispute whether or not the majority of the cavities presently in use contain the expired engravings. asserts that most of the molds no longer have the markings, Solo but Pequignot cites a chart indicating that 1,094 out of the 1,642 cavities currently in use still have expired patent numbers. This dispute is not one of a material fact that would preclude summary judgment. 5These estimates are based on the number of cavities containing the expired patent numbers and deposition testimony concerning the cost of each replacement cavity. -5- labor, production downtime, and other factors. Solo admits that it never conducted a formal cost analysis before developing its policy. Rather, replacement of the attorneys § 292 as deceive over indicated to attorneys Solo took reasonable steps to replace time and did not otherwise manifest and the an intent to the public. deposition testimony of also contains Solo's policy is detailed in the Smith, including: dated April 2001, an e-mail 30, Rajenda Chauhan, cavities; (1) 2003 a drawing of one of that from Smith to a '797 lids, (2) tooling employee, the "RE tooling employees, Patent" Chauhan and Smith instructed them that new cavities could not contain the expired numbers;6 cavities were ordered or made with the (5) the number would not be engraved on any new testimony by two Matthew Banach, The record the policy's asking him to confirm that '797 patent) (3) and Kuczma. with the patent number scratched out; dated June 24, the Diehl, considerable evidence of implementation, 2000; that a wholesale concluded that such steps were not necessary under The development of (i.e., its the cavities would be costly and burdensome, long as cavities Solo (4) testimony that no new '797 patent since June undisputed evidence that many of Solo's current mold 6Chauhan testified specifically that Smith gave him these instructions shortly after Smith joined the company in 2000, Chauhan Dep. account that 34:8-9, corroborating Smith and the attorneys' the policy was developed at that time. -6- cavities do not contain Douglas Eveleigh, the patent numbers; Solo's chief IP counsel (6) testimony by since 2006, that he reviewed the policy shortly after he was hired and found it permissible; and (7) Banach confirming conserve the policy and stating The '569 '569 patent, which covers was issued on May 20, 2003. the '797 patent, Like produced the lids the expired markings covered by the 1986 it was that its purpose was "to Solo was the cavities the 2003, that it did for it was ordering. advice consistent with this '569 patent's track all accordingly. On January Solo would not be the new set of Traveler lid Kuczma testified that she gave Solo e-mail. expiration, instructing Solo employees lids impending expiration of Smith e-mailed Kuczma to confirm that '569 patent number to that issued. Because Smith had begun to aware of for hot and expired on October 24, lids 28, adding the lids adopted the same policy for '569 patent and took certain steps valid, from Eveleigh to "Traveler" added to Solo on the Traveler '797 patent. Solo's patents, Solo's the the that shortly after the patent The evidence indicates cavities e-mail Patent. drink cups, of 2006 costs." 2. The an October 26, On March 9, Smith sent 2004, soon after another e-mail, that because the patent was no longer "reference to it should be removed during any outer ring retooling," and product drawings for all Traveler lids -7- should be updated to remove any references further stated that at once," but wore out. that the to the patent. "tooling does instead, not need cavities would be The evidence also includes The e-mail to be changed all replaced when a cover sheet documenting the agenda of an IP committee meeting on November 29, agenda included an item called "Lid markings patents," they 2004. in view of and the sheet included a handwritten note, The expired "remove when re-tool," which Kuczma testified she wrote to reflect Solo's policy, consistent with her advice. testimony, '569 Solo did not order or make any new cavities with the engraving after C. The According to undisputed Conditional the patent expired. "May be Covered" Language. "may be covered" language originated in 2004. Kuczma testified that she drafted the language and that it was added to Solo's packaging at her advice and the advice of other Wallenstein & Wagner attorneys, who were concerned that Solo was not giving notice to potential infringers pursuant to 35 U.S.C. 287.7 2004 An e-mail from Smith to Solo.employees on September 14, confirms that the language was developed and added at this time. Kuczma testified that she recommended that Solo place this 7Under 35 U.S.C. as such, § 287, if a patented product is not marked the patentee may not recover damages for any infringement unless it can prove that the infringer had notice that the product was patented. Damages are only recoverable for infringement occurring after the notice. -8- § language on all of numerous products its packaging, including packaging for that were not protected by any current patents or pending patent applications, because Solo had a constantly changing patent portfolio and it was economically impractical to mark individual packages or items with individual patent numbers.8 She further testified that because of the language's conditional nature, she believed that it was not a false marking, even if placed on unpatented products. this action, During the pendency of Solo removed the language because it found that it was reaping no benefits and it did not want to subject itself to further lawsuits. Solo had a procedure for handling inquiries regarding patents through its website, www.solocup.com. were initially routed to Smith, one made any inquiries this to Eveleigh. No regarding whether any of Solo's products were covered by patents until of and after 2006, Any such inquiries Pequignot did so during the course litigation.9 8Kuczma testified that B[i]n the course of [the attorneys'] discussions with Solo, it became apparent that the same packaging was used for all sorts of products, some of which were patented and some of which were not patented. So, it was a nightmare and economically not feasible because they had the same cartons, the same packaging for various products. So, that's why we attempted or that's why we put together the language that we did." Kuczma Dep. 163:1-9. 9Pequignot did not use Solo's website to make the inquiry, but instead called Solo's toll-free telephone number. After indicating the nature of his inquiry, he was told by a customer service representative that he was being transferred. He then -9- II. Summary judgment Standard of Review. is pleadings and evidence, appropriate when, there is no genuine fact and the moving party is entitled to a of 56(c); law. See Fed. U.S. 317, most favorable to Co. v. 322-23 R. Civ. (1986). P. on the basis of issue of material judgment as Celotex Corp. v. a matter Catrett. Evidence must be viewed in the the nonmoving party. Zenith Radio Corp.. 475 U.S. Matsushita Elec. 574, the 587 (1986). 477 light Indus. The party opposing summary judgment may not rely on mere allegations or denials in its pleadings. nonmoving party must, depositions, "by Fed. [its] R. Civ. P. 56(e). own affidavits, answers to interrogatories, Rather, the or by the and admissions on file, designate specific facts showing that there is a genuine issue for trial." colorable" Celotex. 477 U.S. at 324. or "not significantly probative" overcome a summary judgment motion. Inc.. 477 U.S. 242, 249-50 is "merely insufficient to Anderson v. Liberty Lobby, (1986). III. A. Evidence that is Discussion. Intent to Deceive. 1. The Clontech Standard. Whether Solo violated § 292 depends on whether it acted "for the purpose of deceiving the public." The key legal authority hung up, without mentioning his name, before he could be transferred. Pequignot Dep. 287:16-289:11. -10- for evaluating intent to deceive under § 292 Federal Circuit in Clontech Laboratories, Corn., 406 F.3d 1347 (Fed. Cir. 2005), is set out by the Inc. v. Invitrocren where the court stated: Intent to deceive is a state of mind arising when a party acts with sufficient knowledge that what it is saying is not so and consequently that the recipient of its saying will be misled into thinking that the statement is true. Seven Cases v. United States. 239 U.S. 510, 517-18, 36 S.Ct. 190, 60 L.Ed. 411 (1916). Intent to deceive, while subjective in nature, is established in law by objective criteria. Id. Thus, "objective standards" control and "the fact of misrepresentation coupled with proof that the party making it had knowledge of its falsity is enough to warrant drawing the inference that there was a fraudulent intent". See Norton v. Curtiss. 57 C.C.P.A. 1384, 433 F.2d 779, 795-96 (1970). Thus, under such circumstances, the mere assertion by a party that it did not intend to deceive will not suffice to escape statutory liability. Such an assertion, standing alone, is worthless as proof of no intent to deceive where there is knowledge of falsehood. But in order to establish knowledge of falsity the plaintiff must show by a preponderance of the evidence that the party accused of false marking did not have a reasonable belief articles patent). no properly 406 F.3d at *the standard is preponderance of the whether defendant was it that covered the by a [plaintiff] further articulated proved by a [defendant] it, it did not have an in marking its products," n[t]he question of whether conduct before faith," The court the evidence that statutory deception is facts (i.e., statute ensues. 1352-53. honest good faith belief and that marked Absent such proof of lack of reasonable belief, liability under Clontech. that were a question of ruled that, liable because, did not provide fact," on one of rises id. its at id. to at the level 1353. products, n[b]eyond blind assertions "evidence -11- that 1355, of On the the of good it had an objective good faith belief that its . . products [were] patented." Id. at 1357. Pequignot argues that Clontech equates with intent to deceive, patented, patent, knowledge of falsity and that when a party marks a product as knowing that it is not protected by a valid, unexpired the party necessarily acts with intent to deceive. Pequignot asserts Thus, that Solo acted with intent to deceive because it admits that it marked billions of products as patented, knowing that they were not covered by valid, Pequignot's unexpired patents. reading of Clontech is unpersuasive. than announcing a definition of intent to deceive, creates a standard of proof. false marking, "warrant[s] Specifically, Rather Clontech the court held that a combined with knowledge of the falsity, drawing the inference that there was a fraudulent intent," and that this inference cannot be rebutted by "the mere assertion by a party that it did not intend to deceive." Id. 1352 the (emphasis added). Contrary to Pequignot's position, at Federal Circuit did not hold that this inference is irrebuttable. Indeed, Pequignot's interpretation would eliminate any distinction between intent to deceive, knowledge of falsity, which § 292 requires, and a different state of mind.10 "Section 292 specifically imposes a fine only when the defendant "marks upon ... 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." If Pequignot's proposed standard were correct, the phrase "for the -12- Moreover, to hold, as Pequignot suggests, knowingly made false patent markings offering evidence that it did not inconsistent with the high bar intent. See Brose v. Sears, (5th Cir. 1972) show that the defendant No. CV-00-2430-VEH, 2006), Section 292 R.J. 2008) "[t]he that is 2006 WL for proving deceptive 455 4448613, 482 at *24 F.3d 1347 Ala. (Fed. Tobacco Co.. 537 cf. Central P.C.. Jan. Cir. 13, 2007) Star Scientific, F.3d 1357, 1366 [of deceptive intent] based on sufficient evidence and be reasonable but the burden to Solutions. (N.D. 768 threshold for establishing a successful ("[T]he inference evidence, F.2d 763, to deceive); Advanced Cardiac claim is extremely high"); Reynolds set the plaintiff bears aff'd in relevant part, (noting that v. v. that intend to deceive would be acted with intent Admixture Pharmacy Servs. a party is precluded from even Roebuck & Co., (holding that that it must also be the single most (Fed. must not Inc. Cir. only be in light of that reasonable inference able to be drawn from the evidence[.]").u Accordingly, the Court holds marking made with knowledge of that under Clontech. falsity creates a false a rebuttable purpose of deceiving the public" would instead read "with knowledge that the same is unpatented," or some other similar phrase. "Star Scientific involved allegations of inequitable conduct, in which intent to deceive must be proved by clear and convincing evidence, a heightened standard of proof. Nonetheless, this pronouncement on intent to deceive, although distinguishable, is informative. -13- presumption of intent to deceive. defendant must present more party." To rebut evidence than a Whether evidence suffices to rebut "turns on a fact-specific examination of conduct." Peouicmot 2. I. The Expired 540 F. Supp. '797 and '797 and "mere assertion by a the presumption 654.u Patents. Under a proper reading of Clontech. been granted to Solo on the summary judgment has '569 patents for cup lids because the evidence in the record successfully rebuts inference that Solo acted with intent i. the the defendant's 2d at *569 this presumption, the to deceive. Clontech as Applied to Marking Products with Expired Patent Numbers. Unlike in Clontech. the false markings of the patents involve expired patents, covered the products at all. '797 and '569 rather than patents that never No court has addressed how the Clontech standard applies to allegations involving only expired hold, "Contrary to Pequignot's assertions, this Court did not in the following statement from Pecruicmot I. equates knowledge of falsity with intent that Clontech to deceive: Whether marking with a conditional statement constitutes a culpable false marking depends on whether Pequignot can demonstrate by a preponderance of the evidence that Solo intended to deceive the public- i.e.. that Solo "did not have a reasonable belief that the articles were . . . covered by a patent" or a pending patent application. Pecruicmot I. 540 F. Supp. 2d at 655-56 (quoting Clontech. 406 F.3d at 1353). This discussion of Clontech was dicta, as it was not relevant to the only issues raised in the motion to dismiss in Pecruionot I namely, whether marking products with expired patents or conditional language can constitute -14- false marking. patents. As such, the question of what suffices to prove intent to deceive under such circumstances is one of first impression.13 The Court finds that when, as here, the false markings at issue are expired patents that had previously covered the marked products, weaker, the Clontech presumption of intent to deceive is because the possibility of actual deceit, benefit to the false marker, are diminished. marked with an expired patent number, as well as the When a product is any person with basic knowledge of the patent system can look up the patent and determine its expiration date, deceived. Moreover, reducing the potential for being in the case of design patents like Solo's, marking an article with an expired patent can work to the marker's detriment, because public patent documents reveal all of the previously patented design features public domain, thus creating a road map for anyone wishing to legally copy the product. Conversely, that are now in the See Smith Dep. 406:15-407:8. if a product is marked with an unexpired patent that does not cover it at all, advantage to the marker, the prospects for deceit, are higher because it is and potential far more difficult for competitors and the public to determine whether the 13In a distinguishable fact pattern, intent to deceive was found where a defendant marked products with both expired patent numbers and numbers of patents that did not cover the products at all, and conceded that he made these markings to "differentiate [his] product from potential copiers." v. Pro Patch Svs.. Inc.. 434 F. Supp. 2006) . -15- See DP Wagner Mfcr. 2d 445, 457 (S.D. Inc. Tex. marking is false, particularly if the patent is complex.14 although some presumption of deceptive product intent exists when a is knowingly marked with an expired patent, presumption is weaker than when a product Thus, that is marked with an unexpired patent that does not cover the product.15 ii. Whether Solo Acted With an Intent to Deceive. Because Solo admits expired patents, applies. that However, this presumption is definitively rebutted by for the purpose of deceiving the but in good faith reliance on the advice of counsel and out of a desire to reduce costs and business A party's good faith belief whether it acted with intent at 1355 is relevant to deceive. disruption. to determining See Clontech. 406 F.3d (holding that a plaintiff must show that a defendant 14It is noteworthy that in Clontech, were lids with a weakened presumption of intent to deceive evidence that Solo acted not public, it knowingly marked its "did the patents at issue for sophisticated molecular biology products. 15Solo made similar arguments in its Motion to Dismiss for Failure to State a Claim, asserting that marking a product with an expired patent could not be a false marking, in part because of the smaller possibility of deceit and minimal benefit to the marker. The Court disagreed. Pecruicmot I. 540 F. Supp. 2d at 654. That holding remains unchanged; if a party falsely marks an article with an expired patent with actual intent to deceive, § 292 is violated. However, at the summary judgment stage, where Solo's liability turns on whether it intended to deceive, the absence of any reason to deceive strongly suggests that no such intent existed. See Matsushita. 475 U.S. at 596-97 (holding that the "absence of any plausible motive to engage in the conduct charged" was "highly relevant" to determining whether summary judgment should have been granted in a civil conspiracy case). -16- not have an honest good faith belief in marking its products"). In addition, good faith reliance on the advice of counsel can be a defense to allegations of intent to deceive. & Tool v. Sturm, 5181, at *2 (Fed. Cir. (CD. Ruaer & Co, Cal. Inc.. June 25, No. 1985), See Arcadia Mach. CV84-5197MRP, 1985 WL aff'd. 2d 1124 786 F. 1986) ,16 Solo has provided considerable "actual evidence" far more than "mere assertions" showing that it did not intend to deceive the public. by Diehl, Kuczma, It has provided unrebutted, and Smith that Solo, sworn testimony pursuant to counsel's advice and due to concern over the costs and disruption from replacing all of the mold cavities at once, formulated a policy under which cavities with expired numbers would be replaced as they wore out or were damaged. It has provided additional unrebutted evidence that this policy was implemented and followed, including the sworn testimony of Banach and Chauhan, numerous e-mails and updated tool drawings, and testimony by Eveleigh that he reviewed and re-approved the policy after being hired as Solo's IP counsel in 2006. The undisputed evidence also shows that Solo was genuinely "Although Clontech and Arcadia are distinguishable in that in those cases, the defendants' "good faith belief" and "advice of counsel" concerned whether their patents actually covered the articles in question, whereas Solo admits to knowing that its products were not covered by the patents at issue, the Court finds that the advice Solo received from its counsel is nonetheless relevant to whether it intended to deceive. -17- concerned about the law. It was following the advice of counsel and adhering to Smith, Solo's Director of Product Development, who originally raised the marking issue to Diehl in 2000. Smith who followed up with Diehl a month later. It was who, after being informed by Diehl mark the new cavities," doing so." personnel that there was Smith "[n]o need to asked Diehl whether Solo was "wrong in It was Smith who repeatedly contacted Solo's to confirm that they were updating the drawings ordering any new cavities with expired numbers. It was tooling and not There is not a scintilla of evidence that Solo ever ignored its counsel's advice or, more importantly, manifested any actual deceptive intent. There is also no evidence that Solo had any desire to keep the expired numbers on the lids for any reason other than to avoid the costs and disruption of a wholesale replacement. deposition on this point is Kuczma's telling: Solo didn't come to me and say, you know, "We want a way to keep this number on our products." They didn't come to us and ask, "How can we maintain this on our products?" We were talking to them about this patent is going to expire [sic]. So we need to remove it from the products. How can we do that, you know, in an organized, you know a sense that made in a way that made sense in a business way and still within, of the Kuczma Dep. record shows you know, the scope law. 116:20-117:5. In sum, all of the evidence in the that Solo genuinely acted in conformity with its understanding of the law as explained to it by its Although Pequignot argues that -18- counsel. there are disputes of material fact that preclude summary judgment in Solo's of favor, the alleged disputes are either entirely speculative, immaterial all or to whether Solo acted with actual intent to deceive the public. For example, Pequignot focuses on the lack of any formal legal memoranda or records of research memorializing the advice given by Wallenstein & Wagner, exactly when the advice was Kuczma, the lack of clarity regarding given, and the fact and Eveleigh cannot remember the names researched. What is at issue, however, or witnesses' they researched nearly a decade ago. of any cases they is not the quality of Wallenstein & Wagner's advice or recordkeeping, which advice was given, that Diehl, the manner in ability to remember cases On the only relevant question whether Solo intended to deceive these issues are immaterial.17 Pequignot also points out that Solo did not do a detailed analysis of the cost of replacing all of the cavities at once. At most, this suggests that Solo's policy not to replace the cavities immediately may not have saved much money. The lack of a major economic benefit is not evidence that Solo acted with intent to deceive. The evidence Pequignot cites to show actual intent to "Moreover, given the lack of virtually any case law, before this case, addressing whether marking a product with an expired patent violated § 292, it is unsurprising that Wallenstein & Wagner did not prepare detailed memoranda. -19- deceive is threadbare. For example, discussing a different, newly-patented product, mail that "adding the word in 2006, xpatented' to any marking on the product) Eveleigh, wrote in an e- to literature (in addition is nice to have as it will give others additional notice of our patent and make them think twice about copying the product." The unremarkable fact that Solo's IP counsel was aware of the advantages of marking a new product with a valid patent is irrelevant to whether Solo had an intent to deceive when it adopted its policy regarding the lids. Similarly, that Solo's website, '797 and until recently, '596 contained images of lids showing the expired patent numbers also is not evidence of deceptive intent. mention the patents, legible, The web pages themselves did not the markings in the images were barely and the unrebutted testimony is that the lids in the images were randomly taken from Solo's inventory and not chosen because they contained the patent markings. On these facts, [Solo] there is not acted with intent Solutions, Inc.. 369 F. "a scintilla of evidence that to deceive." Supp. 2d 539, FMC Corp. 584 (E.D. v. Pa. has successfully rebutted the Clontech presumption, has offered nothing more than speculation in return. Control 2005). Solo and Pequignot Summary judgment has therefore been granted to Solo. 3. Conditional For similar reasons, "May Be Covered" Language. summary judgment has also been granted -20- to Solo on the issue of whether it intended to deceive when it marked its packages with the "may be covered" The Court has held the "may be covered" language. language, if knowingly placed on an article that is not covered by a current or pending patent, is a false marking that violates § 292 if done with intent to deceive, because it "clearly suggests that the article is protected by the patent laws," and "potential inventors and consumers cannot readily confirm whether the article is protected." effect, Peauicmot I. the conditional statement trespassing' sign." 540 F. Supp. 2d at 655. "functions as a de facto In vno Id. It is undisputed that Solo knowingly placed this language on products that were never covered by any patents or pending applications. Although this makes the question of intent to deceive a closer call than in the case of the patents, »797 and '596 Solo has successfully rebutted the Clontech presumption. The evidence, including Kuczma's testimony and Smith's e-mail of September 14, 2004, establishes that the language was added at the suggestion of Solo's outside counsel, of any Solo employee or officer, not at the initiative and that it was added so that Solo would arguably provide notice to potential infringers of Solo's actual, valid patents. There is also undisputed testimony by Kuczma and Smith that the decision to place the language on all of Solo's packaging, rather than only on packaging of -21- products known to be covered by valid patents applications, was made because the alternative was from a logistical and financial perspective. undisputed that Solo had procedures lines to handle any inquiries, Pequignot, 292. is also and that no one, other Moreover, than before no court had expressly ruled that conditional language such as § It too difficult on its website and phone ever made any such inquiries. Peguignot I, or patent that used here In short, there is no constituted a false marking under evidence to support counsel's advice about this following that advice, was unreasonable or intended to deceive the public in any way. sort of Accordingly, packages with the conditional not act with intent B. the Court has granted summary judgment there is no need to address § 292. parties have moved for a determination of incentives this for crui the tarn actions such as to However, issue. this one, Solo on the meaning of issue could significantly effect addressed the damages Solo's it did "offense." in the damages provision of decision about language, to deceive the public. the intent question, "offense" and Solo's when Solo marked its "may be covered" Damages and the meaning of Because language, the view that the Because a the the Court has issue and has granted summary judgment in favor. The false marking statute states, -22- in relevant part, "Whoever marks upon . . . any unpatented article, the word 'patent' or any word or number importing that the same is patented for the purpose of deceiving the public . . than $500 for every such offense." added). Pequignot argues . [s]hall be fined not more 35 U.S.C. § 292(a) that each falsely marked article constitutes an "offense," and therefore that Solo, have acted with intent to deceive, offenses. Solo, {emphasis conversely, if found to committed billions of argues that an "offense" is only committed when a party makes a distinct decision to falsely mark, and therefore that it committed at most three offenses - two when it decided not to immediately stop marking the cold drink and Traveler lids once their patents expired, to add the "may be covered" and one when it decided language to its packaging. The Court adopts Solo's position, which is supported by the vast majority of case law addressing damages under § 292. seminal case on the subject, the First Circuit, In the interpreting an earlier but similar version of the false marking statute, held: [A] plaintiff, in order to recover more than a single penalty, must go further than to prove the marking of a number of unpatented articles. The proof must be sufficiently specific as to time and circumstances to show a number of distinct offenses, and to negative the possibility that the marking of the different articles was in the course of a single and continuous act. London v. 1910). Everett H. Dunbar Corp.. In reaching this 179 F. conclusion, the statute and its penal nature, 506, 508 (1st Cir. the court cited the text of noting that "the statute must -23- be read as making the fraudulent purpose or intent public as concerns the gravamen of the offense." stating: the result may follow that the for imposing the penalty, false marking of small in great quantities will result an enormous sum of penalties, ... entirely out of proportion to the articles Congress that penalties should accumulate as followed London. 18See A.G. C07-5158RBL, the It can hardly have been the intent of or stamping machine might operate." the courts or cheap in the accumulation of value of Nearly all in "if we construe the statute to make each distinct article the unit press It also voiced that an alternative interpretation could result disproportionate penalties, articles Id. to deceive the fast as a printing Id. that have addressed this issue have either explicitly or implicitly.18 Conversely, Design & Assocs. v. Trainman Lantern Co.. 2009 WL 168544, at * 3 (W.D. Wash. Jan. 23, No. 2009) (finding that a defendant that falsely marked 15,000 lanterns over three years committed only "a single continuous offense"); Forest Group, Inc. v. Bon Tool Co., No. H-05-4127, 2008 WL 2962206, at *5-6 (S.D. Tex. July 29, 2008) (finding only one false marking offense when the defendant "made only one separate, distinct decision to mark its stilts after it knew the stilts did not meet all the claims of [the patent at issue]"); Bibow v. Am. Saw & Mfa. Co.. 490 F. Supp. 2d 128, 129 n. 1 (D. Mass. 2007) (opining that "[i]t is doubtful that the statute ever intended to create such a lucrative game of xgotcha!'" by imposing a fine for each time a press release was "seen in some medium"); Undersea Breathing Svs., Inc. v. Nitrox Techs., Inc.. 985 F. Supp. 752, 781 (N.D. 111. 1997) (fining the defendant $500 for a single decision to mark flyers); Sadler-Cisar Inc. v. Comm. Sales Network, 786 F. defendant was Supp. 1287, 1296 (N.D. Ohio 1991) (holding that a liable for only one offense when falsely marking a device because "continuous markings over a given time constitute a single offense"); Joy Mfg. Co. v. CGM Valve & Gauge Co.. 730 F. Supp. 1387, 1399 (S.D. Tex. 1989) -24- (finding only one false marking Pequignot has cited only one case after 1885 in which a court without citing any authority or engaging in any legal analysis imposed a fine for each falsely marked item. Prods.. Nov. 29, 1996) Inc. v. 1995) Birdsona. No. (unpublished), See Enforcer 1-93-CV-1701-CC, aff'd, at 20-21 98 F.3d 1359 (Fed. (N.D. Ga. Cir. (fining defendants $50 for each flea trap product or product packaging falsely marked). authority to the contrary, In light of the consistent Enforcer Products is not persuasive.19 While conceding that London does not support his position, Pequignot makes a number of arguments in favor of his preferred construction. None, however, provide sufficient grounds for deviating from the well-settled London line of cases. First, Pequignot maintains that the word "offense" refers to the term "unpatented article," arguing that the use of the word "such" before "offense," the singular "article" "articles," and the modifiers instead of "any" and "every" suggest that each and every false marking of an "unpatented article" "offense." However, is its own the statute also expressly differentiates offense when the defendant marked an advertising brochure that was printed multiple times). 19One court has found a middle ground, assessing the $500 maximum statutory fine for each week during which the defendant committed false marking. See Icon Health & Fitness. Inc. v. The Nautilus Group. Inc.. No. 1:02CV109TC, 2006 WL 753002, at *7 (D. Utah Mar. 23, 2006); see also Brose. 455 F.2d at 766 n. 4 (suggesting that a court could limit the damages by assessing the fine for each day or week the marking occurred). -25- between an "article" and an "offense." Thus, the London court's interpretation that only a marking coupled with an intentionally deceptive decision constitutes an "offense" is at least as plausible as Next, the one suggested by Pequignot. Pequignot argues that London is not persuasive because it was decided under a pre-1952 version of the statute that imposed a minimum penalty of $100 per offense, current version's $500 maximum fine. Under Pequignot's argument, rather than the See London, 179 F. at 507. the concerns about disproportionate fines that motivated the London court are no longer relevant because a court can now limit the total damages by minimizing the amount of the per-offense fine, This argument, however, which the London court could not. is unpersuasive because courts after 1952 have continued to apply London and its rationale. Moreover, notwithstanding a court's discretion to reduce an award, specter of significant, the disproportionate fines would still loom large in a false marking case if Pequignot's construction were adopted. Pequignot also cites the evolution of the statute, arguing that two changes were meant to clarify that the fine should be imposed on a per-article basis: (1) an 1870 revision that changed the language from "shall be liable for such offense" -26- to "shall be liable for every such offense" (emphasis added);20 and (2) the 1952 change from a $100 minimum fine to a $500 maximum - a revision that, according to Pequignot, was intended to effectively overrule London by providing courts with discretion to fashion an appropriate per-article fine.21 nothing, other than pure speculation, However, to indicate that either of these revisions had anything to do with whether an per article or per decision.22 Moreover, opportunity since London in 1910 "article," wrong, "offense" is Congress has had ample to change the word "offense" to or to otherwise make it crystal-clear that London is but has not done so. decisions following London. London is there is correct. Against the backdrop of numerous this is persuasive evidence that See Norfolk Redev. Chesapeake & Potomac Tel. Co. of Va.. & Hous. 464 U.S. Auth. 30, 35 v. (1983) ("It is a well-established principle of statutory construction that '[t]he common law . . . ought not 20See Patent Act of 1870, ch. to be deemed repealed, 230, § 39, 16 Stat. (1870) (amending statute); Patent Act of 1842, Stat. 543, 544 (1842) (original statute). 21See Act of July 19, 814 1952, ch. 950, § 292, ch. unless 198, 263, 66 Stat. § 203 5, 5 792, (1952). "Pequignot has not cited to any legislative history regarding the 1870 revision. Regarding the 1952 amendment, the Senate report stated, in relevant part, "The minimum fine, which has been interpreted by the courts as a maximum, is replaced by a higher maximum." S. Rep. No. 82-1979 (1952), as reprinted in 1952 U.S.C.C.A.N. 2394, 2424, available at 1952 WL 3180. This legislative history reveals nothing about how courts are to construe the term "offense." -27- the language of a statute be clear and explicit for this purpose."' (quoting Fairfax's Devisee v. (7 603, Cranch) 623 Hunter's Lessee. 11 U.S. (1812))). Pequignot also attempts to bolster his position by citing cases interpreting other statutes as providing for separate violations or offenses per article or product. States v. Mirama Enters.. 387 F.3d 983, 989 See, (9th Cir. e.g.. United 2004) {finding that a manufacturer's failure to report a defect in thousands of juicers constituted thousands of violations of the Consumer Product Ass'n. 662 Safety Act); F.2d 955, 966 United States v. (3d Cir. 1981) Reader's Digest (holding that each mailing of a simulated check was a separate violation of an FTC order under the Federal Trade Commission Act). unavailing for two reasons. First, This argument is Solo has cited contrary authority that interprets other analogous statutes as imposing fines per decision, & Enarav. Co.. tarn action, 38 F. not per article. 28, at (E.D. Mo. 1889) Stephens Lith. (finding, in a oui only one offense of false copyright marking where the defendant printed 10,000 168544, 29 See Taft v. *3 copies); see also A.G. Design. 2009 WL (noting that "counterfeiting laws do not apply to every bill counterfeited; rather only to the act of illegally producing or tendering the counterfeit bills," one thousand dollar bills and that "theft of from a man's wallet would only constitute a single offense of theft"). -28- Second, the previously cited case law dealing specifically with § 292 itself is far more relevant and persuasive than case law concerning other statutes. Finally, if Pequignot's construction were adopted, § 292 would allow plaintiffs who have suffered no injury to pursue potentially lucrative recoveries against companies like Solo that have caused no actual injury to anyone. posture of this litigation, favor of Given the gui tarn public policy concerns mitigate in the construction urged by Solo. See Taft. 38 F. ("Plaintiff is not suing for the value of his services, injury to his property, at 29 or for but simply to make profit to himself out of the wrongs of others; and when a man comes in as an informer, and in that attitude alone asks to have a half million dollars put into his pocket, his labors light, the courts will never strain a point to make or his recovery easy."). For all the above-stated reasons, the Court adopts the holding in London that an "offense" under 35 U.S.C. distinct decision by a defendant to falsely mark. § 292 is a Accordingly, even if Solo were found to have acted with an intent to deceive, it would be liable for at most three offenses of false marking.23 23In his reply brief, Pequignot asks that even if the Court finds in favor of Solo on the meaning of "offense," it should nonetheless enter summary judgment in his favor that Solo has falsely marked at least 21,757,893,672 articles with expired patent numbers or the "may be covered" language. Because this argument was raised for the first time in a reply brief, and because the Court finds that the number of falsely marked articles is irrelevant, summary judgment on this point is denied. -29- IV. Conclusion. For the reasons discussed in this Memorandum Opinion, well as those stated in open court, as summary judgment has been granted to the defendant in all respects, and denied to the plaintiff in all respects. Entered this /4o Alexandria, day of August, 2009. Virginia /s/ Leonie M. Brinkema "^ United States District Judge -30-
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