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"Patent Markings" Lawsuits Could Run Into the Trillions
bizwriter writes "The latest legal bugaboo facing manufacturers is the false patent marking suit. Using what has been until recently an obscure type of legal action, individuals and enterprising law firms have targeted large manufacturers with lawsuits that can easily run million of dollars — in a case involving a drink cup manufacturer, over $10 trillion — for incorrectly including patent numbers on products. Some companies named in such suits are 3M, Cisco, Pfizer, Monster Cable, and Merck. Even expired patent numbers can be actionable." Sounds like a perfect opportunity for some enlightened appeals court to inject some sense into the debate. What do you think the chances are? Note: if ever there were a page that cries out for the Readability bookmarklet, this is it.
How about this is completely unrelated and if I really care about the list of patents on a product I'm probably treating them as a warning, not an ad, and I'd rather they be too-inclusive than super-exclusive?
The World Wide Web is dying. Soon, we shall have only the Internet.
I wish (US) copyright law worked this way around ... right now there's essentially no risk in tacking on a questionable copyright notice.
> The problem for companies is that they might have lost track of what patents
> cover a given product, or might have forgotten to update packaging to remove
> numbers of patents that had expired.
Don't "lose track". Don't "forget". Or don't mark (it isn't required). Problem solved.
Warning: this article may contain humor, sarcasm, parody, and perhaps even irony. Read at your own risk.
Why is it that editors around here seem to think that laws are made by the courts? This one is a great example - saying it is an opportunity for the Federal Appeals court to do something. Like what? They get to rule based on law. If we need the law changed, the court can't do that - it needs to go to the legislative branch for that.
I still say Monster Cable deserves to be sued to bankrupcy. Same with Best Buy (Worst Buy) and Microsoft.
Never going to happen.
In the eyes of the Federal Gov, upholding patents and IPs are so important, it would be considered National Security to protect them. Seriously, what the hell does America have that's worth selling? Nothing except services and IP. We hardly manufacture anything anymore.
Life is not for the lazy.
> Sounds like a perfect opportunity for some enlightened appeals court to
> inject some sense into the debate.
No, it's a perfect opportunity for an enlightened Congress to correct the law. Oh. Wait...
Warning: this article may contain humor, sarcasm, parody, and perhaps even irony. Read at your own risk.
From the article, these are suits against companies claiming patent protection on products when they don't in fact have it.
That's the opposite of claiming patent protection for something you don't have rights to, ie, patent trolling.
You are not a brain: http://books.google.com/books?id=2oV61CeDx-YC
I have no sympathy with those who claim intellectual property - sure, these lawsuits are filed by scum, but they're filed against people who claim to own ideas. I hope these are long, plentiful, painful lawsuits for both sides.
For every problem, there is at least one solution that is simple, neat, and wrong.
You can sue anyone for anything. Doesn't mean you'll win.
If a company falsely labels its products with imaginary patent numbers, they deserve to be sued into oblivion. It's outright lying to the public, and an attempt at intimidating would-be competitors. It's wrong and should be punished harshly.
Patents are overused as is, and one of the reasons they are often misused (eg against open source) is because it's easy and relatively risk free. If the costs of misuse can be increased dramatically, many companies may think twice before doing it.
Monoprice sells those cables for below $4 so that would have to be a lot of postage charges to burn that.
This is simple a case of false advertising. The companies that are being sued labelled their products wrong. "Oh I forgot". Yeah, likely story. I see they did NOT forget to put the patent claim on the product. How odd is that eh?
If it is going to cost the likes of Monster Cable a few millions or even bankrupt them to get false patent claims of products, then I am all for it, and the people bringing these cases making a fortune? Well sometimes the person who cleans up the system gets paid.
Say that someone found a way to make serious money of prosecuting companies sending fake copyright take down notices, would we be against that as well? No.
Sometimes you need to cheer on the slime to get rid of the scum.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
Since the premise of the whole thing is that the plaintiff is a friend of "our Lord the King" or the US Government and the defendant submitted false claims to it, and the plaintiff is not personally harmed, there is no need to award the plaintiff any damages. Problems solved, just rule that any damages awarded will go to the aggrieved party, or the US government in this case. Once the lawyers know they are not going to be getting a piece of the award, they will go find some one else to screw^h^h^h^h^h sue.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
How about reforming the law to do away with the moronic idea of awarding "punitive damages", or whatever it is called in cases like these, to claimants? In some countries, like the one I live in, payments to claimants are pretty much limited to actual damages and legal fees, maybe with a small bit added on top for things like mental anguish or redress. That lady who sued McDonalds over scalding coffee should at most have gotten her medical and legals bills refunded, with perhaps a couple thousand thrown in for her trouble. That's what she'd get over here (and if I remember correctly, that's what she originally sued McD for). Make no mistake though, actual damages in case of severe injuries can run into millions as well... but we do not reward people for a bit of bad luck or for finding some obscure legal technicality that does not affect anyone. Slipping on the pavement in front of a fancy restaurant should not turn into a windfall, neither should this new form of patent trolling.
If a claimant can prove actual damages caused by improper patent marking, then by all means should they be able to sue for these damages. And if another company has been naughty and put incorrect markings on their products, they should received reasonable punishment. Some of these amounts sound excessive, and in any case, they should be treated as fines and go to the state, not to some random claimant.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
That's what us old-timers call fraud. It's not OK, no matter how the apologists here may try to spin it. Yes, sometimes it's not cheap or easy to comply with the law - but that doesn't make complying with the law optional no matter how much you wish it was.
Sometimes I wonder if the people who post here think about what they're saying - or if they just scan the article enough to formulate a (weak) opposing point and rush to post it. There's only one thing worse than a patent troll and that's corporations trolling with patents they don't own. If corporations can destroy people for violating their patents, what do you think should be the proper punishment for claiming patents that you don't own?
Live by the sword, die by the sword.
Those are the maximum damages allowable under the statute. Actual damages may be much lower; a reward of $0.01 or even $0.10 per cup might not be so unreasonable for committing a billion counts of fraud. What is interesting to note, however, is that one must prove both that either the cups were never patented, or if they were that they were manufactured after the patent expired.
The whole point of qui tam actions are to encourage people to bring the suits in the first place. They do this with Medicaid fraud in many states, for example. The state might not have the resources to closely examine all possible instances of fraud, or private parties might have better information. So by giving people a cut off the award, you give them an incentive to look for the fraud and to bring it to the government's attention.
"Anyone who [rips a CD] is probably engaging in copyright infringement." - David O. Carson
Here is a link to the court's decision. It is not a judgment against Solo, but a denial of their request to dismiss the case.
The judge argues the problem of incorrect markings here:
The plaintiff, i.e. the "troll", has not yet made his case. In order to prevail he has to prove that Solo used the incorrect markings "for the purpose of deceiving the public." That remains to be determined.
But therein, it is not clear to me what's really going on here with Solo (for example). It seems that laziness about cleaning up one's patent markings has a distinct reward, i.e. to scare off copy-cat competitors (which is exactly the kind of subsequent activity that the publicly filed/expired patent is intended to encourage). I'm not so sure that these are just mistakes, and in fact, I find it unlikely that there isn't some willfulness here. The corporate counsels that insist on taking advantage of adding the patent markings don't consider the correctness of removing them once they are no longer valid???
It may take a crack of the whip to clean up the rampant "laziness" that leaves these wrong and discouraging markings in use.
It still drives me nuts when people point to that case as evidence that our legal system is broke. It is broke, I don't deny but that case is not one to use. Here are some facts about that particular case and why the jury awarded such a large fine (that was later reduced by a judge): (from http://lawandhelp.com/q298-2.htm in case you want to look yourself).
McFact No. 1: For years, McDonald's had known they had a problem with the way they make their coffee - that their coffee was served much hotter (at least 20 degrees more so) than at other restaurants.
McFact No. 2: McDonald's knew its coffee sometimes caused serious injuries - more than 700 incidents of scalding coffee burns in the past decade have been settled by the Corporation - and yet they never so much as consulted a burn expert regarding the issue.
McFact No. 3: The woman involved in this infamous case suffered very serious injuries - third degree burns on her groin, thighs and buttocks that required skin grafts and a seven-day hospital stay.
McFact No. 4: The woman, an 81-year old former department store clerk who had never before filed suit against anyone, said she wouldn't have brought the lawsuit against McDonald's had the Corporation not dismissed her request for compensation for medical bills.
McFact No. 5: A McDonald's quality assurance manager testified in the case that the Corporation was aware of the risk of serving dangerously hot coffee and had no plans to either turn down the heat or to post warning about the possibility of severe burns, even though most customers wouldn't think it was possible.
McFact No. 6: After careful deliberation, the jury found McDonald's was liable because the facts were overwhelmingly against the company. When it came to the punitive damages, the jury found that McDonald's had engaged in willful, reckless, malicious, or wanton conduct, and rendered a punitive damage award of 2.7 million dollars. (The equivalent of just two days of coffee sales, McDonalds Corporation generates revenues in excess of 1.3 million dollars daily from the sale of its coffee, selling 1 billion cups each year.)
McFact No. 7: On appeal, a judge lowered the award to $480,000, a fact not widely publicized in the media.
McFact No. 8: A report in Liability Week, September 29, 1997, indicated that Kathleen Gilliam, 73, suffered first degree burns when a cup of coffee spilled onto her lap. Reports also indicate that McDonald's consistently keeps its coffee at 185 degrees, still approximately 20 degrees hotter than at other restaurants. Third degree burns occur at this temperature in just two to seven seconds, requiring skin grafting, debridement and whirlpool treatments that cost tens of thousands of dollars and result in permanent disfigurement, extreme pain and disability to the victims for many months, and in some cases, years.
Voting them all out of office, now that's change I can believe in.
McFact No. 9. McDonalds wouldn't make their coffee that hot if people didn't want it that hot. If its hotter than other restaurants, presumably that is their competitive advantage.
This came up in the trial. Managers were encouraged to turn the heat up because the ultra-hot coffee wouldn't cool down enough for the customers to cash in on the free refill unless they loitered long after they'd finished eating the food they'd ordered.
Citing revenue numbers and not profits is just a low blow.
I'm sure McDonalds are a bunch of big boys and can handle it. Not really sure how this is a low blow...
I know coffee is cheap, but time, labor, energy, buildings, equipment, management, and lawyers are not. McDonald's does not "make" $1.3M/day selling coffee, they just collect that much, based on estimates of annualized sales and the list price of a cup of coffee.
Care to cite your source?
$1.3M in daily profits from coffee would not be remotely shocking for a company with over 31,000 locations and 47 million customers daily. The gross margins on coffee are around 60% (look at Starbucks income statement if you need proof) and McDonalds EBIT margin in 2008/09 was 29.8%. McDonalds had revenues around $30 billion last year. If they really made $1.3M on coffee per day in profit that means their annual coffee sales were around $1.6 billion or if the gross margin is used the number is more like $780 million in sales. Big numbers but quite reasonable given McDonalds revenues and the amount of coffee they sell. Starbucks revenues by comparison were just under $10 billion last year as a quick sanity check so $1.6 billion in coffee sales from McDonalds sounds pretty reasonable. I'm actually a little surprised it's not higher.
And even "collect" is a stretch, because not every cup of coffee sells at list price, and not every cent of every transaction is necessarily collected by McDonalds (e.g. credit card processing fees).
The percent of losses due to these factors is minor (2-4% at most is typical in the industry) and without question quite well known to McDonalds accountants. It is accounted for (indirectly) in their financial statements so any numbers you look at will have factored this in already.
Disclosure: I am a certified accountant.
Loser pays actually helps a lot more than you're describing. It makes it enormously more feasible for attorneys to take cases on contingency, especially obviously ridiculous ones.
EVERY attorney I've ever spoken with (and that is a lot of them) has told me that if a case goes to court there is at minimum a 10% chance they will lose the case no matter how iron clad their argument. Even being correct is no guarantee that you will win once the case gets to a judge/jury. If we have a loser pays system that is a pretty substantial risk for a party who can't afford to lose.
Don't get me wrong, I think there should be some form of loser pays in the system - we just have to be careful how it is implemented.
Yes, it is. It's the very definition of not caring about your customers: allowing them to potentially come to harm for your own profit.
Yet Another Tech Blog
(but so much more, including game and movie reviews)
http://yanteb.peasantoid.org
In more recent developments, Solo is granted summary judgment. BNet's cited blog post must have missed it.
http://www.williamsmullen.com/rocketdocketiplit/blog.aspx?topic=63&All=null&IsListParentTopic=true
"Last week, in a case it described as one of "practically first impression," the Eastern District of Virginia granted summary judgment in favor of Solo Cup Co. that it was not liable for improper patent marking under 35 U.S.C. 292(a). Pequignot v. Solo Cup Co., No 1:07cv897-LMB/TCB (E.D. Va. July 2, 2009). The Court agreed with Solo that the advice of counsel it received to replace patent-marking molds with non-marking molds in a gradual fashion was reasonable. Solo's overall conduct was held to evidence a lack of intent to deceive the public. The Court also held that an "offense" under the statute is the overall decision to mark improperly, thereby rejecting Pequignot's argument that Solo should be penalized for each and every lid it marked."
"Solo also prevailed on summary judgment with respect to its fallback position, namely, that even if there were intent to deceive the public, the offenses punishable under the statute are the decisions to mark improperly, not each and every marking of a product. Thus, in an alternative holding, the Court decided that the maximum amount of damages for which Solo could be liable is $1500."
And in a recent article by Law Professor Thomas Field, http://www.ipfrontline.com/printtemplate.asp?id=24082
"The opinion in Pequignot v. Solo Cup Co., 646 F.Supp.2d 790 (E.D. Va. 2009) (Pequignot III), a case resolved last August, and now on appeal, signals a very different, perhaps more typical view of those who seek to recover under section 292(b). There, the court grants summary judgment for Solo because it was unable to find deceptive intent."
hi!
How about reforming the law to do away with the moronic idea of awarding "punitive damages", or whatever it is called in cases like these, to claimants?
So how do you propose to make large companies pay attention to their bad behavior? The medical bills are pocket change and a company doesn't have a sense of ethics. They exist to make money. That is the ONLY reason most of them exist. If a company misbehaves one way to punish the company is to do so financially - hence, punitive damages.
If you have a better idea I'm sure lots of people would be interested but I'm pretty sure you don't.
In some countries, like the one I live in, payments to claimants are pretty much limited to actual damages and legal fees, maybe with a small bit added on top for things like mental anguish or redress.
Which is an approach that potentially rewards large companies for bad behavior. If the benefit of the bad behavior outweighs the financial cost, the company is going to behave badly. People have died because of this sort of cost/benefit analysis.
And if another company has been naughty and put incorrect markings on their products, they should received reasonable punishment.
Agreed but you don't seem to have a very clear idea of what reasonable might be. A $50,000 fine to McDonalds is not a punishment.
Some of these amounts sound excessive, and in any case, they should be treated as fines and go to the state, not to some random claimant.
Why is the state any more deserving? Besides, the state will take much of it in taxes anyway.