Federal Circuit Holds That “Any Person” Has Standing to Bring False Patent Marking Claims

But Foreshadows Possible Defenses

In Stauffer v. Brooks Brothers, Mr. Stauffer’s claims of false patent marking under 35 U.S.C. 292 were dismissed by the district court for lack of standing.  In a not-so-surprising but long awaited decision, the Federal Circuit held that “even though a relator may suffer no injury himself, a qui tam provision [i.e. 35 U.S.C. 292] operates as a statutory assignment of the Untied States’ rights, and ‘the assignee of the claim has standing to assert the injury in fact suffered in by the assignor.’” Stauffer v. Brooks Brothers, 2009-1428, -1430, -1453 (Fed. Cir., August 31, 2010). What exactly is the necessary “injury in fact” suffered by the United States? “[A] violation of that statute [35 U.S.C. 292] inherently constitutes an injury to the United States… .  Because the government would have standing to enforce its own law, Stauffer, as the government’s assignee, also has standing to enforce section 292.” Opinion at 9 (emphasis added).  To the extent that there remained much doubt, it is now clear - anyone can bring a false marking claim and no specific individualized injury is required.


What is perhaps more interesting than the issues decided in Stauffer are the issues that were mentioned, but left for another day. First, the Stauffer opinion discusses a constitutional challenge to 35 U.S.C. 292 under the “take care” clause of Article II of the Constitution that was raised by amicus Ciba Vision. After introducing this potential challenge, the opinion states:

While Ciba raises relevant points, the district court did not decide, and the parties did not appeal, the constitutionality of section 292. Thus, we will not decide its constitutionality with the issue having been raised or argued by the parties. (emphasis added)

While not clearly foreshadowing the outcome, the Federal Circuit is clearly sending out an invitation to take on this issue head on in future cases.   Given the relatively thin procedural safeguards set out in Section 292, this is certainly a live issue that has the potential to put an end to the continuously growing number of false marking cases as we know them.

Second, in the remand order, the opinion states:

We remand for the court to address the merits of the case, including Brooks Brothers’ motion to dismiss pursuant to Rule 12(b)(6) ‘on the grounds that the complaint fails to allege an ‘intent to deceive’ the public – a critical element of a section 292 claim – with sufficient specificity to meet the heightened pleading requirements for claims of fraud imposed’ by Rule 9(b).

As reported previously, a number of district courts have already dismissed cases for failing to meet the heightened pleading standard of Rule 9(b), so this issue will likely be presented to the Federal Circuit in the not-to-distant future.  If the Federal Circuit ultimately confirms that the heightened pleading standard is indeed required for false patent marking cases, the ability for "any person" to adequately plead a claim of false marking should be greatly diminished.

Secondary Considerations are Primary in the Post-KSR Obviousness Analysis

Two recent Federal Circuit cases emphasize the importance of the so-called “secondary considerations of non-obviousness” in deciding the question of patent validity.  In Transocean v. Maersk Contractors, the Federal Circuit reversed the district court’s grant of summary judgment of obviousness because the district court did not give any weight to “significant objective evidence of nonobviousness” presented by the patentee, Transocean.  The Federal Circuit held that:

The district court erred by failing to consider Transocean’s objective evidence of nonobviousness…While it is true that we have held in individual cases that objective evidence of nonobviousness did not overcome the strong prima facie case – this is a case-by case determination. [citations omitted] To be clear, a district court must always consider any objective evidence of nonobviousness presented in a case.

Opinion at 11.



Two days after deciding Transocean, the Federal Circuit decided Geo M. Martin Co. v. Alliance Machine Sys. Int’l LLC, 2009-1132, -1151 (Fed. Cir., August 20, 2010). In Geo M. Martin, the Court affirmed the district court’s JMOL holding (following a hung jury) that the asserted claims were obvious as a matter of law. In this case, the district court properly considered the “secondary considerations” of non-obviousness, but concluded that they did not overcome the strong prima facie showing of obviousness. For several points argued by the patentee, such as commercial success, failure of others, and industry praise, the Federal Circuit found insufficient evidence of a nexus between the alleged “secondary consideration” and the claimed invention. In addition, the patent owner argued that alleged copying by others also supported a finding of non-obviousness. The timing of the alleged copying, however, had the opposite impact on the Court. Rather than supporting non-obviousness, both the district court and Federal Circuit found the evidence supported acts of “simultaneous invention” and that “simultaneous inventions, made ‘within a comparatively short space of time,” are persuasive evidence that the claimed apparatus ‘was the product only of ordinary mechanical or engineering skill.’” [citations omitted] Opinion at 20. When all was said and done, “[b]alancing all of the secondary considerations, this court agrees…the [patentees] evidence of non-obviousness, even if fully considered by a jury, would fail to make a difference in this case.”  Opinion at 21.

These cases do not break significant new ground on the law of obviousness, but do provide continuing guidance as to the growing importance of secondary considerations of non-obviousness in determining patent validity.

** One final note:  Congratulations to my Dorsey & Whitney partners Tom Vitt and Sri Sankaran, who successfully represented Alliance Machine Systems in the Geo M. Martin case.

Where In The World Is The “Offer to Sell”?

It Doesn’t Matter for Liability Under 35 U.S.C. 271(a)

In Transocean v. Maersk Contractors, 2009-1556 (Fed. Cir., Aug. 18, 2010) the Federal Circuit dealt squarely with the issue of an offer to sell made outside the U.S. for use of a product in the United States. The facts were largely undisputed. A contract was entered into in Norway by two U.S. companies for the use of an oil drilling ship within the U.S. waters in the Gulf of Mexico. The ship was made outside the U.S. pursuant to the contract. The ship was later modified to be non-infringing (pursuant to an earlier order entered in a different case), so use of the actual modified ship was found not to be an act of infringement. However, the contract contemplated the unmodified design and this design was therefore the subject of the “offer to sell.”


The Federal Circuit held that:
Opinion at 19.  Thus, it is now clear: It doesn’t matter where the offer is made, only where the future sale is contemplated. If that contemplated sale is directed to the U.S., liability for infringement under 35 U.S.C. 271(a) may attach for the offer. Of course, if there is only an offer and no actual infringing sale, damages may become a difficult question. That, however, is a question for another day.

In order for an offer to sell to constitute infringement, the offer must be to sell a patented invention within the United States. The focus should not be on the location of the offer, but rather the location of the future sale that would occur pursuant to the offer.

Although not an issue squarely presented in Transocean, the language of this opinion suggests that an “offer” that is made within the United States, but contemplates performance outside the United States would not be within the scope of 35 U.S.C. 271(a).  In reaching its holding, however, the Court noted the policy considerations that underlie it holding.  The Court stated that “[a company making an offer outside the U.S.] would generate interest in its product in the U.S. to the detriment of the U.S. patent owner, the type of harm that offer to sell within the U.S. liability is meant to remedy.”  Despite this policy guidance, it would seem that, at least in some cases, an offer made in the U.S. for a sale contemplated outside the U.S. could also have a negative impact on the U.S. patent owner, yet under a fair reading of Transocean may not be actionable.

A “Golden Hour” for Defendants Accused of Joint Infringement

After a 27 page discussion on inequitable conduct, Judge Dyk dedicated a mere two paragraphs affirming a district court grant of JMOL that rejected a jury finding of infringement of both method claims and system claims. Golden Hour Data v. emsCharts, 2009-1306 -1396 (Fed. Cir. August 9, 2010).  For both the method and system claims, the Federal Circuit majority agreed with the district court that “that the evidence of control or direction was insufficient for the jury to infer control or direction.” Opinion at 27.

The claims of Golden Hour’s patent (U.S. Patent No. 6,117,073) are directed to an “integrated data management system for tracking a patient incident.” Claim 1, a system claim, requires (1) a dispatch module and (2) a billing module. Claim 15, a method claim, required steps of (1) collecting flight information, (2) collecting patient information from a clinical encounter, and (3) integrating the patient information and flight information.



The first defendant, emsCharts, developed a client billing module. The second defendant, Softtech, provided a flight dispatch and information module. “The two companies formed a strategic partnership, enabled their two programs to work together, and collaborated to sell the two programs as a unit.” Opinion at 7-8. According to an emsCharts press release, the defendants’ “partnership allows emsCharts to combine their existing product line with Softtech’s CAD [Computer Aided Dispatch] technology, enabling them to deliver a complete pre-hospital data solution for Emergency Medical Services.” J. Newman dissent at 5. Although the press release uses the term “partnership” and the majority refers to it as a “strategic partnership,” the opinion does not further elaborate on any actual legal relationship between Softtech and emsCharts with regard to the integrated system.

With respect to sales of the integrated system, the majority stated that “[s]uch a sale might well create liability on the part of emsCharts for the sale of the patented system, whether or not emsCharts controlled Softtech. The problem is that by agreement, claims 1 and 6-8 were submitted to the jury only on a joint infringement theory. Such a verdict can only be sustained if there was control or direction of Softtech by emsCharts.” Opinion at 28. Despite acknowledging the “strategic partnership” between the parties, the majority held that the necessary “control or direction” was still lacking.

The majority first considered the process claims and relied on Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329 (Fed. Cir. 2008) and BMC Resources, Inc. v. Paymentech, L.P, 498 F.3d 1373 (Fed. Cir. 2007), for the well established proposition that “control or direction” of one party by another is required for joint infringement of process claims. Without elaboration (or citation), however, the majority then extended this test to the system claims as well.

In her dissent, J. Newman suggests that “a collaborative effort as here, a “strategic partnership” to sell the infringing system as a unit, is not immune from infringement simply because the participating entities have a separate corporate status.” Dissent at 5. Judge Newman does not cite any precedent for this position, however.

Although only two paragraphs long (less than half the length of this post), Golden Hour is interesting for two reasons. First, it clearly applies the “controlling party” or “mastermind” standard for joint infringement to system claims as well as process claims. (This was suggested in BMC Resources, but not clearly part of the holding). Second, it is a case where two parties accused of joint infringement clearly worked closely together to integrate and sell the accused system and yet the resulting “strategic partnership” between the defendants was still not deemed close enough by the majority to support a jury verdict of joint infringement.

Recent District Court Decisions Hold False Marking to Heightened Pleading Requirements

Recent decisions from the Federal Circuit have not provided defendants with any “silver bullets” to obtain early dismissal of cases alleging false patent marking. To the contrary, these decisions (which established that the fine for false marking is based on each article marked and confirmed that a product marked with an expired patent number is indeed an unpatented article), may serve to embolden relators and result in them bringing additional false marking cases. Although the standard for pleading false marking cases has not yet been addressed by the Federal Circuit, recent district court decisions have been holding false marking allegations to a higher pleading standard under Fed. R. Civ. P. 9(b) and dismissing cases that fail to meet this standard. These district court cases may provide some hope to defendants in false marking cases.


In a Memorandum Opinion dated June 17, 2010 in Simonian v. Cisco Systems, 10-CV-1306 (N.D. Ill), Judge Der-Yeghiayan dismissed Mr. Simonian’s complaint on Cisco’s motion to dismiss under Rule 12(b)(6). In dismissing the complaint, the Court acknowledged that there was no binding precedent on point, but reasoned that false marking allegations are fraud-based claims and therefore “are subject to the heightened pleading requirements of Rule 9(b).” Opinion at 6. With respect to the intent prong of the false marking claims, Mr. Simonian alleged, upon information and belief, that Cisco is “a sophisticated company and has many decades of experience applying for, obtaining, and/or litigating patents.” The court found that this general allegation was “unsupported by specific facts,” and that “Simonian has failed to plead specific facts showing Cisco’s knowledge of the mismarking or its intent to deceive the public.” Opinion at 8. As such, the Court held that “Simonian’s complaint does not meet the heightened pleading requirements of Rule 9(b)” and dismissed the complaint. The court dismissed Simonian’s claims without prejudice, however, and specifically provide that Mr. Simonian may file a motion for leave to file an amended complaint. (Simonian has since filed a motion seeking leave to file an amended complaint and Cisco has filed are opposition to this motion, which is now before the court.)

Similarly, in Advanced Cartridge Technologies v. Lexmark, Int’l., Judge Merryday dismissed Advanced Cartridge Technologies’ false marking allegations for failing to meet the pleading requirements with respect to intent under Rule 9(b).  Advanced Cartridge Technologies v. Lexmark, Int’l, 10-CV-486 (M.D. Fl.), see Order dated June 30, 2010 (“Order”).   In this case, the complaint simply stated that “defendant knows, or reasonably should know, that marking the Cartridge Products with patents that do not cover the Cartridge Products, or patents that are invalid or expired, will deceive the public.” See Order at 2. As to this allegation, the court concluded that “[p]roviding only sparse factual detail, the complaint utterly fails to ‘state with particularity the circumstances constituting fraud.’” Order at 2.  As with the Simonian case, the plaintiff/relator was given leave to file an amended complaint to attempt to remedy the inadequate pleadings.

Because these cases were dismissed without prejudice, the plaintiff/relator has been given a second bite at the apple. It remains to be seen whether these plaintiff’s will be able to plead sufficient facts, even upon information and belief, to meet the heightened pleading requirement under Rule 9. It will also be interesting to see if other courts follow these cases in holding false marking cases to the heightened pleading standards under Fed. R. Civ. P. 9(b) and whether this will provide a substantial change in litigating false marking cases.

Bilksi Comes Out With A Wimper, Rather Than With A Bang

After receiving dozens of amicus briefs and pondering the case for close to seven months following oral argument, the Supreme Court has finally released its much anticipated decision in Bilsky. Bilski v. Kappos, 561 U.S. ___(2010).   In short, the Court affirmed the judgment of the en banc Federal Circuit that the claims of the Bilski patent are not directed to patent eligible subject matter. In doing so, however, the Court specifically rejected the Federal Circuit's “machine or transformation test” as the sole test for patent eligibility for process or method claims. Instead, it viewed Bilski’s claims as “abstract ideas” that are outside the scope of patent eligible subject matter.

This result is not too surprising to this commentator.   As I mentioned last June when cert was granted, "[the Supreme Court's] past decisions over the years on the question of patentable subject matter, however, tend to avoid bright line standards and lean towards a more liberal scope of patentable subject matter, but certainly don’t embrace the scope of “anything under the sun made by man” as the Court once suggested.
The following quotations are from the syllabus and/or opinion of the Court and reflect the Court's holding. 

• "The machine-or-transformation test is not the sole test for patent eligibility under §101. The Court’s precedents establish that although that test may be a useful and important clue or investigative tool, it is not the sole test for deciding whether an invention is a patent-eligible “process” under §101."

• "[T]he Federal Circuit incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test. Recent authorities show that the test was never intended to be exhaustive or exclusive."

• "Section 101 similarly precludes a reading of the term “process” that would categorically exclude business methods. The term “method” within §100(b)’s “process” definition, at least as a textual matter and before other consulting other Patent Act limitations and this Court’s precedents, may include at least some methods of doing business."

• "Section 273 thus clarifies the understanding that a business method is simply one kind of“method” that is, at least in some circumstances, eligible for patenting under §101."

• "This Court’s precedents establish that the machine-or transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101. The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible “process.”

• "[I]n deciding whether previously unforeseen inventions qualify as patentable “process[es],” it may not make sense to require courts to confine themselves to asking the questions posed by the machine-or-transformation test."

• "Even though petitioners’ application is not categorically outside of §101 under the two broad and  textual approaches the Court rejects today, that does not mean it is a “process” under §101."

• "Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, the Court resolves this case narrowly on the basis of this Court’s decisions in Benson, Flook, and Diehr, which show that petitioners’ claims are not patentable processes because they are attempts to patent abstract ideas. Indeed, all members of the Court agree that the patent application at issue here falls outside of §101 because it claims an abstract idea."

• "The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. Allowing petitioners to patent risk hedging would preempt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea."

• "Petitioners’ remaining claims are broad examples of how hedging can be used in commodities and energy markets. Flook established that limiting an abstract idea to one field of use or adding token post solution components did not make the concept patentable. That is exactly what the remaining claims in petitioners’ application do."

• "Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr."

• "And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past."

More to come regarding the concurring opinions of Justice Stevens (joined by Justices Ginsburg, Breyer and Sotomayor) and Justice Breyer (joined by Justice Scalia) in a later post.



[Many thanks to Randall Berman, an associate with Dorsey & Whitney, for his assistance in quickly preparing this post]

False Marking Cases Are Likely to Live Another Day

Articles Marked With Expired Patent Numbers Are
"Falsely Marked," But Intent Will Be More Difficult For Relators to Establish

As reported in earlier posts, the number of false patent marking cases exploded following the Federal Circuit’s holding in The Forest Group v. Bon Tool, 590 F. 3d 1295 (Fed. Cir. 2009) that held that every falsely marked product constitutes a separate offense subject to fine under 35 U.S.C. 292. The vast majority of the recently filed false marking cases are based on the theory that a product marked with an expired patent number is an “unpatented article.” This issue was squarely presented in Pequignot v. Solo Cup, where the district court held that this was indeed the case. Many false marking defendants have been anxiously awaiting the Federal Circuit decision in Pequignot hoping that the Federal Circuit would reverse the finding of the district court with respect to expired patents and provide an opportunity to quickly defeat or dismiss many of these cases. Those folks will now be disappointed. In its June 10, 2010 decision, the Federal Circuit unequivocally held that “articles marked with expired patent numbers are falsely marked.” (See http://cafc.bna.com/09-1547.pdf)

Of course, finding that a product is falsely marked is not the end of the inquiry. In order to be liable for false marking, the marker must act “for the purpose of deceiving the public.” Under the Federal Circuit’s holding in Clontech Labs. v. Invitrogen, this intent element can be satisfied if it is proven that the statements about marking were false and the marking party knew the statements were false. It is here where Solo prevailed and where the Federal Circuit provided some helpful guidance to those accused of false marking. First, the Federal Circuit clearly held that Clontech only establishes a presumption of intent and that such a presumption can be rebutted with evidence of good faith. Second, the burden of proof needed to rebut the Clontech presumption is only a preponderance of evidence. Finally, the court agreed that when ‘the false markings at issue are expired patents that had previously covered the marked products, the Clontech presumption of intent to deceive is weaker” and therefore easier to rebut. In this case, Solo was able to rebut the Clontech presumption by establishing that the marking at issue was made for legitimate business reasons not related to “deceiving the public” and that it had acted consistently with the advice of counsel it had received. As both the district court and Federal Circuit noted, “Pequignot has provided not a scintilla of evidence that Solo ever ignored its counsel’s advise or, more importantly manifested any actual deceptive intent.”


In addition to expired patent numbers, Solo also marked certain packaging materials used for both patented and unpatented articles using the language that the products “may be covered” and referenced a website where more specific patent information could be found. The Federal Circuit noted, in dicta, that “it is highly questionable whether such a statement could be made ‘for purposes of deceiving the public,’ when the public would not reasonably be deceived into believing the products were definitely covered by a patent.”  In finding no intent to deceive the court noted that Solo proffered evidence to rebut a presumption of intent, including “provid[ing] the consumer with an easy way to verify whether a specific product was covered; the consumer could ‘contact www.solocup.com’ for details.” Thus, while the broad language was still an act of “false marking,” there was ample evidence to rebut a presumption of intent to deceive the public.

Some takeaways from Pequignot:

• Marking with expired patents is “false marking.” This case is not a silver bullet that will result in false marking cases being dismissed en mass.

• If marking is false, and known by the marker to be false, there is a rebuttable presumption of intent to deceive the public.

• The presumption of intent to deceive the public can be rebutted with a preponderance of evidence establishing good faith reasons for the marking and/or reasons mitigating bad faith

• Referring to a collection of products and patents and indicating that the product “may be covered” still results in “false marking” but for a relator to establish that a marker had the requisite intent to deceive with such equivocal language should be difficult.