Patentee wins on marking statute interpretation but evidence shortcomings kill pre-suit damages anyway

Posted on August 12, 2010 by Joshua Heslinga

In the ongoing patent battle between WiAV Solutions, LLC and a number of mobile technology companies (Motorola, Nokia, et al.), Judge Robert E. Payne has ruled in the last two days on two of defendants’ motions for summary judgment.  One opinion’s interpretation of the patent marking statute has implications beyond this suit, and that opinion also offers both positive and negative procedural lessons of which practitioners should take note.

The case is Eastern District of Virginia case no. 3:09-CV-447 (although it may also be designated as the “full employment for lawyers” case, with, by my count, 59 lawyers listed on the docket on PACER).  We have previously blogged about the dismissal of a number of WiAV’s other claims and their subsequent certification for appeal.  (That appeal can be followed on PACER as Federal Circuit case no. 2010-1266, with oral argument set for September 10.)

The ruling on marking

On June 10, Defendants moved for summary judgment of no willful infringement and of no-pre-suit damages.  The Court’s August 10 memorandum opinion granted summary judgment as to no pre-suit damages and accordingly denied the willful infringement aspect of the motion as moot.

The patent marking statute, 35 U.S.C. 287(a), “encourages” patentees and those making, selling, offering to sell, or importing a patented article to give notice of the patent by putting the patent number on the patented article.  The encouragement comes in the provision that “In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice.”

As part of its claim of infringement of U.S. Patent No. 6,539,205 (“Traffic channel quality estimation from a digital control channel”), WiAV sought pre-suit damages from July 14, 2003, through December 31, 2007.  WiAV did not seek pre-suit damages from December 31, 2007, to July 14, 2009 (when the suit was filed, thereby giving actual notice of infringement) because it was undisputed that several major companies (LG, RIM, Apple, and HTC) acquired licenses and sold unmarked articles on various dates beginning on December 31, 2007.

WiAV argued that sales by two other companies (Mindspeed and Skyworks) prior to December 31, 2007, did not trigger the statutory requirement to mark and therefore that the failure to mark did not bar pre-suit damages for the 2003-07 period.

Defendants asserted that, under the plain language of the statute, no damages can be recovered until actual notice is given, even damages that accrue before a requirement to mark is triggered.  They argued that WiAV wanted to revise the statute through construction to read that “no damages shall be recovered by the patentee in any action for infringement during the period in which there is a failure to mark, except on proof...”

The Court held that Defendants "ignore[d] the statutory context in which the provision precluding damages appears" and that "the statute gives rise to some ambiguity" on the period for which damages are precluded.  (Mem. Op. at 11.)  The parties then disagreed as to how the ambiguity should be resolved in light of the purposes of the statute.

The Federal Circuit described three purposes of the statute in Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1443 (Fed. Cir. 1998): (1) helping to avoid innocent infringement, (2) encouraging patentees to give notice to the public that the article is patented, and (3) aiding the public to identify whether an article is patented. 

In 2003, the District of Delaware ruled favorable to WiAV’s argument, holding that a patentee can recover damages for infringement during a period of time when § 287 is not triggered, even if § 287 is later triggered and the patentee fails to comply.  The Court reached that result after concluding that “it is only when the patentee is himself contributing to the problem of innocent infringement by producing unmarked product that 287(a) punishes that patentee by precluding damage recovery.”  (Mem. Op. at 12.)

The defendants argued here, however, that allowing division of damages periods as WiAV sought would render the statute ineffective at achieving its "principal purpose" of providing notice. 

The Court concluded that Defendants' interpretation "penalizes the patentee for failing to comply with a statute that the patentee was not required to comply with in the first place.  And it is simply unreasonable to read the statute in this manner."  Therefore, the Court held "that a patentee is not precluded from collecting damages for a period in which marking was not required even if the requirements of the marking statute were later triggered and the patentee failed to comply."  (Mem. Op. at 13.)

Procedure dooms WiAV's pre-suit damages anyway

WiAV’s statutory interpretation victory was short-lived, however.  The Court rejected WiAV’s attempt to shift the burden to the defendants to prove that the marking statute was applicable.  Rather, citing an 1894 Supreme Court opinion, the Court held that it was "clear that the patentee bears the burden of showing compliance with the marking statute."  (Mem. Op. at 14.)  WiAV failed to survive summary judgment because it failed to offer evidence that could lead a jury to find in its favor on that point, on which it bore the burden of proof.

WiAV relied on 30(b)(6) testimony to show that one pre-Dec. 31, 2007 company (Mindspeed) was not practicing the patent (and thus that the marking statute was not triggered).  Unfortunately for WiAV, however, the deponent contradicted that statement twice later in the deposition. 

Expert testimony was needed, said the Court, to draw any conclusion about whether pre-Dec. 31, 2007 sales practiced the patent, and WiAV failed to offer such evidence.  WiAV did offer a declaration of its expert, but the Court held that, even if allowed, that declaration was “entirely speculative and conclusory” and thus wholly failed to explain the technical details necessary to accept WiAV’s arguments that pre-Dec. 31, 2007 sales did not practice the patent.

The Court also ruled against WiAV with respect to the other company (Skyworks) that was involved prior to Dec. 31, 2007, holding that offers to sale counted as practicing the patent and also that WiAV failed to offer evidence to prove that Skyworks made no sales or offers for sale in the United States.  Again, WiAV relied on a 30(b)(6) deponent who contradicted himself twice later, and again that was insufficient because WiAV bore the burden.

The summary judgment procedural lessons are clear:  A party must understand all of the issues on which it bears the burden of proof and support those issues with evidence.  A litigant cannot count on 30(b)(6) testimony if that testimony is not clear, and experts must go beyond mere conclusions to provide grounds for a fact finder to adopt their conclusions.  Furthermore, as my colleagues have recently emphasized and as this blog regularly observes, the Eastern District’s “Rocket Docket” places special constraints on presentation of evidence, including requiring litigants to be organized from the very beginning and often greatly constraining the time available to search for and prepare to present such evidence.

Defendants skillfully navigate the Local Rules

Eastern District practitioners may have wondered if there was a misprint in the first paragraph of this blog entry, which refers to defendants’ motions for summary judgment, plural. 

Local Civil Rule 56(C) prohibits separate motions for summary judgment on separate grounds without leave of court.  As I’ve noted in a past blog entry, in conjunction with the Local Rules’ page limits on briefs, that limits what can be raised at summary judgment and is a significant part of how the Eastern District’s “Rocket Docket” avoids flurries of motions and forces litigants to move things along toward trial.

In this case, however, defendants successfully moved the Court to allow them to file three motions for summary judgment, divided by issue.  They were, no doubt, aided in that effort by the ability to argue that doing so was actually more efficient than having multiple defendants raise several issues in overlapping presentations, such that they were not seeking an increase in the number of possible motions or the number of pages overall.

This example shows that Eastern District judges will listen to reason with respect to the Local Rules, but litigants need to conceptualize how their case should be presented and must ask the Court for appropriate procedural relief where necessary.

 
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False Marking Penalties Dramatically Increased by Recent Federal Circuit Decision

Posted on January 26, 2010 by Robert Angle

 On December 30, 2009, the Federal Circuit in The Forest Group, Inc. v. Bon Tool Company, issued a unanimous decision establishing a new standard for assessing the size of the penalty in an action for false patent marking.  This is a potentially significant development in the area of false patent marking. A full discussion of Forest Group, authored by James Moore Bollinger, George B. Snyder and Laura E. Krawczyk, can be found here.

In Pequignot v. Solo Cup Co., No 1:07cv897-LMB/TCB (E.D. Va.), which we discussed in April 2009 (see link), Judge Brinkema initially denied Solo Cup’s motion to dismiss, but later granted summary judgment to Solo Cups upon finding that Solo lacked an intent to deceive the public given its reasonable reliance on advice of counsel in deciding to replace patent-marking molds with non-marking molds in a gradual fashion. See Pequignot v. Solo Cup Co., 646 F. Supp.2d 790, 2009 U.S. Dist. LEXIS 76032 (E.D. Va. August 25, 2009). Significantly, Judge Brinkema also held that an "offense" under the statute is the overall decision to mark improperly and rejected Pequignot’s argument that Solo should be penalized for each and every lid it marked. This decision by Brinkema may not stand given the logic of the Federal Circuit’s decision in Forest Group.

 

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False patent markings as the newest qui tam claim?

Posted on April 21, 2009 by Robert Angle

On March 27, 2009, Judge Brinkema ruled in Pequignot v. Solo Cup Company, 2009 U.S. Dist. LEXIS 26020 (E.D.Va. March 29, 2009), that 35 U.S.C. § 292 -- which prohibits false patent marking -- is "one of the few remaining qui tam statutes in American law." Matthew Pequignot, a licensed patent attorney, sued the Solo Cup Company ("Solo"), the well-known maker of many disposable cups, lids, plates, bowls and utensils, for falsely markings its products with two expired patents, U.S. Patent No. RE28, 797, entitled "Lid," and U.S. Patent No. 4,589,569, entitled "Lid for Drinking Cup," and for including the phrase "This product may be covered by one or more U.S. or foreign pending or issued patents" on products that were not protected by any patent or pending patent application. Solo moved to dismiss asserting that Pequignot lacked Article III standing because he failed to allege any actual or imminent injury. Solo also argued that Pequignot’s claims violated the constitutional separation of powers doctrine under Article II. Judge Brinkema rejected both arguments.

While agreeing that Pequignot lacked Article III standing as a traditional plaintiff, Judge Brinkema held that § 292(b) confers standing on him to sue as a qui tam relator. Section 292(a) provides that whoever falsely marks a product with either a patent number, the words "patent" or "patent pending," or other words or numbers implying that the product is protected by a current or pending patent when it is not, and does so with the intent of deceiving the public, "[s]hall be fined not more than $500 for every such offense." Significantly, § 292(b) provides that "Any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States." (Emphasis added). Judge Brinkema explained that § 292(b) meets five of the six elements of a qui tam statute:

It defines a wrong to the government as the false patent marking in violation of § 292(a). It imposes a statutory penalty of up to $500 per violation. It provides that "any person may sue for the penalty," regardless of whether or not such a person is personally harmed. Finally, it allows the suing person to receive half of the recovery from the suit, with the remainder going to the government.

Id. 2009 U.S. Dist. LEXIS 26020 at *18. Judge Brinkema also noted that "the Supreme Court and those courts that have adjudicated cases under § 292 have explicitly termed a § 292(b) a qui tam statute."  Id. at *18-19 (citations omitted). Accordingly, "[t]hese factors are more than sufficient to conclude that § 292(b) is indeed a qui tam statute, and therefore, that Pequignot has Article III standing, as a partial assignee of the government’s claims, to sue Solo."  Id. at *26.

Judge Brinkema swept aside Solo’s argument that such a construction of § 292(b) violates Article II by impermissibly undermining the Executive Branch’s ability to control qui tam litigation:

Enforcement of the substantive provisions of § 292 is not the type of executive function whose delegation to an authority not controlled by the Executive Branch would presumptively raise serious Article II questions.

Id. at *37. Judge Brinkema appeared to rue her decision to deny the motion to dismiss, describing the survival of § 292(b) as a qui tam statute as "likely an accident of history."  "The only practical impact of the qui tam provisions of § 292(b) appears to be its potential to benefit individuals, such as the plaintiff in the case at bar, who have chosen to research expired or invalid patent markings and to file lawsuits in the hope of financial gain."  Id. at *42.  Judge Brinkema invited Solo and other potential defendants to seek revision of it in Congress as has been done with other qui tam statutes. Until then, however, Pequignot opens the door for other qui tam plaintiffs to get into the potentially lucrative game of suing product manufacturers who continue to mark their products with expired patents.

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