Western District of Virginia Court Grants Partial Summary Judgment on False Patent Marking and Consumer Law Claims

Posted on February 14, 2012 by Dabney Carr

Last week, Judge Turk in the Western District of Virginia granted a plaintiff summary judgment on several elements of his false marking claims as well as on elements of his state law claims of false advertising and consumer protection act violations but held that whether the defendant acted with the intent to deceive was an issue for the jury at trial. Sukumar v. Nautilus, Inc., Case No. 7:11CV00218, 2012 U.S. Dist. LEXIS 16506 (W.D.Va. Feb. 10, 2012) (Turk, J.) (found here).

Sukumar designed several custom exercise machines for medical rehabilitation of the elderly and planned to build the machines himself, but feared that he might violate several patents listed on similar machines sold by Nautilus. In the end, he paid Nautilus $150,000 to manufacture customized equipment and claimed that Nautilus’ patent marking prevented him from designing and building his own customized machines.

Sukumar’s case was stayed pending Congress’ consideration of the America Invents Act (AIA). After passage of the AIA, Sukumar amended his Complaint to assert competitive injury and to add state law false advertising and consumer protection act claims.

Sukumar moved for partial summary judgment on its false patent marking claim and on its claims of violations of California’s false advertising law and Washington’s consumer protection act. Judge Turk denied summary judgment on any claim, but, interestingly, entered summary judgment on individual elements of each of the claims. 

False Marking

  • Nautilus admitted it had mismarked all the machines, and Judge Turk found that it was patently obvious that none of the patents listed on any of the equipment covered the machines. Sukumar claimed that the blatant extent of mismarking combined with Nautilus’ knowledge of the mismarking established the necessary intent to deceive. 
     
  • Judge Turk held, however, that whether Nautilus “evinced a conscious desire that the public be deceived” was a genuine issue of fact for trial. 

California False Advertising Claim

  • Judge Turk granted summary judgment that Nautilus publicly disseminated untrue or misleading statements, but as with the false marking claim, refused summary judgment on whether Nautilus knew or should have known the statements were untrue.

Washington Consumer Protection Act Claim

  • Again, Judge Turk entered summary judgment that Nautilus’ false marking was misleading.  Unlike the other claims, no intent to deceive was required, but whether Nautilus’ false marking had the “capacity to deceive a substantial portion of the public” was a fact issue.

Judge Turk’s decision illustrates the difficulty proving intent to deceive. Even though Nautilus blatantly mismarked its products and admitted that it had falsely marked its product, Sukumar could not show any direct evidence of deceptive intent. Such evidence is rare, forcing false marking plaintiffs to prove their cases at trial through circumstantial and other indirect evidence. What is more, in most cases, defendants will, as Nautilus did, claim that its mismarking was more a case of inadvertence than intentional deceptive conduct.  Trial is set for November 5 to November 9, 2012.
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Judge Turk Breathes New Life Into False Marking Claims

Posted on January 11, 2012 by Dabney Carr

If you thought passage of the America Invents Act would end the flood of false patent marking claims, think again. In December, Judge Turk in the Western District of Virginia ruled that a false marking plaintiff could proceed under state consumer protection laws and that such claims were not preempted by the patent laws or the AIA. Sukumar v. Nautilus, Inc., Case No. 7:11CV218, 2011 U.S. Dist. LEXIS 145960 (W.D.Va. Dec. 19, 2011) found here. 

Sukumar alleged that Nautilus had falsely marked a number of products in violation of 35 U.S.C. 292. After enactment of the AIA, Sukumar amended its Complaint to allege that it had suffered a competitive injury and that Nautilus acted in bad faith. Sukumar also added state-law claims of false advertising and unfair competition under California law and unfair competition under Washington law.

Nautilus moved to dismiss the state law claims as preempted by federal patent law and the AIA. While acknowledging that “the patent grant is within the exclusive purview of federal law,” Judge Turk denied the motion holding:

  • The AIA contains no express preemption provision.
     
  • There is no field preemption of state unfair competition claims that rely on a substantial question of federal patent law, relying on Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318 (Fed. Cir. 1998), overruled on other grounds, Midwest Indus. Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1359 (Fed. Cir. 1999). 
     
  • Neither the AIA nor its legislative history reveals any evidence that Congress intended to “impose upon the traditional authority of the states to regulate areas of consumer protection.”
     
  • There was no direct conflict that made it physically impossible for Nautilus to comply with both federal and state law.
     
  • Sukumar’s state-law unfair competition claims did not create an obstacle to Congress’ intent in passing the AIA

Judge Turk’s opinion contains two important limitations on state-law unfair competition claims for false marking. 

First, citing Hunter Douglas, Judge Turk held that federal law would preempt Sukumar’s claims if Nautilus did not act in bad faith. In effect, Judge Turk added an element of bad faith to Sukumar’s claims by judicial fiat and allowed this new “unfair competition plus bad faith” claim to go forward. Second, Judge Turk left open the possibility of preemption if a plaintiff did not allege competitive injury.

Two days after his ruling, Judge Turk heard argument on Sukumar’s motion for partial summary judgment on liability on both its false marking claims under Sec. 292 and its unfair competition claims. Judge Turk took the motions under advisement and has not ruled as of today.

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Federal Circuit Affirms Solo Cup False Marking Decision

Posted on June 10, 2010 by Dabney Carr

In a widely-followed appeal of an Eastern District of Virginia case which we previously blogged about here, the Federal Circuit held today that Solo Cup did not have the "intent to deceive the public" required for false marking liability.  in Pequignot v. Solo Cup Co., No. 2009-1547 (Fed. Cir. June 10, 2010) (found here). The decision affirmed Judge Brinkema's ruling granting summary judgment in favor of Solo Cup, Pequignot v. Solo Cup Co., 646 F.Supp. 2d 790 (E.D. Va. 2009). Under the Federal Circuit’s decision, even if a patentee knowingly marks a product with an expired patent, it can avoid liability by showing by a preponderance of the evidence that it did not intend to deceive the public.

In short, Solo Cup marked certain plastic cold drink lids by stamping the lids with two patent numbers during the production process. After one of the patents expired, Solo sought advice of counsel about whether it needed to replace all of its stamping molds to remove the patent number. Based on the advice it received and the cost of replacing all of its molds, Solo developed a policy to wait to remove the expired patents when it replaced the molds. Solo’s outside counsel also advised Solo to include on its packaging the phrase “the product may be covered by one or more U.S. or foreign pending or issued patents. For details contact www.solocup.com.” Based on that advice, Solo placed the “may be covered” language on its packaging, even though it knew that some of the packaging was not patented.

Judge Brinkema granted summary judgment to Solo, finding that Solo had no intent to deceive the public. Solo’s knowledge of the falsity of the patent marking, she held, raised a rebuttable presumption of intent to deceive. Solo successfully rebutted that presumption, however, based on its good faith reliance on advice of counsel and its desire to reduce costs and avoid business disruption. Judge Brinkema likewise found that Solo had rebutted the presumption with respect to the “may be covered” language based on the advice of counsel and for logistical and financial reasons.

The Federal Circuit affirmed the finding of lack of intent to deceive.

  • Agreeing with Judge Brinkema, the court held that under Clontech Labs., Inc. v. Invitrogen, 406 F.3d 1347 (Fed. Cir. 2005) the combination of a false statement and knowledge that the statement was false created a rebuttable presumption of intent to deceive, not irrebuttable proof of such intent.
  • Solo’s burden of proof was to show by a preponderance of the evidence that it did not have the requisite intent to deceive.
  • Where the false markings at issue are expired patents that had previously covered the marked products, the presumption is weaker.
  • 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 presumption.

Solo’s unrebutted evidence that it relied on the advice of counsel, its evidence that its true intent was to reduce costs and business disruption and its good faith step of implementing and following a policy to remove the patent numbers when molds were replaced were sufficient to rebut the presumption of deceptive intent.

As to the “may be covered” language, the Court held that “it is highly questionable” whether such a statement could be made for the purpose of deceiving the public. Regardless, the court affirmed Judge Brinkema’s decision that Solo’s evidence successfully rebutted the presumption.

The Federal Circuit did not agree with Solo on everything, however. It rejected Solo’s claim that the statute did not apply where products were previously covered by a patent. It also refused to reach Judge Brinkema’s alternative holding that even if Solo had an intent to deceive, it could have committed no more than three “offenses” within the meaning of the statute.

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