Source: https://pitiptechblog.com/2011/07/
Timestamp: 2019-04-26 00:43:47+00:00

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Yesterday, the Federal Circuit heard oral arguments in FLFMC, LLC v. Wham-O, Inc. (No. 2011-1067) to decide whether the patent false marking statute (35 U.S.C. § 292) is constitutional under the “Appointments” and “Take Care” clauses of the United States Constitution (Article II, Sections 2 and 3). The panel is comprised of Judges Linn, Dyk, and Prost, and attorneys representing FLFMC, Wham-O, the US government, and the Chamber of Commerce of the United States of America argued before the Court. An audio recording of the argument can be heard here.
The district court below (from the Western District of Pennsylvania) dismissed FLFMC’s lawsuit, finding that it lacked standing to bring the action, and FLFMC appealed to the Federal Circuit.
It is difficult to predict how the Court will rule from the argument yesterday, but we can get an idea of some of the key issues that the Court is wrestling with. The argument chiefly focused on two key issues—(1) is there a sufficient government notice requirement in the statute and (2) does the government have sufficient control over the litigation to satisfy its constitutional obligations?
Does § 292 Require Notice to the Government?
As to the first issue, counsel for FLFMC noted that there is a provision for giving the USPTO notice of any lawsuit involving a patent (35 U.S.C. § 290) and many plaintiffs are giving the government notice as a matter of routine practice. Counsel for Wham-O countered that many plaintiffs are not giving notice under § 290 or otherwise and that § 290 only requires notice within 30 days of filing suit, by which time many cases have been settled and dismissed. In either case, the government is not getting adequate notice to fulfill its constitutional obligations. The government conceded that the notice under § 290 does not specifically indicate that the lawsuit involves allegations of false marking, so the government would have to specifically investigate every patent case filed to determine whether it involved false marking, as opposed to infringement, for example.
The Court clearly was concerned about the apparent lack of notice, and the panel questioned whether it could create a notice requirement to preserve the constitutionality.
Does the Government Have Sufficient Control of the Litigation?
The other key issue was the government’s ability to intervene and control the litigation. On its face, the statute is silent about government control and intervention. Counsel for FLFMC argued that the Federal Rules of Civil Procedure give the government the right to intervene because it has a stake in the outcome of the lawsuit, and that the Court can look to these Rules in determining the constitutionality. The Court seemed to accept this argument. Counsel for Wham-O countered that while the government may be able to intervene, it has no ability to control the litigation. It cannot force a dismissal of the lawsuit or reject a settlement. It can only ask the Court for assistance, which puts the government in no better a position that any other amicus or intervenor. There was also some dispute over whether civil litigants should be precluded from bringing suit if the government has already filed a criminal action.
Given the tenor of the argument, it seems safe to say that the Court has some concerns about the constitutionality of the false marking statute. Whether those concerns rise to the level of invalidating the statute is another question. What will be interesting is how the decision in this case will affect the legislation pending in Congress that rewrites the false marking statute (HR 1249, § 16 and S 23, § 2(k)). Should the Court hold that the current false marking statute is unconstitutional, it may require Congress to revisit the amendments to that statute.
The parties’ Federal Circuit briefs can be found here.
The District Court order finding no standing can be found here.
Materials that have fallen into the public domain should be free of any claims of copyright infringement, right? Not so fast says the Eighth Circuit. As with many issues surrounding copyright law, the answer is not so clear cut. It depends on whether other copyrights exist and how one uses the public domain materials in relation to the other copyrights.
At the time of these movies’ release in 1939, the copyright laws required that materials be marked with a copyright notice in order to gain the protection of the copyright laws. Materials that failed to comply with the notice requirements of the 1909 Copyright Act in effect at that time forfeited any copyright protections and fell into the public domain. Prior to releasing the films, the studios distributed marketing materials (posters, photographs, lobby cards, etc.) with images of the actors in costume on the sets. None of these materials complied with the copyright notice requirements, and, thus, fell into the public domain. When the movies were released, the studio properly marked the movies and continues to hold a valid copyright in them.
Defendants used these public domain images on shirts, lunch boxes, music box lids, playing cards, and three-dimensional models and figurines. In some cases, defendants added features to the images, such as signature phrases from the movies, or combined the images to create new scenes, sometimes reminiscent of scenes from the movies.
Warner Brothers sued, arguing that defendants were only entitled to reproduce the public domain images in their entirety and in the same form without any modifications (i.e., only reproduce the posters as posters). Anything else, it argued, violated its copyrights in the movies and the right to create derivative works.
The Eighth Circuit agreed that the underlying images from the marketing materials were in the public domain, but found that the use of those materials was limited by other copyrights.
In other words, if material related to certain characters is in the public domain, but later works covered by copyright add new aspects to those characters, a work developed from the public domain material infringes the copyrights in the later works to the extent that it incorporates aspects of the characters developed solely in those later works.
The Court then looked at the original books, the movies, the public domain materials, and the defendants’ products to see whether defendants’ use infringed Warner Brothers’ copyrights. In particular, the Court looked to the images in the marketing materials and found that the visual appearance was not sufficiently consistent to have thrown the characters themselves into the public domain by virtue of the release of the marketing materials. Instead, the Court found that only the exact images were in the public domain.
Taking this all together, the Eighth Circuit found that defendants were not limited to merely reproducing the public domain materials in exactly the same form as they originally existed. Instead, it found that defendants could reproduce any portion of the public domain materials in any two-dimensional format they chose.
The Court did prohibit defendants from combining public domain images into a new composite work, though. This, it felt, created a “new increment of expression of the film character that was not present in the separate images” and, therefore, infringed Warner Brothers’ copyrights. Similarly, the Court prohibited defendants from taking the two-dimensional images and recasting them in three-dimensional form. This too created a new increment of expression that violated Warner Brothers’ copyrights.
The takeaway from this case is that there are no simple answers when it comes to materials that are both copyrighted and in the public domain. One has to look carefully at the facts of the case to determine the nature and scope of the materials in the public domain and in the copyrighted materials. For example, do the public domain materials convey properties and characteristics of the characters or are they just isolated images? How much is in the public domain versus how much is still copyrighted? Has the copyrighted material added anything over the material in the public domain?
While not a complete victory for the studio, Warner Brothers obtained much of what it wanted in this case. Defendants cannot create new works based on the material in the public domain. Instead, they are limited to reproductions (either in full or in part) of the public domain material. It will be interesting to see if either side tries to appeal this decision to the Supreme Court.
Will Patent False Marking Litigation Flame Out?
Posted on July 1, 2011 by PSMN® | Comments Off on Will Patent False Marking Litigation Flame Out?
With the House and Senate passing versions of the America Invents Act that will reform the patent laws as we know them, I thought it would be interesting to look back at how patent false marking litigation burst onto the scene in 2010 and how it appears to be flaming out now in 2011. In the last two years, the patent world has been abuzz with claims of false marking brought by individuals against some of the largest companies in America. There were fears that this litigation would result in monstrous penalties where there was little “wrongful” action. As typically happens, these fears appear to have been overblown. While certainly a headache for those companies that were sued and for those companies that have gone to great lengths to verify compliance with the statute, the result seems to be more of a short-term inconvenience.
(a) Whoever, without the consent of the patentee, marks upon, or affixes to, or uses in advertising in connection with anything made, used, offered for sale, or sold by such person within the United States, or imported by the person into the United States, the name or any imitation of the name of the patentee, the patent number, or the words “patent,” “patentee,” or the like, with the intent of counterfeiting or imitating the mark of the patentee, or of deceiving the public and inducing them to believe that the thing was made, offered for sale, sold, or imported into the United States by or with the consent of the patentee; or Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word “patent” or any word or number importing that the same is patented for the purpose of deceiving the public; or Whoever marks upon, or affixes to, or uses in advertising in connection with any article, the words “patent applied for,” “patent pending,” or any word importing that an application for patent has been made, when no application for patent has been made, or if made, is not pending, for the purpose of deceiving the public– Shall be fined not more than $500 for every such offense.
35 U.S.C. § 292(a). Prior to 2009, courts interpreting these statutes held that the penalty should not be imposed for each article falsely marked, but rather should be imposed for the decision to falsely mark a product line. See, e.g., London v. Everett H. Dunbar Corp., 179 F. 506 (1st Cir. 1910). As a result, there was little incentive for a litigant to bring a false marking claim and few cases were filed.
In 2007, things began to change. Matthew Pequignot, a patent attorney, filed suit against Solo Cup for falsely marking its plastic cup lids with expired patent numbers. Pequignot argued that the prior holdings were incorrect and that penalties should be imposed per article. Because there were potentially over 21 billion cups that were falsely marked, Solo Cup theoretically faced more than $10 trillion in potential penalties under Pequignot’s interpretation.
As the case was winding its way through the courts, the Federal Circuit heard an appeal in an unrelated case Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009) that would ultimately spark a huge new cottage industry. Forest Group had a patent covering stilts commonly used in construction and sued Bon Tool for infringement of its patent. Bon Tool counterclaimed, alleging that Forest Group falsely marked its stilts. The court found that (1) Bon Tool did not infringe; (2) Forest Group had falsely marked some of its stilts and fined it $500 for a single offense of false marking; and (3) the case was not exceptional, so the court did not award attorney fees. Bon Tool appealed the last two findings, and the Federal Circuit determined that the fine under the false marking statute applies to each article falsely marked, not the decision to mark as the district court had held. (The Federal Circuit affirmed the decision not to award attorney fees). On remand, the district court imposed a fine of $180 for each of the 38 stilts that were falsely marked. Thus, the case that lit the false marking industry on fire and resulted in thousands of subsequent lawsuits was ultimately over a $6,840 fine.
From 2007 to 2009, only 47 false marking cases had been filed in federal courts, but after the December 28, 2009 decision in Forest Group, patent attorneys and litigants stormed court houses across the country, filing almost 1,500 cases in the next year and a half. Given the potential $500 per article fine, companies that mass produced products were understandably concerned about facing potentially huge liability for wrongly marking their products.
Because false marking is a qui tam action and the statute appeared to authorize anyone to file suit, there was no need for patent attorneys to find clients who had been actually injured by the alleged false marking. Instead, patent attorneys were filing suit on their own or creating their own corporations to file suit against alleged false markers. The lawsuits tended to focus on products that had expired patent numbers, rather than products that were marked with inappropriate, but still valid, patent numbers. The reason was obvious—there was no need to go through the costly exercise of proving that the patent did not cover the product when the patent had expired. One could immediately jump to the question of whether the product was falsely marked with the intent to deceive the public.
Two later decisions by the Federal Circuit only intensified the flames sparked by the Forest Group decision. In Pequignot v. Solo Cup Co., 608 F.3d 1356 (Fed. Cir. 2010), the Court confirmed that marking a product with an expired patent number fell within the scope of the false marking statute (although it affirmed the judgment against Pequignot because he could not prove that Solo Cup acted with an intent to deceive). And, in Stauffer v. Brooks Brothers, Inc., 619 F.3d 1321 (Fed. Cir. 2010), the Court confirmed that anyone had standing to bring suit under the false marking statute, even if they did not suffer any direct personal injury.
The Federal Circuit appeared to be showing no inclination to beat back this fire. All indications were that a new form of patent “trolling” litigation was here to stay.
Comments Off on Will Patent False Marking Litigation Flame Out?

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