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Chicago IP Litigation Tracking Northern District of Illinois IP Cases

Tag Archives: False Patent Marking

Competition-Based False Patent Marking Case Not Transferred

Posted in Jurisdiction

Universal Beauty Prods., Inc. v. Morning Glory Prods., Inc., No. 10 C 3212, Slip Op. (N.D. Ill. Oct. 18, 2012) (Grady, J.).

Judge Grady denied defendant Morning Glory’s motion to transfer venue to the E.D. North Carolina in this competition-based false patent marking case.  The parties agreed that venue was proper in each district.  The Court, therefore, only considered the convenience factor and the public interest.

Convenience Factors

Unlike many prior false marking cases, plaintiff UBP’s choice of forum was given weight as defendant MGP’s competitor who was allegedly harmed by the false marking in this jurisdiction.

The alleged false marking decisions were made in North Carolina, but UBP’s harm allegedly occurred in this district.  So, the situs of facts and access to judges were both neutral.  Convenience of witnesses weighed slightly in MGP’s favor.  Only MGP identified local third party witnesses.  But the input of those witnesses was unclear.  Convenience of the parties also weighed slightly in MGP’s favor, but the Court balanced that by requiring depositions of MGP personnel to occur where they are located.

Public Interest Factor

The public interest factors were neutral.  Both districts had an interest in keeping cases related to their resident corporations.  And both districts were well-versed in the law.

AIA False Marking Limitations Upheld as Constitutional

Posted in Jurisdiction

Heathcote Holdings Corp., Inc. v. Suncast Corp., No. 11 C 1010, Slip Op. (N.D. Ill. Jul. 25, 2012) (Zagel, J.).

Judge Zagel held that the America Invents Act (“AIA”) provisions limiting false patent marking standing to persons that suffered a competitive injury, even in ongoing cases, was not an unconstitutional taking.  Defendant allegedly marked several different snow shovel models with stickers indicating that the shovels were covered by expired design and utility patents - the allegedly false marking.  After the filing of the suit, the AIA retroactively required that the plaintiff have suffered a competitive injury in order to have standing to maintain its false marking suit.  Plaintiff Heathcote acknowledged that it lacked standing pursuant to the new standard, but argued that the retroactive elimination of its claim was an unconstitutional taking.  

The Court held, citing to several decisions in other districts, that Congress was free to create qui tam actions and free to remove them.  Congress had the authority to invite private citizens to enforce its laws and the authority to remove that right when Congress decided that the volume of cases was too great, for whatever reason. 

Patent Act Does Not Preempt Patent-Related Lanham Act Claims

Posted in Legal News

GL Trade Ams., Inc. v. Trading Techs. Int’l., Inc., No. 11 C 1558, Slip Op. (N.D. Ill. Jan. 23, 2012) (Holderman, C. J.).

Judge Holderman granted defendant Trading Technologies’ (“TT”) Fed. R. Civ. P. 12(b)(6) and 9(b) motion to dismiss plaintiff GL Trade’s false advertising, unfair competition and deceptive trade practices case alleging that TT misrepresented the scope of its patents. Initially, GL Trade’s Lanham Act false advertising and unfair competition claims were not preempted by patent law. The Federal Circuit held that Lanham Act unfair competition claims based upon marketplace statements were not preempted because the Lanham Act claim required a showing of bad faith. And the allegedly false patent markings were marketplace statements. As a matter of law, TT’s actions could not have been bad faith, although what constitutes bad faith in patent-related communications was “somewhat nebulous.” TT’s belief that the marked products read on the marked patents was legally plausible. GL Trade, therefore, could not have acted in bad faith. Similarly, it was legally plausible for TT to believe that it could mark covered products even when they were not being used in a patented way.

Revised Label Does Not Create False Marking Intent

Posted in Pleading Requirements

Simonian v. BP Lubricants USA Inc., No. 10 C 1258, Slip Op. (N.D. Ill. Sep. 9, 2011) (Feinerman, J.).

Judge Feinerman granted defendant BP Lubricants’ Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiff Simonian’s false patent marking case with prejudice. After the Federal Circuit held Simonian’s intent allegations lacking, Simonian amended its Complaint. The Court held that the amended complaint did not meet Rule 9(b) pleading standards for the following reasons:

  1. Simonian’s allegation that a license agreement proved BP Lubricant’s knowledge of the patent’s expiration failed because the Agreement did not reference the patent’s expiration date.
  2. General allegations that BP Lubricants understand that patents expire did not create intent. Allegations that BP Lubricants briefly litigated the patent may have been sufficient.
  3. The fact that the term of the patent was printed on its face was also not sufficient to show intent. Allowing this allegation to create intent would render the BP Lubricants decision a "dead letter."
  4. While BP Lubricants allegedly revised its front labels three times after the patent’s expiration, BP Lubricants did not revise the back label containing the marking. Because the marking was never revised, the label revisions were irrelevant.

Finally, because Simonian was fully aware of the BP Lubricants decision when he prepared his amended complaint, and because he did not seek leave to replead the dismissal was made with prejudice.

False Patent Marking is Constitutional

Posted in Jurisdiction

Simonian v. Allergan, Inc., No. 10 C 2414, Slip Op. (N.D. Ill. Apr. 28, 2011) (St. Eve, J.).

Judge St. Eve denied defendant Allergan’s motion to dismiss plaintiff Simonian’s false patent marking suit holding that the false marking statute was constitutional pursuant to the Take Care Clause. The government retained little control over false marking actions, but that was less of a concern because false marking cases were civil not criminal. And, in fact, the government retained sufficient control. The executive branch was notified of each suit because the district court clerk was required to give the Director of the Patent Office (a member of the executive branch) notice of every patent suit. Furthermore, the government may intervene in every case. And when the government intervenes, plaintiff cannot dismiss a case without the government’s agreement.

False Patent Marking Settlement Allows Sales of Existing Marked Product

Posted in Settlement

Zojo Sol’ns., Inc. v. Cooper Tools, Inc., No. 10 C 1504, Slip Op. (N.D. Ill. Jun. 15, 2011) (Norgle, J.).

Judge Norgle entered final judgment as part of an agreed settlement that had been approved by the Department of Justice in this false patent marking case, which was entered before President Obama signed the America Invents Act. Of particular interest:

  • Any litigation involving alleged false marking before the date of the judgment was barred.
  • Defendant Cooper Tools was free to sell existing inventory with the accused markings as of the Effective Date until such product was fully depleted.

False Patent Marking Statute is Constitutional

Posted in Federal Rules

Luka v. The Proctor & Gamble Co., No. 10 C 2511 (N.D. Ill. Mar. 28, 2011) (Kennelly, J.).

Judge Kennelly granted certain defendants’ motions to dismiss plaintiff’s false patent marking case for failure to sufficiently plead intent, and held that the statute was constitutional.  Note that this case was decided before President Obama signed the America Invents Act which removes expired patents from the false marking statute.

Proctor & Gamble

Plaintiff’s general allegations against defendant Procter & Gamble were insufficient, particularly in light of the license agreement requiring defendant Innovative to comply with the marking statute.

Innovative

Plaintiff sufficiently pled intent as to Innovative by attacking the P&G-Innovative license agreement. In that agreement, Innovative accepts the responsibility of complying with the marking statute.

Helen of Troy & Idelle

Plaintiff’s claims as to Helen of Troy and Idelle failed because they were the sort of generalized pleadings that BP Lubricants held insufficient.

Constitutionality

The Court held that § 292, the false marking statue was constitutional:

For these reasons, the Court agrees with the district court in the Pequignot case that "[a]though these mechanisms concededly do not rise to the same level of government control provided by the FCA, the FCA’s strict safeguards are not required because . . . § 292(b) represents a minimal intrusion onto Executive Branch power." Peguignot v. Solo Cup Co., 640 F. Supp. 2d 714, 728 (E.D. Va. 2009), vacated in part on other grounds, 608 F.3d 1356 (Fed. Cir. 2010).

False Marking Claim Dismissed for Generalized Pleading

Posted in Pleading Requirements

Simonian v. Astellas Pharma US Inc., No. 10 C 1539, Slip Op. (N.D. Ill. Mar. 28, 2011) (Coleman, J.).

Judge Coleman granted defendant Astella’s Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiff Simonian’s false patent marking claims for failure to meet the Fed. R. Civ. P. 9(b) heightened pleading standards, but did so without prejudice. The Court held that Simonian’s complaint contained "precisely the same" general allegations — a "sophisticated company" that "knew or should have known" of the expired patent — that the Federal Circuit rejected as deficient in BP Lubricants.

Pre-BP Lubricant Case Allows General Pleading for Intent to Deceive

Posted in Pleading Requirements

Heathcote Holdings Corp., Inc. v. Maybelline LLC, No. 10 C 2544, Slip Op. (N.D. Ill. Mar. 15, 2011) (Pallmeyer, J.).

Judge Pallmeyer granted in part defendants’ (collectively "Maybelline") motion to dismiss plaintiff Heathcote’s false patent marking case. The Court also granted Maybelline’s motion to transfer the case to the Southern District of New York. In this pre-BP Lubricants case, the Court held that Heathcote had sufficiently pled intent to deceive by pleading the allegedly false statement and Maybelline’s knowledge of the false statement. These are the type of allegations specifically held to be in sufficient by BP Lubricants.

Heathcote did not oppose Maybelline’s motion to dismiss L’Oreal USA Creative, so long as it was given leave to replead if it later found Maybelline’s representations were wrong.

Finally, the Court transferred the case to Maybelline’s home district, the Southern District of New York. One key factor was that the alleged conduct would have largely occurred at Maybelline’s headquarters, in New York. The Court also held that the sources of proof in the case will be more accessible in New York than in Illinois.

Situs of Material Events in False Marking Cases is Where Marking Occurred

Posted in Pleading Requirements

Simonian v. Maybelline LLC, No. 10 C 1615, Slip Op. (N.D. Ill. Mar. 14, 2011) (Kendall, J.)

Judge Kendall denied defendant Maybelline’s motion to dismiss, granted its motion to transfer and denied as moot its motion to stay pending the Federal Circuits standing decision in Stauffer, in this false patent marking case. The Court held, pre-BP Lubricant, that Fed. R. Civ. P. 9(b) pleading applied to the intent element, but because the intent went to state of mind the fraud could be alleged generally, inconsistent with BP Lubricants. Because plaintiff Simonian had generally pled intent, the complaint was sufficient.

The Court then transferred the case to the Southern District of New York, Maybelline’s home district. As a relator plaintiff, Simonian’s choice of forum was given little deference. And the situs of material facts was where marking decisions were made – New York – not where marked products were bought – Illinois. The Court, therefore, transferred the case.

False Patent Marking Requires Particular Allegations That Each Defendant Marked

Posted in Pleading Requirements

Newt LLC v. Nestle USA, Inc., No. 09 C 4792, Slip Op. (N.D. Ill. Mar. 28, 2011) (Coleman, J.)

Judge Coleman denied defendants’ Fed. R. Civ. P. 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, but dismissed the false patent marking case pursuant to Rule 12(b)(6) for failure to sufficiently plead intent to deceive. The Court held that plaintiff Newt had standing to sue without proof of particularized injury, citing Stauffer v. Brooks Bros., Inc., 619 F. 3d 1321, 1327 (Fed. Cir. 2010).

Newt alleged that defendant Graphic Packaging ("GPI") falsely marked the products and sold them to the customer defendants. GPI made no allegations that the customer defendants marked the accused products. The customer defendants were, therefore, dismissed.

Further, all defendants were dismissed because Newt only made generalized intent allegations — e.g., that defendants were "sophisticated companies." 

Finally, the Complaint was dismissed because Newt made only general allegations against all defendants, rather than particular allegations against each defendant.

Collective Scienter Does Not Apply to False Patent Marking

Posted in Summary Judgment

Heathcote Holdings Corp. v. William K. Walthers, Inc. d/b/a Darda Toys, No. 09 C. 6722, Slip Op. (N.D. Ill. Mar. 11, 2011) (Bucklo, J.).

Judge Bucklo granted defendants summary judgment that it lacked the intent to deceive required by the false patent marking statute, 35 U.S.C. § 292. While an employee and her team were responsible for the information on the packaging, there was no evidence that the employee or her team were aware that the patents had expired, were (in one case) not the correct patent number or otherwise had any knowledge of the false marking statute. Indeed, plaintiff acknowledged that defendant "makes an effort to ensure that its packaging is truthful." Furthermore, upon learning of plaintiff’s allegations, defendant created an "action plan" to resolve the issues. Defendant segregated the accused inventory, removed the patent information and held new production until its suppliers could change the markings. Based upon these facts, the Court held that no reasonable jury could find that the defendant had the required intent to deceive.

The Court went on to hold that the concepts of agency and collective corporate knowledge, or "collective scienter" were not applicable. The Seventh Circuit had specifically held that intent to deceive is not a corporate attribute.

N. D. Illinois 2011 Patent Trends

Posted in Local Rules

Several significant trends are developing as I read this year’s N. D Illinois patent decisions. The trends are largely, although not all, Chicago-specific. And they appear to be largely influenced by the not-so-new Local Patent Rules.

  1. Faster Settlement Times. Patent cases are settling faster. While the economy may still be playing a role, I believe that the LPR 2 initial contentions are driving early settlements. When parties take them seriously and make their best early cases, it is causing opponents to reconsider their positions and driving earlier settlements. Maybe more importantly, armed with more substantive analysis up-front, parties are talking more and more settlement discussions lead to more settlements. No doubt this is one of the impacts that the Court expected when it developed the LPR 2 initial contentions.
  2. False Patent Marking is Dying. In early 2010, the Northern District was among the top three districts for false patent marking filings, in particular those cases brought by marking trolls (non-competitors in the defendant’s industry). Unlike the Eastern District of Texas (which applied Rule 8 notice pleading to the intent requirement), the Northern District was split with many judges applying Rule 9 heightened pleading and a few applying Rule 8 notice pleading. That slowed the flow of cases to a degree, but what seems to have finished them is a combination of the Federal Circuit’s BP Lubricants decision (requiring Rule 9(b) pleading for the intent requirement) and a decision this spring holding that corporate intent was not recognized in the Seventh Circuit, so the required intent must be shown in at least one employee, officer or agent of the corporation.
  3. LR 56.1 Summary Judgment Decisions are on the Decline. There seem to be fewer decisions granting or denying summary judgment for failure to comply with the Local Rule 56.1 requirements for statements of material facts. Having tracked five years worth of intellectual property summary judgment decisions chastising parties for failure to comply with Local Rule 56.1, I cannot imagine that there is a trend toward strict compliance with Local Rule 56.1. Furthermore, this does not appear to be true in the trademark, copyright or trade secret realms. So, my suspicion is that this trend is really about fewer summary judgment decisions. And there are fewer summary judgment decisions for at least two reasons: 1) earlier settlement which avoids summary judgment motions; and 2) the Local Patent Rule 6.1 comment that judges have discretion to delay "early" summary judgment motions until the end of the discovery and the LPR 1.1 authority to delay motions raising claim construction issues until after the claim construction opinion issues.

False Patent Marking: Filed Settlement Agreement

Posted in Settlement

Heathcote Holdings Corp. v. Learning Curve Brands, Inc., No. 10 C 7799 (Kendall, J.).

I generally write about opinions issued by the Northern District, but the parties in this case recently filed their false patent marking settlement agreement. Because of the extreme interest in false marking cases over the last eighteen months, I am posting about the settlement. Plaintiff accused defendants of falsely marking various Thomas the Tank Engine toy trains and related products with two patents. In one instance, the alleged false marking appears to be based upon the omission of one number from the patent number — it read U.S. Patent No. 7,178,68 instead of 7,178,685.

Here are the highlights of the agreement:

  • Defendants agreed to pay $85,000, with half mailed for overnight delivery directly to the Department of Justice.
  • The agreement was subject to approval by Department of Justice’s Director of Intellectual Property Staff before becoming final, which was given with minor edits.
  • The agreement released all false marking claims related to the two patents at issue, but did not attempt to waive any possible false marking by defendant as of the date of the agreement. Of course, it may be that the two identified patents were either defendants’ only patents or the only patents that defendant had marked products with. So, this term may effectively be a complete release of all possible false marking claims.
  • Neither party admits or denies the constitutionality of the false marking statute.

False Marking Plaintiff’s Chosen Form Not Given Deference

Posted in Jurisdiction

Heathcote Holdings Corp., Inc. v. Leapfrog Enters., Inc., No. 10 C 1471, Slip Op. (N.D. Ill. Dec. 27, 2010) (Coar, J.).

Judge Coar transferred plaintiff Heathcote’s false patent marking case to the Northern District of California. Because Heathcote was a relator standing in the shoes of the federal government, Heathcote’s chosen forum was given little deference. All of defendant’s witnesses — party and non-party alike — were located in California. Additionally, the relevant evidence was located in defendant’s California offices. And Heathcote was unlikely to have much relevant evidence. The Court, therefore, transferred the case.

Marking With an Unexpired Patent Not Fixed by Also Marking with a Live Patent

Posted in Pleading Requirements

Simonian v. Allergan, Inc., No. 10 C 2414, Slip Op. (N.D. Ill. Nov. 30, 2010) (St. Eve, J.).

Judge St. Eve denied defendant Allergan’s motion to dismiss plaintiff Simonian’s false patent marking claim regarding Allergan’s RESTASIS product. The Court, citing its Blistex decision, held that false patent marking claims were subject to Fed. R. Civ. P. 9(b) heightened pleading requirements. Simonian’s general averment that Allergan marked with an allegedly expired patent with an intent to deceive was sufficient, without more facts.

The Court also held that the fact that RESTASIS was marked with an unexpired patent, did not insulate Allergan from marking with an expired patent as well, citing Clontech Labs., Inc. v. Invitrogen Corp., 406 F.3d 1347 (Fed. Cir. 2005). In Clontech, the Federal Circuit explained that "an unpatented article" was one "not covered by at least one claim of each patent with which the article is marked." Id. at 1352 (emphasis added).

False Patent Marking Claims Subject to Rule 9(b) Pleading

Posted in Pleading Requirements

Simonian v. Blistex, Inc., No. 10 C 1201, Slip Op. (N.D. Ill. Nov. 3, 2010) (St. Eve, J.).

Judge St. Eve denied defendant Blistex’s Fed. R. Civ. P. 12(b) motion to dismiss Simonian’s false patent marking case. As an initial matter, the fact that most of Simonian’s statements were made upon information and belief did not require dismissal. The Court then held that false patent marking, or at least its intent requirement, was subject to Rule 9(b) heightened pleading. But Simonian met that standard by pleading that Blistex allegedly falsely marked its lip-ointment products with an expired patent.

Local Patent Rules Do Not Apply to False Marking with Expired Patents

Posted in Local Rules

Zojo Sol’ns., Inc. v. Leviton Mfg. Co., No. 10 C 881, Slip Op. (N.D. Ill. Oct. 20, 2010) (Grady, Sen. J.).

Judge Grady granted defendant Leviton’s 28 U.S.C. § 1404(a) motion to transfer this false patent marking case to the Eastern District of New York. Plaintiff Zojo’s choice of forum was given little deference because Zojo was a qui tam plaintiff. The location of Leviton’s witnesses and documents in New York combined with the fact that Leviton’s New York headquarters was the situs for the alleged false marking, favored transfer. That was true even though the Eastern District of New York was a slightly faster court. The most interesting aspect of the decision, however, was a statement that the Local Patent Rules did not apply to false patent marking cases because patent infringement was not alleged. Presumably, the analysis is different if the alleged false marking involves a marked product that allegedly does not fall within the claims of the marked patent.

False Patent Marking Plaintiff Must Meet Rule 9(b) Pleading for Intent

Posted in Pleading Requirements

Simonian v. Edgecraft Corp., No. 10 C 1263, Slip Op. (N.D. Ill. Sep. 20, 2010) (Grady, Sen. J.).

Judge Grady granted defendant Edgecraft’s Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiff Simonian’s false patent marking claims. The Federal Circuit’s recent decisions rejected two of Edgecraft’s three arguments. In Stauffer, the Federal Circuit held that any individual had standing to sue for false marking without regard to injury in fact. And in Solo Cup, the Federal Circuit held that marking with an expired patent could constitute false patent marking.

The Court, however, held that Fed. R. Civ. P. 9(b) heightened pleading standards applied to the intent to deceive requirement. Simonian’s "bare allegations" – and otherwise only "mere labels and conclusions" – at best suggested a "possibility of misconduct," not intent. While Rule 9(b) does allow intent to be pled generally, the allegations must create a reasonable inference that defendant acted with the necessary intent.

False Marking Case Dismissed With Prejudice for Failure to Plead Intent

Posted in Pleading Requirements

McNamara v. Natural Organics, Inc., No. 10 C 3544, Slip Op. (N.D. Ill. Sep. 1, 2010) (Shadur, Sen. J.).

Judge Shadur denied defendant’s motion to stay this false patent marking case pending the Federal Circuit’s standing decision in Stauffer (Stauffer has since been decided). The Court also dismissed plaintiff’s second amended complaint for failure to plead the requisite intent to deceive pursuant to Fed. R. Civ. P. 9(b) heightened pleading standards. Plaintiff attempted to plead intent upon information and belief using a nine-year-old statement made on defendant’s behalf about its skilled legal representative in an FTC proceeding. But that quoted language referred to a lawyer who was deceased, and he had passed away even before the FTC proceeding. Because plaintiff had already been given two chances to replead, the Court dismissed the case.

Any Person Has Standing to Bring False Patent Marking Claim

Posted in Pleading Requirements

Simonian v. Irwin Indus. Tool Co., No. 10 C 1260, Slip Op. (N.D. Ill. Aug. 27, 2010) (Lindberg, Sen. J.).

Judge Lindberg denied defendant Irwin Industrial Tool’s ("Irwin") motion to dismiss plaintiff Simonian’s false patent marking case. First, the Court denied Irwin’s standing arguments. While the Federal Circuit had not yet issued its Stauffer decision regarding standing, the Court used similar reasoning. The Court analogized to the False Claims Act and held that any person had standing without proof of an injury in fact. The false marking injury is to the government and the public at large.

The Court also held that Simonian sufficiently pled the requisite intent to deceive, whether notice pleading or Fed. R. Civ. P. 9(b) standards applied. Simonian pled that Irwin was a "sophisticated company" with years of patent experience and that Irwin knew or should have known the patent was expired when it was marked.

False Claims Act Does Not Bar Multiple False Marking Suits

Posted in Federal Rules

Simonian v. Hunter Fan Co., No. 10 C 1212, Slip Op. (N.D. Ill. Jul. 8, 2010) (St. Eve, J.).

Judge St. Eve denied defendant Hunter Fan’s motion to dismiss plaintiff’s false patent marking case. Hunter Fan argued that the Court lacked subject matter jurisdiction because approximately four hours before this suit was filed, another plaintiff filed a separate suit in the Northern District of Texas accusing Hunter Fan of the same alleged false patent marking. The False Claim Act did have a first-to-file provision, 31 U.S.C. § 3730(b)(5), but the provision expressly limited its application to False Claims Act cases. Because false patent marking is part of the Patent Act, not the False Claims Act, the first-to-file limitation was not applicable. 

In reply, Hunter Fan argued that 35 U.S.C. § 292 allowed for only a single claim, and that the reasoning of the False Claim Act’s first-to-file rule should have been applied to the false patent marking statute.  Hunter Fan, however, waived these arguments by failing to make them in its opening brief. 

Patent Reform Act Has False Marking in its Sites

Posted in Legal News

A few weeks ago, I discussed how the Northern District of Illinois had become the false patent marking capitol of the world (okay, the United States) and how the Local Patent Rules may be playing into it. But Congress may be stepping in to limit false patent marking suits – click here for a Patent Docs post showing that similar amendments have been introduced in both the House and the Senate patent reform bills. The current versions of the amendments would require that false patent making plaintiffs have suffered competitive injury. And most significantly, the amendments would apply the standing requirement to both pending and future false patent marking cases. If passed and signed into law, these amendments would effectively end the vast majority of the 100+ false patent marking cases filed this year, including more than 50 filed in the Northern District of Illinois.

The Public Patent Foundation – a false patent marking plaintiff itself – has come out in opposition to the amendments. Presumably, most industry segments support the competitive injury requirement which still gives the false patent marking statute plenty of teeth.

Northern District of Illinois: False Patent Marking Capitol of the World

Posted in Local Rules

The Northern District has become the jurisdiction of choice for 35 USC Section 292 false patent marking suits. Of the more than 80 false marking suits filed this year, more than half were filed in Northern District. Granted many of the suits, 38, have been filed by a single plaintiff and his counsel, but several other plaintiffs have chosen the Chicago federal courts to file complaints that arguably could have been filed in almost any district court. As I have watched the cases pile up, I have spent a fair amount of time trying to determine why the plaintiffs are choosing Chicago. While the numbers could be skewed by one plaintiff, Simonian, that has filed the majority of the cases, several other plaintiffs are availing themselves of the Chicago courts, so I do not think that answers the question. Rather, I think the Chicago filings are a by-product of the new Local Patent Rules, for two reasons: 1) assuming that the Local Patent Rules apply to these cases (and I believe they will) the Local Patent Rules will place most of the upfront responsibilities on the defendant-patentholder; and 2) the proposed case schedule that would have cases tried in two years gives plaintiffs a moderate case length moderating their potential fees and costs while maintaining a relatively high defense cost for the defendants, including the potential threat of the longer pre-Rules schedule for most Northern District of Illinois patent cases prior to enacting the Rules. Before I analyze the reasons further, some background will be valuable as false marking is a very new phenomena in patent law and remains unknown to many.

Modern False Marking Cases

The first of the modern false marking cases, excluding the occasional false marking claim in a broader patent dispute between competitors, was Pequignot v. Solo Cup Co., No 1:07cv897-LMB/TCB (E.D. Va. July 2, 2009). In that case, Solo was accused of falsely marking coffee cup lids sold to Starbucks. The Eastern District of Virginia’s Judge Brinkema granted Solo Cup summary judgment finding that there was no intent to deceive the public in Solo’s alleged false marking based upon the advice of Solo’s counsel that it would be reasonable to replace molds identifying expired patents with molds showing no marking gradually. Additionally, the Court held that a patent marking “offense,” punishable by a fine up to $500, was the decision to improperly mark, not each improperly marked product. That decision significantly reduced the damages potential for false marking cases, and is currently on appeal at the Federal Circuit.

Then in the last week of December 2009, the Federal Circuit decided Forest Group, Inc. v. Bon Tool Co. In that case, the district court followed reasoning similar to the Solo case fining defendant $500 for a single decision to false mark. But the Federal Circuit reversed, holding that the fine was to be assessed per falsely marked product. That drastically changed the damages calculus for false marking claims, and led to the deluge of patent false marking cases beginning this January. 

In the first quarter of this year, at least to date, more than 80 false marking cases have been filed. The Federal Circuit will soon hear oral argument in Pequignot v. Solo Cup, to rule upon the bounds of the intent required by 35 USC Section 292. The only potential relief for patent holders is a section of the current patent reform bill in the U.S. Senate that would require that the false patent marking plaintiff have been harmed by the alleged false marking – check out a discussion of the provision at the Patent Docs.

The Local Patent Rules are Driving False Marking Cases

With that background, the question remains – why are so many false patent marking cases being filed in the Northern District? As I proposed above, the reasons stem from the Northern District’s new Local Patent Rules. First, many people see false marking cases as commercial litigation in patent litigation’s clothing. That is not completely the case, however. In fact, the parties must determine whether the marked product reads upon the patent claims, unless the the only issue is an expired patent. That means that the court and the parties must conduct a full infringement analysis with all of the required claim charts, technical analysis, expert discovery, Markman hearings and perhaps even summary judgment motions. That means that the Local Patent Rules will likely govern these cases, bringing with them the required Initial Disclosures and production obligations, and claim charts.

That is significant because the false marking plaintiff does not have all of the obligations of either a typical patent plaintiff or defendant, while the false marking defendant has most of its obligations. The plaintiff will not have to produce his reduction to practice documents, prosecution histories, etc. along with Initial Disclosures, although the defendant likely will have to at least produce the prosecution histories. And the defendant will also have the obligations of a typical defendant – producing documents sufficient to show how each accused product or process works. So, the defendant has initial discovery burdens that are not shared by the plaintiff, and the plaintiff is guaranteed early document production. Additionally, the defendant will likely be obligated to produce initial infringement contentions, after which the plaintiff would have to respond with noninfringement contentions. So, the plaintiff not only escapes initial production requirements, but also gets to file its initial claim charts last. These are significant costs for the defendant which may benefit the plaintiff, at little up front cost. Additionally, knowing that these costs are coming early in the case may drive the defendant’s willingness to settle up. Of course, it could always backfire on the plaintiff and drive the defendant’s settlement down in line with the amounts spent upon early discovery.

Second, the Local Rules contemplate a two year time-to-trial, as opposed to the prior patent litigation average in Chicago that was likely in excess of three years. So, the plaintiff still has a moderately long time to trial, driving up the defendant’s likely litigation fees and expenses, but not so long that the plaintiff feels like it will never see its potential award.