Patent, Trademark & Copyright : Law Office of Kloss, Stenger & LoTempio

Even though a jury ruled that the software that runs the famous Facebook site infringed on the patent of Leader Technologies, Facebook still won the case. The reply appeal brief was just filed last month.

I think the issues in this case are relevant for all inventors. Inventors should be aware that disclosure of their invention prior to filing a patent application could invalidate the patent after it is allowed.

If you are an inventor and you have an idea and you want to "get it out there" into the market, you better file a patent application less than one year after you offer it for sale, publish it anywhere or use it in public.

On November 19, 2008, Leader filed a patent infringement suit against Facebook alleging infringement of United States Patent No. 7,139,761 (Leader Technologies, Inc. v. Facebook, Inc., (D.Del. 2008). Fed. Cir. Case No. 2011-1366). On July 28, 2010, the jury rendered a verdict that Facebook infringed all of the asserted patent claims and that the claims were neither anticipated nor obvious in light of the prior art. But the jury also ruled that even though Facebook directly and literally infringed on the patent...the patent was invalid because of 102(b) disclosures.

A patent is invalid under 35 U.S.C. § 102(b) if the patentee publicly used or offered for sale a product that embodied the patented invention more than one year before filing the patent application.

The jury found the patent invalid on the theory that Leader had publicly used the patented invention and offered it for sale more than one year before filing the patent application.

Leader Technologies is an innovative software company based in Columbus, Ohio. Chairman and founder Michael McKibben created Leader in 1997 with the goal of using "the internet as a platform for doing large scale communications and collaboration."

At that time, the internet was in its infancy, with the number of users measured in the mere millions. Leader recognized the untapped potential of the internet-"an unclaimed market space"-and moved to enter that marketplace.

Leader won the part of the trial that most people would think would be the most important: Leader won on "literal infringement" of 11 of 11 patent claims and no published prior art regarding Leader's U.S. Patent No. 7,139,761 (PDF).

In other words, the engine running Facebook is Leader's invention. But Facebook won because of a statutory bar called "on sale bar and public disclosure."

The case is now on appeal to the Federal Circuit Court of Appeals in Washington, D.C. The appeal briefs have been filed and a date for oral argument is going to be set. The Leader brief (PDF) argues that Facebook had no evidence of sale/public disclosure and confused the jury with court room theatrics. The Facebook brief (PDF) argues their evidence was "substantial."

It is pretty unbelievable that this case has not gotten more publicity.

The case raises many questions:

• Could  Mark Zuckerberg have invented Facebook in "one or two weeks" while studying for finals?
• Is it just a coincidence that Leader inventor's son Max was in the dorm next to Zuck?
• Could Zuckerberg have hacked into the inventor's son's Harvard email account that described McKibben's invention which Zuck just mimicked and launched a month later?
• Is there evidence that Facebook had to wait until the Leader patent published in the summer of 2004 to add the "groups functionality" in Facebook because they couldn't figure out how to do it without the patent?

But none of the questions of who invented really matter now because of the statutory bar. Perhaps Leader can overturn the jury's decision. The blog "Origin of Facebook's Technology?" breaks down the appeal briefs and points out all the weaknesses in the Facebook arguments. Perhaps the blog is a little one-sided, I wonder what the agenda is? But who knows what's going happen in this case.

The lesson every inventor should take away from this case is: file your patent application as soon as possible.

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Protecting intellectual property on the Internet has been a dilemma for the music and movie industry since peer-to-peer technology emerged with the original Napster.

Recently in an effort to curtail copyright infringement the government has shut down peer-to-peer webpages and the music and movie industry have filed and threatened to file lawsuits against individuals who illegally obtained or shared copyrighted material.

The US government has shut down webpages that facilitate illegal file-sharing through the Immigration and Customs Enforcement (ICE) office of Homeland Security Investigations which executed court-ordered seizure warrants against a number of domain names.

Ben Sisario wrote an article for the New York Times entitled "U.S. Shuts Down Web Sites in Piracy Crackdown” where he stated that

The new seizures also come as a new bill, the Combating Online Infringements and Counterfeits Act, is making its way through Congress. The bill, which was approved by a Senate committee, would allow the government to shut down sites that are “dedicated to infringing activities”... Critics have said the law is too broad, and could affect sites that have nothing to do with file-sharing.

The Electronic Frontier Foundation, an online civil liberties group, has called it “an Internet censorship bill-- a reckless scheme that will undermine global Internet infrastructure and censor legitimate online speech.”

Among the domains shut down was torrent-finder.com and sites that specialized in music: onsmash.com, rapgodfathers.com and dajaz1.com.  it has been reported that at least 70 other addresses had been shut down, most belonging to sites related to counterfeit clothing, DVDs and other goods.

In another attempt to fight copyright infringement and make some money, under the name of the US Copyright Group, the attorneys of Dunlap, Grubb & Weaver are sending out thousands of offers of settlement in lieu of a lawsuit threatening large statutory damages to people for the alleged illegal downloading of certain movies like Hurt Locker and Far Cry.

The Tech Dirt Blog has been following this US Copyright Group closely and has posted a series of articles that cover this story very well.

Dunlap, Grubb & Weaver has sent out letters to thousands of people with this type of language:

Our law firm has filed a federal copyright infringement lawsuit in US District Court for the District of Columbia on behalf of our client is Voltage Pictures LLC we are sending you this letter as a courtesy before we are required to take more formal legal action which would involve adding you as a named defendant in the lawsuit.

The suit was filed against 5000 Doe defendants. We subsequently obtained identifying contact information for many of the defendants from the Internet Server Providers (ISPs) your contact information is supplied to us by your ISP as one of the defendants who illegally obtained or shared our clients copyrighted motion picture through peer-to-peer networking (Gnuttella, BitTorrent etc.) we are sending you this letter is a courtesy before we are required to take more formal legal action which would involve adding you as a named defendant to the lawsuit.

In this letter the "US Copyright Group" cites recent cases against individuals for peer-to-peer file sharing on the Internet where juries awarded large statutory damages. Some incredibly large statutory damages have been awarded by juries in a couple of cases.

• Joel Tenenbaum, a graduate student, was found to have infringed the copyrights in 30 songs and was slapped with damages of $675,000 (Sony BMG Music Entertainment v. Tenenbaum).
• Jammie Thomas-Rasset, a single mother of four, was found to have infringed the copyrights in 24 songs and was hit with damages of $1.92 million. (Inand Capitol Records, Inc. v. Thomas-Rasset).

So basically the jury said for copying about $25 worth of songs the record industry was injured by almost $2 million. How do you justify such a huge award? Talk about crazy runaway juries!

Although these awards were well within the range of statutory damages set by Congress, the federal district courts struck them down, ruling that the damage awards were, respectively, "grossly excessive" and "simply shocking." They’re still going through the appeal process now.

 "Statutory damages must still bear some relation to actual damages." Hon. Michael J. Davis, Dist. Judge, U.S.District Court, Dist. Minnesota, January 22, 2010, Capitol Records v. Thomas-Rasset

Do you or your kids download free songs or movies on the internet? Nate Anderson reported  at  Ars Technica.com that the consequences of an award like these could be life-altering to the average Joe defendant in these types of cases.

Dunlap, Grubb, & Weaver could take her to court, where the lawyers would try to prove her actions "intentional." And once they did that, "our client will be seeking the maximum statutory damages allowed by the Copyright Act in the amount of $150,000 per infringement, attorneys' fees and costs."

A group calling themselves the USCopyrightGroupIsAScam thinks that US Copyright Group is

“extorting through the legal system thousands of people for the supposedly illegal downloading of certain movies like Hurt Locker and Far Cry. Smaller picture companies Like Voltage and others are trying to use these extortion methods to make profits and possibly gain back monies lost to illegal downloading and pirating of their movies."

But what is protectable? And how are companies trying to come up with innovative theories of law to combat what they deem as infringement? 

What if you were to purchase software on a CD in a box and never opened it and wanted to sell it? Timothy Vernor was sued by Autodesk for copyright infringement for selling unopened boxes of software on eBay.

Vernor, claimed his actions were protected under the "first sale doctrine" (codified in Section 109 of the Copyright Act).  Vernor argued that once Autodesk sells its software to a customer, the company shouldn’t be able to control any resales. Vernor asked the court for a declaratory judgment that he was legally allowed to resell the software.

Steven Seidenberg reported in InsideCounsel.com that the “The 9th Circuit panel held, in Vernor v. Autodesk, Inc., that simply by adopting the right legal terminology, copyright owners can license their works instead of sell them-and the resulting licenses can limit what anyone, even third parties, may do with the works. Copyright owners who license their works rather than sell them can limit customers' use."

How will that change the landscape in copyright infringement? Is it too restrictive? The digital age has put a new twist into an old theory of law. For example it used to be you would buy a vinyl record with eight or nine songs on the record. You could play those songs on a record player at your house or your friend’s house and you could physically bring that record from place to place.

But now in the digital world digital songs can be shared by simply e-mailing or plugging your digital player into someone else’s computer. Should  you have a right to listen to that song anywhere on anyone’s computer or digital playing device? Or once you buy a song should you have to keep it on one computer?

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I hope everyone is having a happy Thanksgiving. I searched through the patent office to find patents with a Turkey and I looked through the many utility patents and design patents. This led me to wonder if people really understand the difference between the two.

• Utility Patents: For any process, machine, composition of matter or manufacture

• Design Patents: For any original and ornamental design for an article of manufacture

In general terms, a "utility patent" protects the way an article is used and works ( 35 U.S.C. 101), while a "design patent" protects the way an article looks ( 35 U.S.C. 171). A design patent protects only the ornamental appearance of an article, and not its structure or utilitarian features.

Both design and utility patents may be obtained on an article if invention resides both in its utility and ornamental appearance.

It can be to your advantage to simultaneously file for utility patent protection on the functional aspects of an invention, and design patent protection on the ornamental aspects of the invention.

But if you didn't file it simultaneously once the utility patent application is in condition for allowance, you may file a divisional design patent application based on the original utility patent application.

Another way to get design patent protection is to file a design divisional if a rejection is received and it doesn't look as though any of the claims are going to be allowed. 

In order to successfully follow this strategy the original utility patent application must filed with design application quality drawings and a brief description of the ornamental aspects of the invention.

What is an inventor's strategy for protecting intellectual property? Take a look at the examples of the utility and design patents that I posted here.

I doubt if Inventor Roy D. Williams ever sold this ingenious Turkey hunter's safety placard. And I wonder if anybody ever used the Retainer for dressed poultry invented by Anthony J. Volk.

Both patents have expired and are now in the public domain, so feel free to make, use and sell them if you wish to.

Entrepreneurs should consider using the vast amount of free technology that can be found in patents in the public domain. But I think that's a topic that will have to be dealt with in a future blog post.

Whether or not these patents are valuable can be determined by answering this question: would anybody have copied these products had they not received a patent?

The courts have ruled that to find infringement of a design patent, the accused product must be compared to the claimed design to determine whether the two designs are substantially the same.

To find infringement, the allegedly infringing product must incorporate the point of novelty of the claimed design. 

The standard of infringement involves two stages.

1. First, one must determine what the ornamental features of the patented design are and whether one or more of these were appropriated by the product alleged to infringe. If not, there is no infringement.
2. If there was appropriation of one or more of the unique features, then a second test is applied. One looks at both the similarities and differences between the two products to determine if there is sufficient overall similarity to deceive the ordinary observer. If so, infringement exists.

The protection offered by design patents is somewhat limited because courts determine infringement by comparing the design patent drawings to a competitor's "infringing" item. Consequently, the appearance of the drawings is critical in design patents.

Although the answer to the question as to the value of the design patent for the "hunter's safety placecard" is that nobody would have copied it, many companies recognize the value of design patents in various fields of invention.

For example, last month design patents were obtained in various industries for things like Semiconductors, transistors or integrated circuits  D625,695 (.PDF) and D624,890(.PDF), Parts, Accessories And Attachments For Vehicles D626,058 (.PDF) and Jewelry, Symbolic Insignia, And Ornaments D625640(.PDF)

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Recently I wrote a blog post regarding the alleged infringement of the trademark IHOP. Now the national drugstore chain Walgreens believes that the Wegmans logo looks too much like the Walgreens registered trademark (.PDF).

So they have opposed Wegmans new trademark registration application (.PDF) and filed a federal lawsuit claiming infringement. 

Take a look at the two trademarks. Do you think they are confusingly similar? Would you think that one company has anything to do with the other simply based on the font of the mark or "trade dress"?

What about just the W? Why does it look like the Washington Nationals logo? Check out the W on the cap and compare that to the Walgreens  registered trademark (.PDF) for the letter W.

Walgreens filed a trademark infringement lawsuit (complaint .PDF) at a federal court in Virginia against Wegmans, a western New York based supermarket chain, claiming unfair competition/ false designation of origin in connection with Walgreens’ U.S. Trademark Registration; trade dress infringement; dilution of Plaintiffs distinctive marks and unfair competition under the common law.

On the same day Walgreens filed in the United States Patent and Trademark Office before the Trademark Trial And Appeal Board a "Notice of Opposition (.PDF)" to the registration of the Wegmans trademark Application Serial No.85/037,348 for the mark WEGMANS.

Because both companies use a similar script in their logos, Walgreen Co. says in the complaint that the marks are confusingly similar and consumers could be misled into thinking the companies are connected.

I thought you just might find this information interesting, the complaint also alleges that both parties used the same Toronto design company, Watt International Inc. See paragraphs 15 and 20 in the complaint (.PDF).

It must be pretty uncomfortable between the Toronto design company and the law suit parties right about now. I wonder if they're using that design firm anymore? And if it is true why isn't the Toronto design company part of the lawsuit?

Wegmans spokeswoman Jeanne Colleluori told the Democrat and Chronicle of Rochester that the company also didn't think there was any possibility consumers could be confused.

While Walgreens says its "flying W" deserves trademark protection because it has been in use since 1951. But Rochester-based Wegmans said the scripted "W" it adopted in 2008 is actually a copy of logos used by the supermarket in the 1930s.

You might be wondering what happens when an opposition and a lawsuit are pending at the same time? I spoke to Buffalo trademark attorney Anne Downey of the law firm Downey and Downey and she conjectured that most likely the opposition would be suspended until the civil lawsuit was settled. And she cited the TTAB Manual Of Procedure (TBMP) [.PDF] section 510.02,

Suspension Pending Outcome of Another Proceeding "...To the extent that a civil action in a Federal district court involves issues in common with those in a proceeding before the Board, the decision of the Federal district court is often binding upon the Board, while the decision of the Board is not binding upon the court."

It's not uncommon to file an opposition before the Board rather than filing a lawsuit because the parties can resolve their issues in a less costly manner than a federal lawsuit. David Robinson of the Buffalo News reported that Wegmans spokeswoman Jeanne Colleluori said,"We were surprised to learn of this lawsuit, since Walgreens did not contact us with any concerns prior to filing it."

Any entity that thinks it will be harmed by registration of the mark has thirty days from the day the mark is published in the Trademark Official Gazette to file an opposition. The opposition may be filed with the Board and a complaint, including a request that the mark not be registered, may also be filed with a U.S. District Court, especially if issues other than registrability such as infringement are alleged.

Elements for the Opposition

Any person who believes that he or she would be damaged by the registration of a mark on the Principal Register may oppose registration by filing a notice of opposition with the Board, and paying the required fee, within thirty days after the date of publication. 15 U.S.C. §1063

An opposition proceeding is similar to a court proceeding in many respects except that:

• the Opposition is filed with the administrative tribunal of the USPTO: Trademark Trial And Appeal Board;
• the Opposition is less expensive;
• the Opposition is based on a written record; and
• jurisdiction is limited to the issue of registrability (no damages). 

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The International House of Pancakes has a filed (.PDF) a trademark lawsuit in U.S. District Court in Los Angeles against a Kansas City, Missouri based religious group that calls itself the International House of Prayer over the acronym "IHOP."

The pancake house is going after the church group for trademark dilution and trademark infringement. If you just clicked my link over the word acronym you would've found out they aren't the only one using IHOP.

While the two houses have practically nothing in common -- it's a stretch to say that the House of Prayer's use of this mark has confused anyone that is looking for a place to eat breakfast, there is no question that they share the same initials and similar web address IHOP.com (Pancakes) and IHOP.org (Prayer).

The first cause of action is for infringement based on likelihood of confusion (15 U.S.C. § 1114(1)). Depending how the court weighs the below listed factors will determine whether or not this is a good cause of action.

"Likelihood of confusion" is usually the defining test in deciding whether a claim for trademark infringement is valid.  The question to be answered to determine if there is a likelihood of confusion is

whether a "reasonably prudent consumer in the marketplace is likely to be confused as to the origin of the goods or services bearing one of the marks." Dreamworks Prod. Group v. SKG Studio, 142 F.3d 1127, 1129 (9th Cir. 1998).

There are eight factors courts may consider in determining whether a likelihood of confusion exists between the goods or services. This is known as the Sleekcraft test, (AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-349 (9th Cir. 1979):

1. Strength of the mark;
2. Proximity or relatedness of the goods;
3. Similarity of the marks (especially in sight, sound and meaning);
4. Evidence of actual confusion;
5. Marketing channels;
6. Type of goods and purchaser care (meaning how much care does a purchaser take before buying the product);
7. Intent when choosing the mark; and
8. Likelihood of expansion of the product lines.

Without going through each factor I don't think anybody's really confused between a House of Prayer and a House of Pancakes!

There is no similarity of goods and nobody is confused that either one of these companies have anything to do with each other. Although it is unnecessary to show actual confusion to establish likelihood of confusion.

There is no reason why two diverse companies can't share the same trademark.  I often say to clients when searching for the availability of a trademark they wish to register: why do you think they have Domino Sugar and Domino's Pizza? What about Ford Motor Co. and Ford gumballs?

I just performed a quick search on the USPTO trademark search page for the trademark FORD and found 1063 marks using the letters "FORD."  I would think IHOP would have a better case against the THE ORIGINAL PANCAKE HOUSE® for a confusingly similar mark.

I think their cause of action for dilution has a much better chance of success. The Federal Trademark Dilution Act of 1995 expanded the scope of rights granted to famous and distinctive trademarks under the Lanham Act. Dilution differs from normal trademark infringement in that there is no need to prove a likelihood of confusion to protect a mark. Instead, all that is required is that use of a "famous" mark by a third party causes the dilution of the "distinctive quality" of the mark.

The first International House of Pancakes restaurant opened in Toluca Lake, California in 1958, and in 1960 the company began to expand through franchising. In 1973 a marketing program formally introduced the acronym “IHOP.”

International House of Pancakes' claims the international House of Prayer selected and adopted the International House of Prayer name, knowing it would be abbreviated IHOP and they intended to misappropriate the fame and notoriety of the household name IHOP to help promote and make recognizable their religious organization.

The International House of Prayers' use of IHOP began long after the International House of Pancakes’s IHOP mark became famous. The religious group, which promotes its belief in daily, continuous prayer, has drawn thousands of people to Kansas City since it opened 10 years ago.

International House of Pancakes alleges in it's law suit:

IHOP mark is distinctive and famous within the meaning of 15 U.S.C. § 1125(c)(1). International House of Prayer acts are likely to cause dilution by blurring International House of Pancakes famous IHOP mark and otherwise have impaired the distinctiveness of this trademark. International House of Prayer willfully intended to trade on the reputation of International House of Pancakes famous IHOP mark and to cause dilution of International House of Pancakes famous IHOP mark.

It seems like dilution is their best argument. I just wonder why it took 10 years for them to file suit. There is another equitable principle in law called "laches" where if you don't enforce your rights in a timely manner it can result in any claim's being barred.  Don't you think if someone uses a trademark for 10 years it would be unfair to make them stop using their name?

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Congratulations to Spain for winning the World Cup in soccer. But the big money winner is the Fédération Internationale de Football Association (FIFA) for the marketing of the event. The Hollywood Reporter said that 700 million people worldwide watched the World Cup 2010 yesterday.

About 24 million Americans watched Spain win the World Cup over the Netherlands, while 106.5 million viewers in the US  watched the New Orleans Saints' 31-17 upset of the Indianapolis Colts on Superbowl Sunday on CBS.

So I got to wondering about how the trademark for the World Cup was being used, registered and protected around the world. I found a blog called the Worldcupblog.org which reported that FIFA owned a slew of trademark registrations/applications for many different trademarks all over the world. I searched the USPTO webpage and found that there were 150 trademark registrations/applications owned by the organization known as FIFA.

I also found that back in 2006 the World Cup Blog had their wrist slapped by the attorneys of FIFA for what they considered inappropriate use of the trademarks. Although the blog didn't agree with FIFA that their use was inappropriate, in fact the blog considered the use to be a promotion of the event. See how they comically recite why they took down the trademark as requested,

"We have complied with FIFA’s request but not because we agree in the least with their draconian rules. We are just nice people and the only lawyer we could afford to hire to represent us in this dispute was our brother-in-law whose entire legal education comes from watching Perry Mason, LA Law and Law and Order."

Google posted an innocuous drawing on their famous search engine search page. You can see they clearly tried not to infringe on any FIFA trademark. But do you think that the FIFA organization profited by the exposure on Google yesterday?

There have been many examples of overzealous attorneys sending cease and desist letters, the funniest one was the "other white meat" April fools ad for unicorn meat by Thinkgeek.com. In the Unicorn case there was a 12 page letter telling Think Geek Inc. how the National Pork Board was injured by the sale of unicorn meat.

So what does trademark registration protect? Non-commercial use of another's trademark is not actionable as dilution. What is fair use? A trademark can be used when the use does not suggest sponsorship or association with the trademark owner's product or services and therefore is not being used in a manner to confuse the reader.

Use of another's trademark is not considered to be infringement if it falls under one of the following categories of permissible use:

1. Fair Use - this is most commonly seen in comparative advertising; i.e. "In a blind taste test, our cola ranked higher among consumers than Coca-Cola or Pepsi."
2. First Sale Doctrine - Protects resellers/repackagers - this is illustrated by auction websites like Ebay. Resellers frequently list items using another's trademark without authorization, i.e. selling genuine Windows software without being an authorized distributor/retailer.
3. Use in parody or speech - does anybody remember Weird Al Yankovic? 

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How do you protect your intellectual property? What is intellectual property? Is a special sandwich that you make better than anybody else intellectual property? Imagine you are the owner of a new restaurant who has created a new edible masterpiece. And subsequently, to your surprise, you discover that a copycat sandwich is being made across the street, without your permission.What do you do? What are your remedies?

In a new television commercial, Burger King's mascot breaks into the headquarters of McDonald's and steals the recipe to the Egg McMuffin.

I don't think they can register the work with the U.S. Copyright Office and obtain a certificate of copyright. Can they file an application for patent registration of the sandwich structure?

Remember for something to be patentable subject matter it must be a new, useful and a non-obvious improvement over something that's already out there. You don't see too many patents on food recipes and sandwiches. Maybe a design patent (.PDF), but I doubt that will give them much protection.

It may be argued that the business conduct of Burger King in this instance is actionable under federal unfair competition provision of the Lanham Act. While the Lanham Act, in general, focuses primarily on obtaining, maintaining, and enforcing trademark and service mark rights, Section 43(a), allows for suits for false designation of origin. But I don't think there is a false designation, Burger King comes right out and says we're making our own version of this old sandwich.

And it's not a copy of a trade secret (like the McDonald's special sauce) so I don't think there's any grounds for McDonald's to bring a suit. There is probably not much McDonald's can do to stop Burger King from making their version of the egg McMuffin.

What is protectable is the brand name or the trademark. What Burger King is tacitly saying in this clever breakfast commercial is that, McDonald's doesn't own the rights to eggs, sausage, cheese or English muffins. McDonald's owns the trademark "Egg McMuffin(.PDF)."

John DeVore, recently wrote a Special article to CNN entitled "Big burger boys burgle breakfast." about the commercial showing how Burger King's new BK Breakfast Muffin Sandwich's is just a copy of the classic Sausage McMuffin.

But are McDonald's executives upset with this campaign? Have lawyers been rallied and accusatory calls been made?"We haven't received any direct feedback from competitors," said Brian Gries, Burger King's vice president of marketing impact. Gries further defends his company's choice to be up-front about the similarities between the BK Breakfast Muffin and the McMuffin, saying, "We are not above taking a product that we know customers like and delivering it to our guests at a great price."

I love the guile of Burger King making a full admission in the commercial that they are copying this sandwich. I would love to see the internal memos from the lawyers arguing about whether or not they should allow this commercial to air. It is not like McDonald's has not been involved in a number of lawsuits involving trademark issues in the course of its history. But I think if McDonald's brings a lawsuit in this instance it would fuel of a lot of bad press and they would have little chance of success.

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Since my recent blog post entitled "Patent Trolls" Search for Falsely Marked Products the ad hoc “patent marking police” have filed at least 17 lawsuits alleging false marking against 33 different companies. This number is an approximation because False Marking suits are not consistently categorized within the federal court system. To see a list of False Marking suits filed in the last 2 months, go to Justin Gray’s blog, Gray on Claims.

The law allows any private citizen to bring a qui tam action on the government’s behalf against an entity that falsely marks unpatented products. A court can levy a fine for up to $500 for every product that is falsely marked. The final award is split evenly between the government and the person that brought suit.

What will happen if one person wins a huge damages award in one of these cases? How many more would be “Patent Police” will come out of the woodwork? In a blog post on IPWATCHDOG.com you can read A Fanciful False Marking Fiction By a Cottage Industrialist where the author daydreams about how “I just made 42 bajillion dollars today. And it’s not even 9 am.”

How easy is it to file a Patent False Marking complaint? Take a look at this complaint (PDF). Maybe you can be the next bajillionaire.

The two elements of a 35 U.S.C. § 292 false marking claim are:

1. marking an unpatented article; and
2. intent to deceive the public.

It will be interesting to see if the courts will find the necessary intent or mens rea to find false marking and what the courts will do in the “exercise of their discretion” as to the size of damage awards. Some argue that if you are marking a product with a patent number you should know when it expires and what it covers. Intent to deceive should be easy to prove. (See comment #7 by "Noise above Law"on IPWATCHDOG's post)

Now what about the damages award? The Federal Circuit held in the case of Forest Group, Inc. v. Bon Tool Co., No. 2009-1044, that the plain language of the false patent marking statute, requires courts to impose penalties for false patent marking on a “per article” basis.

The §292 statute provides a fine of “not more than $500 for every such offense. This does not mean that a court must fine those guilty of false marking $500 per article marked, even though it can. The statute provides district courts the discretion to strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties for small, inexpensive items produced in large quantities.

This means a court has the discretion to determine that a fraction of a penny per article is a proper penalty. The court's exercise of discretion is a balance between the chilling effect of false marking and imposing a mind boggling 42 bajillion dollars to be shared between the government and a brilliant member of the “patent marking police."

What is the chilling effect of a patent whose number has been falsely marked upon a product?

• Potential competitors may be dissuaded from entering the same market
• It may deter scientific research when an inventor decides to forego continued research to avoid possible infringement
• Can be the reason for unnecessary investment to design around
• Increases cost incurred to analyze patent validity or enforceability

I think the chilling effect of False Marking may be a serious consideration but I don’t think courts are going to start printing money. I have learned that what seems too good to be true, usually is. So don’t buy an armored truck to carry away your billions of dollars just yet.

Before taking my first law school exam Joe Walsh, a fellow law student, said to me that his attorney father gave him this advice: "If you don’t know what the answer to a question is, make pretend you are the judge and come up with a fair resolution."

Okay, you are the judge, what do you think is fair?

Related posts:

"Patent Trolls" Search for Falsely Marked Products

"Patent Reform Act of 2010" and False Marking Rule Change

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What a corporation needs to know about patent law...

I'm sorry if I insult anybody by using the derogatory term "Patent Troll"  for a non-practicing entity (NPE) or patent dealer that claims patent rights to technology and demands a licensing payment for the use of the technology. But if the name fits...

I'm not saying that simply suing to protect your patent rights makes you a Patent Troll. But it's clear that there is an industry where patents are obtained, bought and sold for the sole purpose of initiating lawsuits.

"As of January 1, 2010, PatentFreedom has identified and profiled over 315 distinct NPEs (a number which continues to increase). Since 1985, these NPEs have been involved in litigation with nearly 4,500 different operating companies in over 3,100 distinct actions. And the pace of activity is clearly increasing. Nearly 75% of the suits between these NPEs and operating companies were filed since 2003."

What is a patent troll?  When you hear the word troll you visualize the image of a troll underneath the bridge unjustly charging an unwary passerby a duty to cross the bridge. Or maybe you visualize a fisherman trolling for fish. Let's throw a hook out there (a lawsuit) and see what we can get.

After reading through various articles on the internet on this subject we find both sides of the argument. One side of the argument is that non- practicing entities are Patent Trolls that are eroding the economy, see article by Science Progress:

The patent system was created by the nation’s founding fathers not so much to protect individual ownership rights but to foster investment and technological advancement. Some individuals and companies, however, have opted to use the system for a different purpose: They acquire the rights to certain inventions that are crucial for the proper operation of other, larger inventions, and then essentially hold that intellectual property for ransom to be paid by those who need it. These so-called trolls typically do not make any product and, rather than inspiring innovation, tend to have a chilling effect. For a full discussion of the troll issue ...see Daniel P. McCurdy’s article, “Patent Trolls Erode the Foundation of the U.S. Patent System.”

The other side of the argument is that "patent holders" are just enforcing their constitutional rights. (see "Patent Troll:" A Self-Serving Label that Should be Abandoned)

 "A 'patent troll' is usually defined as someone who enforces a patent yet does not practice the invention protected by that patent. ...Enablers of innovation have consistently been demonized throughout recent literature and characterized as “trolls,” who systematically extort payment from unknowing victims.  Indeed, the cause of many of the lawsuits that 'patent troll' critics abhor is not caused by trolls at all.  To the contrary, the cause of patent infringement lawsuits and other enforcement activity is that others are using patented technology without authorization.  This fact can be and has consistently been addressed in the system as it exists today.  Whether coined “patent trolls” or not, intellectual property companies, small companies, non-manufacturing companies, and other “enforcers” ensure that the system operates as the Constitution directed."

There is public outcry in the patent community that there's a need for patent reform. And there's many suggestions on how to reform the patent system. Some people think that the examiners are are inefficient and allow patent claims that are drawn too broadly. With regard to the"'patent troll" issue it is argued that broad patent claims should be eliminated at the examination stage, and examiners should be better trained at stopping these types of patents from being issued.

Robert C. Pozen of the NY Times, says patent cases end up in court because " The quality of American patents has been deteriorating for years; they are increasingly issued for products and processes that are not truly innovative"  and that patent rules should "...[allow] experts in the field to submit explanatory or critical comments on patent applications." This will help inexperienced examiners make better decisions and improve the quality of allowed patents.

Patent experts argue better patents will stop patent trolls. But others such as Timo Fisher and Joachim Henkel's aren't convinced. See paper, titled "Patent Trolls on Markets for Technology - An Empirical Analysis of Trolls' Patent Acquisition":One Reason Why Improving Patent Quality Won't Solve the "Troll Problem"

"Surprisingly, and contrary to common belief, we find that troll patents are of significantly higher quality than those in the control group. This result implies that elevating minimum patent quality will not put an end to the patent troll business"

I'm not sure if patent quality is the problem. I think lawsuits are started by non-practicing entities regardless whether or not there is a strong case that a product or process infringes on the subject patent. Suits are brought knowing that the party being sued would rather settle even if they know it can be proved at trial that there is no infringement. So there's money to be made in these lawsuits.

In addition, non- practicing entities form corporations around individual patents or groups of patents to limit their liability and farm these cases out to attorneys who specialize in patent infringement cases on a contingency fee basis. The attorneys know that they will be supplied with an endless steam of infringement cases based on multiple patents, so it's worth their while to take a case and put it into suit regardless of the strength of the case. It is not uncommon that these cases are put into suit based on patents that arguably do not cover the product or process that is alleged to be the basis of infringement.

To say that the patent doesn't apply at all may be a stretch, however if it's in the ballpark and there can be an argument made that there is infringement and there is a deep pocket, then a lawsuit is filed. The pressure is on corporate America to either pay up or fight it out in the courts. And everybody knows how expensive a patent litigation is. As a result non-practicing entities get the unwanted moniker "patent troll."

There is Rule 11 of the Federal Rules of Civil Procedure that is supposed to stop frivolous lawsuits. However it appears that once a lawsuit is filed it is very difficult to prove that the lawyer or the entity filed it knowing there was no meritorious case. You don't often see Rule 11 enforced in these cases.

Often the patent troll files a lawsuit based on a patent where there a modicum of an argument that there is an infringement. In these case the biggest concern of the party being sued is not whether they are going to lose the lawsuit, but whether or not it will cost them a fortune to prove they're not infringing. Patent trolls, and particularly those who regularly make infringement allegations know that the enormous cost of patent litigation is a major deterrent against fighting the case through trail and that they will likely receive settlement offers.

So it's not a bad financial strategy for a Patent Troll to sue a patent infringement case whether or not there is a strong likelihood that the product actually infringes. In fact, patent trolls have been known to structure settlement offers around anticipated litigation costs, rather than around the alleged infringer’s sales figures. 

I wouldn't want to defame any non-practicing entities or their attorney's by saying that they know when they initiate a lawsuit that the patent which is the basis of the lawsuit really doesn't cover the product or process of the defendant corporation. Call me "an attorney trying to circle the defense wagons, using the common rallying cry of “patent trolls,” but does anyone really believe that out of thousands of cases filed by Patent Trolls that Rule 11 doesn't apply to any of them?

I guess each law suit has to be evaluated on a case-by-case basis and we shouldn't stereotype any group or demonize their chosen path to make a living. My experience in life is that the truth often lies someplace in the middle. But I also believe that where there is smoke there is fire.

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What a corporation should know about intellectual property law...

It is now in vogue for the new breed of "patent troll" to sue corporations in the US Federal Courts on behalf of the government for falsely marking unpatented products with patent registration numbers.

Corporations need to be able to identify and protect their intellectual property. However, corporate "Intellectual Property Management" and exploitation isn't always that simple. A corporate "IP Committee" should have a good understanding of the law concerning patent marking. Falsely marking a product can expose a corporation to substantial damage claims under 35 U.S.C. § 292 and not marking a patented product at all, may limit the ability of a patent holder to recover damages for infringement under 35 U.S.C. § 287(a).

Section 292 of the Patent Act prohibits:

• Counterfeit marking: marking a product with a patent number without the patent owner’s permission

• False patent marking: marking a product with a patent number on an unpatented article, or the use of “patent applied for” or “patent pending” when no patent application is actually pending for the product

The statute allows any private citizen to bring a qui tam action on the government’s behalf against an entity that falsely marks unpatented products. A court can levy a fine for up to $500 for every product that is falsely marked. The final award is split evenly between the government and the plaintiff that brought suit.

The Court of Appeals Two-step Test (Clontech Laboratories, Inc. v. Invitrogen Corp.)

To determine whether the false patent marking statute has been violated evidence must show:

1. That patent’s claims do not cover the falsely marked product; and
2. The mismarking was done with intent to deceive the public.

Over the last few years, the false marking statute has gained popularity as private patent lawyers have brought false marking claims against corporations who have marked products with expired patent numbers. Patent counsel should advise their clients to examine their patent marking practices because the new patent marking trolls are searching for falsely marked products as a basis to file a lawsuit.

Plaintiffs are seeking literally billions of dollars in penalties. How many cups does the Solo Cup Company manufacture and sell? What about the Crayola Crayon Company? How much would the fine be, if a $500 fine was levied for every cup or box of crayons sold by these companies?

In 2007 a Washington patent attorney brought suit against Solo Cup Co. In Pequignot v. Solo Cup Co., 540 F. Supp. 2d 649 (E.D. Va. 2008) Pequignot alleged that Solo Cup was manufacturing and selling millions of cups, lids, plates, bowls, and utensils with expired patent numbers.

Recently HEATHCOTE HOLDINGS CORP, INC filed a complaint (.PDF) claiming false patent marking against CRAYOLA LLC in the United States District Court in the Northern District of Illinois. Amount Demanded:$9,999,000.00

On December 28, 2009, the Federal Circuit held in the case of Forest Group, Inc. v. Bon Tool Co., No. 2009-1044, that the plain language of the false patent marking statute, requires courts to impose penalties for false patent marking on a “per article” basis.

Prior to this Federal Circuit decision, many district courts had interpreted the false marking statute to impose a single fine or penalty for each “decision” to falsely mark products, irrespective of the number of articles manufactured. As a result, now each falsely marked item may represent a $500 fine.

The court did rule however that "in the case of inexpensive mass-produced articles, a court has the discretion to determine that a fraction of a penny per article is a proper penalty" and that district courts have the discretion to strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties for products produced in large quantities.

Bottom Line: Properly Mark Patented Products

1. Mark patented products with the proper patent registration number so as to give notice and preserve infringement damages.
2. Be aware of when the patent registration expires and stop marking products at the end of the patent term.
3. Don't mark products with patent numbers unless the patent claims cover the product.

Related posts:

"Patent Marking Police" Looking for the Big Jackpot

"Patent Reform Act of 2010" and False Marking Rule Change

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