Should False Marking Claims be Stayed Pending a Decision in Stauffer? Depends on the Court

Defendant's motion to stay plaintiff's qui tam false marking case pending the Federal Circuit's resolution of Stauffer v. Brooks Brothers, Inc., Nos. 2009-1428, 2009-1430, 2009-1453, was denied. "[Plaintiff's] standing to bring a qui tam action under the FCA does not appear to be in serious dispute. . . . The Court finds that the plain language of the FCA provides for qui tam actions whether or not the qui tam plaintiff has personally sustained an injury-in-fact. . . . Plaintiff has alleged that the injuries prohibited by the FCA have occurred and it is unclear why their status as a non-competitor would affect their qui tam standing."

Patent Compliance Group Inc v. North States Industries Inc., 3-10-cv-00405 (TXND August 27, 2010, Order) (Furgeson, J.).

Defendants' motion to stay pending the Federal Circuit's resolution of Stauffer v. Brooks Brothers, Inc., Nos. 2009-1428, 2009-1430, 2b09-1453, was granted. "It is undisputed that the precise issue that is now before this Court - whether a private party has Article III standing to bring a false marking claim under § 292 of the Patent Act when that private party has suffered no injury - is now before the Federal Circuit in Stauffer. . . . [Plaintiff] has failed to articulate any prejudice that it will suffer if the case is stayed. Significantly, [plaintiff] does not allege any injury to itself or any other entity resulting from Defendants' conduct."

Accord Patents, LLC v. Gravity Defyer Corporation et al., 1-10-cv-00642 (GAND August 27, 2010, Order) (Batten, J.)

In False Marking Cases, When a Judge Closes a Door, Somewhere She Opens A Window

Although a few False Marking cases have recently been dismissed for failure to plead facts supporting intent to deceive, some plaintiffs have undoubtedly noticed a small window of hope in those same orders. Judge Robinson stated in Brinkmeier v. BIC Corporation et al., 1-09-cv-00860 (DED August 25, 2010, Memorandum Opinion) that the “plaintiff has provided no indication there was litigation on any of these patents that would imply a working knowledge of the patents, conscious knowledge of the scope and expiration date." This leaves a false marking plaintiff to wonder if there IS some indication of prior litigation, is that enough to sufficiently state facts from which one can infer intent?

A handful of the currently pending False Marking cases involve allegations of prior litigation. At least eleven false marking complaints state that one or more patents at issue have been found invalid or unenforceable. While four of those have either settled or been voluntarily dismissed, seven remain. The plaintiffs that might benefit are Promote Innovation, LLC, Atico International USA, Inc., and oddly enough, Brinkmeier (Brinkmeier v. Exergen Corporation).

Failure to Plead Facts Supporting Intent to Deceive Sinks More False Marking Cases

Defendants' motion to dismiss plaintiff's false marking claims was granted because plaintiff failed to sufficiently plead intent to deceive. "[I]n [another of the court's cases] the allegations were that defendant had continued marking a nationally known product of which this Court could take judicial notice with two expired patents, one of which was alleged to have expired a number of years ago. Defendant was alleged to have decades of experience applying for and prosecuting patents. Thus, I found that plaintiff sufficiently alleged intent. Plaintiff [in this case] makes similar conclusory allegations with regard to intent here but without the specific facts noted above. In this case, I find that the complaint does not sufficiently state facts from which I can infer intent."

Simonian v. Global Instruments, Ltd. et al., 1-10-cv-01293 (ILND August 26, 2010, Order) (Bucklo, J.)

Defendant's motion to dismiss plaintiff's false marking action for failure to state a claim was granted. "To the extent that plaintiff is arguing that [defendant] had knowledge that the patents were expired because the packaging of these products was updated following patent expiration, this argument fails to prove [defendant] had intent to deceive the public. . . . Also, plaintiff has provided no indication there was litigation on any of these patents that would imply a working knowledge of the patents, conscious knowledge of the scope and expiration date."

Brinkmeier v. BIC Corporation et al., 1-09-cv-00860 (DED August 25, 2010, Memorandum Opinion) (Robinson, J.)

Plaintiff's Marking of Packaging Instead of Products Precludes Pre-Suit Damages

The court granted defendant's motion to limit damages in part because plaintiff marked its product's packaging and not the product itself. "[N]o reasonable jury could find that [plaintiff's] choice to mark the product packaging rather than its patented products comports with the marking statute. While [plaintiff] need not have alleged that marking the patented products is physically impossible, it has failed to identify a fact issue with respect to any limitation, physical or otherwise, that presents a reasonable consideration warranting the marking of the product packaging instead."

Belden Technologies Inc. et al v. Superior Essex Inc. et al., 1-08-cv-00063 (DED August 24, 2010, Memorandum Opinion) (Robinson, J.)

Reasonable Royalty Damages for Indirect Infringement not Limited to "Specific Acts of Infringement"

Defendant's motion to limit damages for plaintiff's claims of indirect infringement to "specific acts of infringement that [plaintiff] proves at trial” was denied as premature. "The principle on which [defendant] relies is applicable to a claim of indirect infringement where the plaintiff seeks to establish damages under a 'lost profits' theory. See Standard Haven Products, Inc. v. Gencor Industries, Inc., 953 F.2d 1360, 1374 (Fed. Cir. 1992) (holding where plaintiff sought to establish 'lost profits' as remedy for claim of indirect infringement, amount of lost profits could only be based on six of ten sales of accused device, because plaintiff did not establish remaining four sales resulted in act of direct infringement by purchaser). The principle, however, does not apply to a claim of indirect infringement where the plaintiff seeks to establish damages under a 'reasonable royalty' theory."

Tyco Healthcare Group LP d/b/a Vnus Medical Technologies v. biolitec, Inc. et al., 3-08-cv-03129 (CAND August 23, 2010, Order) (Chesney, J.)

Simonian v. Bunn-O-Matic stayed until the Federal Circuit issues its opinion in Stauffer v. Brooks

The court deferred ruling on defendant's motion to dismiss plaintiff's qui tam false marking claim for lack of standing and stayed the case pending the Federal Circuit's resolution of Stauffer v. Brooks Brothers, Inc., 615 F. Supp. 2d 248 (S.D.N.Y. 2009).

"The Federal Circuit opinion in Stauffer will be the first one that is directly on point to the standing issue in this case. In earlier Federal Circuit opinions . . . the court sidestepped any direct address of qui tam standing, choosing to focus on the substantive issues; however, in Stauffer, standing is the only issue on appeal, and therefore, it must be addressed. Given that the Stauffer decision will be binding on this court, and that the case is already fully briefed before the Court of Appeals for the Federal Circuit with oral arguments less than one week away, an order staying the case pending a decision in Stauffer will not cause undue delay."

Simonian v. Bunn-O-Matic Corporation, 1-10-cv-01203 (ILND August 23, 2010, Memorandum Opinion and Order) (Zagel, J)

Nine Year Delay Does Not Trigger Laches But Does Preclude Award of Prejudgment Interest

Defendant's motion for prejudgment interest was denied for undue delay. "[Plaintiff] argues that [defendant] is not entitled to prejudgment interest because it delayed bringing this lawsuit for nearly a decade and did so as a counterclaim only after [plaintiff] brought suit against [defendant]. . . . As detailed in the Court’s Opinion on [plaintiff's] laches motion [defendant] unreasonably delayed bringing this suit for nine years. Although in the end the Court concluded that the delay did not result in any prejudice to [plaintiff], the delay was nevertheless undue and provides a justification for withholding prejudgment interest."

Humanscale Corp. v. CompX International Inc. et al., 3-09-cv-00086 (VAED August 23, 2010, Memorandum & Opinion) (Spencer, J.)

Steps Performed by Software on Mobile Device Owned by Subscriber but Provided by Defendant are Attributable to Defendant

In denying defendants' motion for summary judgment of noninfringement as to plaintiff's wireless messaging patents the court rejected defendants' argument that steps performed by software embedded in a mobile device are performed by the owner of the device. "[D]efendants urge that because their subscribers possess and own the wireless devices in question, the subscribers and defendants must both act to satisfy the claim limitations. In other words, the subscribers’ ownership of the devices renders the operation of the software attributable to the subscribers, rather than defendants. . . . The court rejects defendants’ contention that because their subscribers own the wireless devices at issue, the conduct of multiple parties is required. The performance of certain steps of the method claims by software on wireless devices that defendants provide to their subscribers does not prevent the claims from being satisfied by the defendants’ conduct."

Intellect Wireless, Inc. v. T-Mobile USA, Inc. et al., 1-08-cv-01215 (ILND August 13, 2010, Memorandum Opinion & Order) (Gottschall, J.)

Assigning Monetary Value to Past Infringement Does Not Undermine Plaintiff's Request for Permanent Injunction

The court denied defendant's motion for summary judgment as to plaintiff's request for permanent injunctive relief. "[T]he mere fact that Plaintiffs have assigned a monetary value to past infringement, does not mean that the same monetary assessment applies to future infringement. There can be no retroactive injunctive relief, so Plaintiffs have no option but to attempt to assign a monetary value to their current loss, this does not necessarily mean that the monetary compensation can fully address their losses, only that there is no other remedy available for past injuries. Further . . . There are material issues of fact relating to the assessment of the equities in this case that preclude a finding of summary judgment on this basis."

Bendix Commercial Vehicle Systems LLC, et al v. Haldex Brake Products Corp., 1-09-cv-00176 (OHND August 19, 2010, Memorandum Opinion & Order) (Nugent, J.)

As Part of Settlement Agreement, False Marking Defendant gets a Free Pass on all Future Allegations of False Marking

From the “Order on Stipulated Dismissal”

“The Court hereby HOLDS and ORDERS that any future litigation brought under35 U.S.C. §292 or any other statute related to false marking or false advertising on behalf of the United States and/or the general public with regard to any existing product manufactured or sold by P.F. Harris is barred.

The Court hereby HOLDS and ORDERS that any future litigation brought against P.F. Harris under 35 U.S.C. §292 or any other statute related to false marking or false advertising on behalf of the United States andlor the general public with regard to U.S. Patent No. 1,636,688 is barred.

The Court hereby HOLDS and ORDERS that P.F. Harris and those acting in concert therewith and/or selling products manufactured by P.F. Harris may have a reasonable period of time in which to sell inventory that has been manufactured on or before the date of this order without further liability.”

Patent Group, LLC v. P.F. Harris Manufacturing Company, LLC, 6-10-cv-00141 (TXED August 10, 2010, Order) (Davis, J.)

Litigation Misconduct and Willful Infringement Warrant Enhanced Damages and Attorneys' Fees Award

Plaintiffs' motion to declare the case exceptional was granted where the jury found willful infringement; defendant "blatantly failed to comply" with the court's order and local rules by withholding an opinion of counsel memo by claiming that the author was a business and litigation lawyer; defendant "repeatedly burdened the Court with unnecessary motion practice throughout this case"; and defendant engaged in deposition and mediation misconduct. "The Court is concerned by the repeated instances of litigation misconduct committed by [defendant], particularly its attempt to conceal relevant and discoverable but damaging documents. [Defendant's] conduct throughout this case falls far below the Court’s standards for professionalism and collegiality."

ReedHycalog UK, Ltd. et al v. Diamond Innovations Inc., 6-08-cv-00325 (TXED August 12, 2010, Memorandum Opinion & Order) (Davis, J.)

Competition in Marketplace, Infringer's Bankruptcy, and Importance of Patent to Plaintiff's Business all Favor Imposition of Permanent Injunction

Plaintiff's motion for a permanent injunction was granted. "[T]he Court has already concluded there was sufficient evidence for the jury to find there are no substantial, non-infringing uses. . . . The negative effect on [plaintiff's] market share and other aspects of its business as a result of [defendant's] infringing acts is more than adequate to support a finding of irreparable harm."

Clearvalue, Inc. et al v. Pearl River Polymers, Inc. et al., 6-06-cv-00197 (TXED August 12, 2010, Memorandum Opinion & Order) (Davis, J.)

Plaintiff's motion for a permanent injunction following a jury verdict was granted. "[T]wo weeks after the jury returned its verdict in favor of [plaintiff], [defendant] went into the Australian equivalent of bankruptcy. Thus, it is highly probable that [defendant] would never be able to pay monetary damages to [plaintiff]. Second, [plaintiff's] syringes compete directly with [defendant's] syringes as exemplified by [one company] being a customer of both [parties]. Third, [plaintiff] has refused to license its technology to its direct competitors and would not license to [defendant]."

Retractable Technologies, Inc. v. Occupational & Medical Innovations, Ltd., 6-08-cv-00120 (TXED August 11, 2010, Memorandum Opinion) (Davis, J.)

Plaintiff's Prior Settlement Agreements/Licenses Concerning its Patented Drug are Discoverable as Relevant to Secondary Considerations and Misuse

The court granted in part defendant's motion to compel the production of prior settlement agreements concerning plaintiff's drug, Lipitor®, but not documents relating to such agreements. The settlement agreements were relevant to secondary considerations and patent misuse. With respect to secondary considerations, "[defendant's] theory is that previous commercial success is tied to [plaintiff's] since-expired . . . patent, which it asserts was a patent integral to [plaintiff's settlement with a defendant in an earlier case]." With respect to misuse, "[plaintiff] cannot merely assert that no patent misuse occurred and direct [defendant] to publicly available documents and press releases to confirm that. [Defendant] needn't take [plaintiff] or [a settling third party's] word on whether [plaintiff] misused a patent. No sane defendant would."

Pfizer Inc. et al v. Apotex Inc. et al., 1-08-cv-07231 (ILND August 4, 2010, Memorandum) (Ashman, M.J.)

Court will revisit and reconsider the standing issue in False Marking case

"ORDER REGARDING PLAINTIFF’S STANDING
UNDER 35 U.S.C. SECTION 292

In United States of America ex rel. FLFMC, LLC v. Wham-O Inc., Civil Action No. 10-435, this Court issued a Memorandum Opinion (Doc. No. 28) and Order (Doc. No. 29) on August 3, 2010 finding that FLFMC, LLC, plaintiff in Wham-O and in the instant case, did not have Article III standing to pursue its qui tam action pursuant to 35 U.S.C. § 292, and that this Court therefore lacked subject matter jurisdiction. The Court granted Wham-O’s motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1), and dismissed that case.

By Order of Court dated May 7, 2010(Doc. No. 25), this Court dismissed a similar Rule 12(b)(1) motion by defendant Ace Hardware in this case. In light of the decision in the Wham-O case, and in the interests of consistency and equal application of the law, the Court will revisit and reconsider the standing issue in this case upon motion and briefs of the parties."

United States of America ex rel FLFMC, LLC v. Ace Hardware Corp., 2-10-cv-00229 (PAWD August 3, 2010, Order) (Schwab, J.)

Continuing Use of Accused Products Sold Prior to Notice of Patent is not Direct Infringement Sufficient to Support Claim of Indirect Infringement

The court granted defendant's motion for summary judgment of no indirect infringement for the continuing acts of other defendants involving products sold by the moving defendant before it received actual notice. "[T]he Court concludes that the only manner in which to logically and consistently apply the binding precedent of [Fonar Corp. v. General Elec. Co., 107 F.3d 1543, (Fed. Cir. 1997)] is to hold that the continued use of the sixty-eight [accused products] that were clearly sold prior to notice does not give rise to direct infringement. And without direct infringement, [defendant] cannot be held liable for indirect infringement as to these products. . . . The Court notes however, that it is somewhat troubled by the result it has reached. . . . Continuing acts of infringement should carry with them independent consequences, particularly if these acts occur with notice of the infringement. Therefore, the resolution reached by the Court, in essence, allows the Defendants to do an end-run around this continuing infringement language within the marking statute. Nonetheless, the Court is bound by Federal Circuit precedent. . . ."

Tesco Corporation v. Weatherford International, Inc. et al., 4-08-cv-02531 (TXSD August 5, 2010, Memorandum & Order) (Ellison, J.)

Wanted: Wooly Willy aka Frank the False Marker

Walk into any Cracker Barrel Old Country Store and take a step back in time. The walls and ceilings are covered with antiques of all sorts, from kitchen utensils to farm implements. Scattered on the sales floor are displays of vintage reproductions as well as new merchandise for sale. From “Bonanza” DVDs to boxes of Moon Pies, the air is filled with nostalgia. Memories from childhood swirl around you when you see the graphic artwork of toys and games you played with so long ago; items you thought were gone forever, unattainable but for perhaps a few well-worn items on eBay. Now such items are available brand new for just a couple of bucks. You gaze in wonder at how perfectly the packaging of these beloved toys has been reproduced to exactly match the original that you remember so well.

Sadly for Wooly Willy, such exact reproductions of vintage packaging can be fodder for a False Marking suit. Last week, the Docket Report listed a False Marking complaint against the distributors of Wooly Willy, the magnetic drawing set. You remember Willy. He’s encased in a layer of clear plastic, which houses tiny magnetic shavings that can be manipulated with a magnetic stylus to change Willy’s appearance. The possibilities are seemingly endless, as the back of the package sports drawings of “Harry the Hermit”, “Dick the Dude”, and “Pete the Pirate”.

According to Unique Products Solutions, Ltd., however, there’s a darker side to Willy’s “magnetic personality”. It all stems from a problem with Willy’s packaging, which has a patent number on the back, a very old patent. Patent number 2,853,830, issued in 1958 and was titled simply “Magnetic toy”. Wooly Willy has entertained boys and girls ever since. Now that Willy’s deceit has been brought to light, does he need a new persona, like “Frank the False Marker”?

The complaint in question is somewhat boilerplate for False Marking cases, which doesn’t necessarily connect with Willy. Perhaps the most questionable claim is that Willy’s packaging might “deter scientific research”. With scientific research at stake here, what can be done to save Willy from those dreaded False Marking fines?

As with all False Marking cases, the plaintiffs will certainly need to prove that Willy intended to deceive the public by using his 34 year-old patent number on his package, which is no small task. However, there is also another barrier in these types of actions that may prevent qui tam plaintiffs from realizing their dream of protecting the US government. Today's Docket Report summarized two other false marking suits involving toys that were dismissed last week for lack of standing. The question is, will a similar motion in Unique Product Solutions, Limited v. Tara Toy Corp. et al be enough to free Willy?


~~~~~~~~~~~~~~
More about Willy:

“Wooly Willy is a shifty character. His many disguises completely change his appearance.”
http://www.smethporthistory.org/smethportspeciality/wollypage.htm

http://www.americanprofile.com/article/35775.html

Today’s Docket Report:
Docket Report for August 9, 2010

See Docket Navigator’s list of False Marking cases:
http://www.grayonclaims.com/false-marking-case-information/

False Marking Plaintiff Lacks Standing Absent "Concrete, Particularized Injury" to United States

Defendants' motion to dismiss plaintiff's qui tam false marking action for lack of standing was granted. "In the current action, Plaintiff fails to allege any cognizable injury to the United States or the public, much less adequate factual pleadings to support a concrete, particularized injury that is actual or imminent. Therefore, Plaintiff lacks standing to pursue the penalties imposed by Section 292."

Shizzle Pop, LLC v. Aviva Sports, Inc. et al., 2-10-cv-02574 (CACD August 5, 2010, Civil Minutes) (Klausner, J.)

The court granted defendant's motion to dismiss plaintiff's false marking action for lack of standing. "[Plaintiff's] position is that the mere fact that defendant affixes (allegedly) the mark of an expired patent to its products is sufficient to show an injury to the market or the public. The Court finds, however, that such generalized injury arising from a violation of the sovereign’s laws against false marking does not, without more, show an adequate 'concrete and actual or imminent' injury. Therefore, even if a sovereign interest for a violation of law were an assignable interest, this case does not present a concrete injury or a 'case or controversy' within the meaning of Article III, section 2."

United States of America, et. al. v. WHAM-O, Inc., 2-10-cv-00435 (PAWD August 3, 2010, Memorandum & Opinion) (Schwab, J.)

30% Royalty is not Excessive Even Though it Eliminates Profits on Infringing Sales

In denying defendant's motion for remittitur of a nearly $30 million verdict, the court rejected its argument that "it was improper to consider a royalty of thirty-four percent, which would not allow [defendant] any profit. To the extent [defendant] intended to suggest that the verdict was grossly excessive or monstrous, that argument fails. Although an infringer’s anticipated profit may be a consideration in determining a reasonable royalty, 'the law does not require that an infringer be permitted to make a profit.' In addition, the verdict was based on a royalty of thirty percent, not thirty-four percent."

Marine Polymer Technologies, Inc. v. HemCon, Inc., 1-06-cv-00100 (NHD August 3, 2010, Order) (DiClerico, J.)

Prior Litigation-Induced Licenses of Patent-in-Suit Not Excluded From Evidence

Defendant's motion in limine to preclude evidence regarding the 5 litigation licenses involving the patents-in-suit was denied. "The five litigation licenses in this case are consistent with the [plaintiff's] other nine non-litigation licenses as all fourteen licenses have similar running royalty structures. Further, while [plaintiff] intends to identify the licenses, the licensees, the rates of the licenses, the total royalties that have been received, and the royalties received per year, it will not identify the licenses as having resulted from litigation. Thus, the danger of prejudice to [defendant] from the implication of validity and infringement by a third party willing to pay money to settle a lawsuit is eliminated."

ReedHycalog UK, Ltd. et al v. Diamond Innovations Inc., 6-08-cv-00325 (TXED August 2, 2010, Memorandum Opinion & Order) (Davis, J.)

Second False Marking Suit Involving the Same Product But Different Patent is not Duplicative

Defendant's motion to dismiss plaintiff's false marking action under the first-to-file rule where defendant had been sued six weeks earlier in another forum was denied. "While the Pennsylvania Action also alleges mismarking of the [defendant's product], it alleges that the [product] was mismarked with a different patent. . . . Nowhere in the Pennsylvania Action is it alleged that Defendant mismarked [its product] using the [patent-at-issue in this case]. Because this action is not duplicative of the Pennsylvania action, the first-filed rule does not apply."

Shizzle Pop, LLC v. Wham-O, Inc., 2-10-cv-03491 (CACD August 2, 2010, Minute Order) (Anderson, J.)

Infringing Sale of Equipment Creating "Long-Lasting Business Relationship" Creates Irreparable Harm Sufficient to Warrant Preliminary Injunction

In recommending that plaintiff's motion for a preliminary injunction be granted, the magistrate judge found that plaintiff had established a likelihood of irreparable harm. "[T]he court takes note of the unique nature of the equipment at issue in this case when assessing irreparable harm. Unlike fungible goods, the record evidences that Plaintiff and Defendant's poultry equipment is large, custom, expensive, and designed to last a significant lifetime of production. The record evidences that once a poultry factory purchases one of these systems, it is unlikely they will reenter the market place for a significant number of years. Thus, each sale of equipment is the likely formation of a long-lasting business relationship."

Morris & Associates, Inc. v. Cooling & Applied Technology, Inc. et al., 5-09-cv-00023 (NCED July 30, 2010, Memorandum & Recommendation) (Daniel, M.J.)

Failure to Reverse-Engineer Accused Products Threatens Infringement Claims

The court denied defendant's motion to dismiss plaintiff's claims as a sanction for serving inadequate infringement contentions, but ordered plaintiff to amend his infringement contentions a third time or face a dismissal sanction. "It is apparent to the Court that plaintiff’s difficulties in attempting to amend his infringement contentions arise from his unwillingness or inability to reverse engineer the accused products in order to determine how he believes they infringe the [patent-in-suit]. . . . While the Court recognizes that reverse engineering may well pose a financial hardship to plaintiff, it appears that he cannot maintain this lawsuit without undertaking reverse engineering or some equivalent that will enable him to better articulate his claims."

Bender v. Maxim Integrated Products, Inc., 3-09-cv-01152 (CAND July 29, 2010, Order) (Illston, J.)