Wednesday, March 16, 2011

False marking claims must satisfy heightened pleading standard


There's been some back and forth on this issue. To plead a claim for false marking, a plaintiff must allege that the defendant marked something as patented with an "intent to deceive the public." Does a plaintiff asserting a false making claim need to satisfy the heightened pleading requirements of Rule 9? The Federal Circuit provided an answer yesterday:
This court holds that Rule 9(b)'s particularity requirement applies to false marking claims and that a complaint alleging false marking is insufficient when it only asserts conclusory allegations that a defendant is a "sophisticated company" and "knew or should have known" that the patent expired.
Here, BP Lubricants was sued for its CASTROL brand motor oil. It had a design patent which protected the ornamental design of the bottle. BP marked the bottles with this patent number. According to the complaint, BP continued to mark the bottles after the patent expired and, on the plaintiff's information and belief: (1) BP knew or should have known the patent was expired; (2) BP is a sophisticated company; and (3) BP marked the products for the purpose of deceiving the public.

At the trial level, the Court held that this pleading did satisfy Rule 9(b). Applying Federal Circuit law (Exergen), the trial Court held that this pleading provided the specific who, what, when, where, and how required to state a claim. Specifically, BP (who) had deliberately and falsely marked (how) at least one line of motor oil (what) with an expired patent, and continues to do so (when) throughout the US (where) with an intent to deceive.

But the Federal Circuit said this wasn't enough. To plead a claim:
a complaint must in the 292 context provide some objective indication to reasonably infer that the defendant was aware that the patent expired.
So, just saying the Defendant is a sophisticated player who "should have known better," isn't enough. A plaintiff must allege some objective indication that the defendant did know better. Without that, the pleading falls short of Rule 9(b), and is ripe for dismissal.

This case is also interesting from a procedural standpoint. BP lost its motion to dismiss at the trial level. Typically, you can't appeal that decision because it is not final. Instead, BP petitioned the Federal Circuit for a writ of mandamus -- an extraordinary remedy. An appellate court can issue a writ -- ordering someone (here, the trial court) to do something -- only when there has been a "clear abuse of discretion or 'usurpation of judicial power.'"

The Court found such extraordinary circumstances here. It had not yet decided the issue of whether Rule 9(b) applied to false marking cases. And this issue has been causing quite a bit of attention and disagreement lately. So, by granting the writ, the Federal Circuit is able to decide an "issue important to 'proper judicial administration.'"

And a last saving point for plaintiffs -- the Federal Circuit reminded trial courts that they should freely grant leave to plaintiffs to amend their complaints.

Petition for a writ of mandamus, directing the district judge to grant defendant's motion to dismiss granted in part.


Thursday, March 10, 2011

Summary Judgment granted where plaintiff did not rebut defendant's expert's opinion on obviousness

Judge Fawsett previously held in the Voter Verified v. Election Systems dispute that you can not infringe a surrendered patent. She's now had a chance to address defendant's further summary judgment motion, asking the Court to find one of the claims of the patent invalid for being obvious in view of the prior art.

First, plaintiff objected to the prior art defendant relied on. The court considered some of the art prior art, but found that other references did not qualify because they were not reasonably accessible to the public interested in the art. The reference that didn't make it was purportedly presented at the Fifth International Computer Virus and Security Conference. Defendant asked the court to find this article prior art on the basis that: (1) defendant's expert stated that the paper was presented at the conference; (2) the paper had a legend in the bottom corner of each page stating the conference name. But this wasn't enough. Specifically, there was no evidence in the record concerning the manner in which the paper was published, and how it was made available to persons of interest in the art. Thus, it didn't qualify as prior art for purposes of summary judgment consideration.

That small win, though, didn't carry the day for plaintiff, because the defendant had other art that was considered prior art. The summary judgment dispute turned on whether the claimed invention was obvious in light of the prior art. To resolve this, the court went through the Graham factors and found the subject claim obvious. Defendant's expert opined on each of the factors ((1) the scope and content of the prior art; (2) differences between the claims and the prior art; (3) the level of ordinary skill in the pertinent art; and (4) secondary considerations such as commercial success and satisfaction of a long felt need). Plaintiff disagreed with the expert's conclusions, but does not have appeared to offer any evidence to the contrary. As such, summary judgment was appropriate.

Summary judgment granted. Claim held invalid for being obvious.

Voter Verified v. Election Systems & Software, Inc., Case No. 6:09-CV-01969 (M.D. Fla. Jan. 25, 2011) (J. Fawsett)

Wednesday, March 9, 2011

Do false marking complaints need to satisfy heightened pleading requirements? Court won't answer that question if the complaint falls short of Rule 8

Another false marking post this week. This one comes from the Ft. Myers division. Herengracht sued American Tombow for false marking. The Court ignored the various "shotgun" allegations in the complaint. Tombow asked for dismissal for failure to state a claim, arguing that the plaintiff must plead the heightened requirements of Rule 9(b) because the claim is based on fraud.

First, the Court laid out the elements necessary to survive a motion to dismiss:
(1) that a word or number indicating an article is patented (2) was marked upon, affixed to, or used in advertising in connection with (3) an article which was in fact not covered by the patent, (4) for the purpose of (the intent of) deceiving the public.
* * *
An article whose patent is expired is "unpatented."
Digesting the complaint, the Court found that plaintiff had pleaded that a Tombow product has been marked with U.S. Patent No. 4,851,076. The '075 Patent is currently expired. And Tombow is a sophisticated company. The Court didn't need to delve into whether or not heightened fraud pleading was required here, because these allegations didn't even satisfy Rule 8's notice pleading:
Because the instant Complaint does not even comply with the ordinary pleading rules of Rule 8, there is simply no need to address [the issue of whether heightened pleading requirements should apply.]
The complaint did not allege that Tombow marked its products with an expired patent number after the patent had expired.

Motion to dismiss granted, without prejudice. Plaintiff was given the ability to file an amended complaint. But Plaintiff did not, so the court closed this matter.

Herengracht Group LLC v. American Tombow, Inc., Case No. 2:10-cv-362 (M.D. Fla. Dec. 30, 2010) (J. Steele)

Tuesday, March 8, 2011

Willful infringement alone does not get you enhanced damages

Harris sued FedEx for infringing a number of patents relating to systems for gathering flight performance data from aircraft for analysis. Generally, the technology provided for aircrafts to wirelessly transmit certain flight performance data to an airport based receiver. In prior systems, the data needed to be manually removed from the aircraft and delivered to the centralized storage area, or through some direct line-of-sight infrared link or fiber optic cable. Harris' patents protected a system for this data gathering which utilized wireless transmission of the flight data via a radio frequency link.

FedEx developed a system for gathering flight statistics on its B727 aircraft. This system wirelessly transmitted flight data from parked airplanes to one of FedEx's servers in Tennessee. This system was found to infringe Harris' patents. And the infringement was found to be willful. Harris sought enhanced damages, attorneys' fees, and an injunction.

Enhanced Damages

35 U.S.C. 284 allows a court to increase a patent infringement damage award by up to three times. A plaintiff must establish that the defendant's infringement was willful. Damages are enhanced in order to penalize an infringer for their increased culpability. A court should consider consider the following factors in deciding whether or not to enhance damages:
  1. whether the infringer deliberately copied the ideas or design of another
  2. whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed
  3. the infringer's behavior as a party to the litigation
  4. the defendant's size and financial condition
  5. the closeness of the case
  6. the duration of the defendant's misconduct
  7. remedial action taken by the defendant
  8. the defendant's motivation to harm; and
  9. whether the defendant attempted to conceal its misconduct
The court analyzed each of these factors, finding 1, 3, 6, 8, and 9 weighed against enhancing damages, while 2 and 5 supported (the others were neutral). FedEx's defenses, even though they didn't succeed, weren't frivolous. FedEx had made a good faith effort to defend itself. In sum, FedEx's conduct was not to egregious as to warrant an award of enhanced damages.

Attorneys' Fees

In patent cases, the prevailing party may be awarded its attorneys' fees if the case is an "exceptional case." If a defendant is found to be a willful infringer, the case is presumed to be an exceptional case, and the court must explain why a case is not exceptional if the court is going to refuse an award of attorneys' fees. Here, the Court did not need to provide that explanation, because it found the case was exceptional and awarded Harris its reasonable attorneys' fees.

Permanent Injunction

It used to be (until 2006) that if you prevailed as a plaintiff in a patent infringement case, you were presumably entitled to an injunction. (That presumption could be rebutted, but the defendant had to do the rebutting). The Supreme Court changed this landscape with its eBay decision, throwing patent law back into the category of other harms -- if you wanted an injunction, you have to prove you're entitled to it. To prove that, a plaintiff must show:
  1. it suffered irreparable harm
  2. the remedies at law (i.e. money damages) are inadequate to compensate for that harm
  3. the balance of hardships in granting an injunction favor the plaintiff; and
  4. the public interest would not be disserved by entering an injunction
The court addressed each of these elements. Concerning irreparable harm, the court noted that a finding of past infringement, alone, does not show irreparable harm. But it does tend to suggest such harm. Here, FedEx argued in part that Harris also licensed its patents. Because of this, FedEx argued, Harris didn't suffer irreparable harm because it has shown that it is willing to license (i.e. accept money) the use of its technology. The court was not convinced by this argument. FedEx's use of its infringing system interfered with Harris' licensing opportunities. This interference was irreparable.

Regarding the second factor, FedEx's interference with Harris' licensing opportunities was not curable by money. As such, Harris was entitled to equitable relief. The final two factors also favored an injunction. So the Court ordered one be entered. The parties now have to submitted a proposed injunction for the Court to issue.

Conclusion

Just because a defendant is found to have willfully infringed a patent does not mean the plaintiff will necessarily get enhanced damages. Nor does it mean the plaintiff will get its attorneys fees (although the defendant has to convince the court to explain why attorneys's fees wouldn't be warranted against the willful infringer). And the right to an injunction depends on the existence of irreparable harm (and the other elements).

Harris v. FedEx, Case No. 6:07-cv-1819, slip op. (M.D. Fla. Feb. 28, 2011) (J. Antoon)

Monday, March 7, 2011

False marking statute held unconstitutional

Regular readers of my blog are familiar with recent developments in false patent marking litigation. The Northern District of Ohio has added another development -- the statute has been found unconsitutional. (I've embedded the order below.) Procedurally, this is somewhat interesting to me. The defendant initially moved to dismiss for a number of reasons. The court held a telephone conference with the parties and, on its own perhaps, asked the parties to file briefs explaining the constitutionality of 35 U.S.C. 292(b) (the qui tam provision of the false marking statute). The court also required notice be provided to the U.S. Department of Justice so that the department (who is charged with enforcing the law) could express its views on the constitutionality of the false marking statute. Apparently, the DOJ did not file any brief.

After the invitation from the Court, the defendant filed a motion to dismiss, arguing that the qui tam provision of the statute violated the Appointments and Take Care Clauses of the U.S. Constitution. Specifically, the defendant argued that the qui tam provision didn't give the executive branch sufficient involvement in false marking litigation.

The Constitution's Take Care Clause provides that the President "shall take care that the Laws be faithfully executed." The Appointments Clause provides that the President "shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the Supreme Court, and all other Officers of the United States." The Court found the false marking statute violated the Take Care Clause (the Court did not address the Appointments Clause, but suggested it would not apply to this situation).
The false marking statute lacks any of the statutory controls necessary to pass Article II Take Care muster. The False Marking statute essentially represents a wholesale delegation of criminal law enforcement power to private entities with no control exercised by the Department of Justice
The Court granted defendant's motion to dismiss (with prejudice).


Notably (as recognized by the Court), the FLFMC, LLC v. Wham-O, Inc. case -- another false marking case -- is still pending before the Federal Court. One of the issues that has been preserved in that appeal is the constitutionality of the False Marking statute under the Take Care clause.