Tuesday, September 21, 2010

Merely Being a "Sophisticated Company" Does Not Impute an "Intent to Deceive" for False Marking Claim

Herengracht Group LLC v. WM Wrigley, No. 10-21784-CIV (September 16, 2010)

Herengracht sued Wrigley for false patent marking under 35 USC 292(a) for the marking of Hubba Bubba Bubble Tape with a patent that expired on May 5, 2008.

In the complaint, Herengracht alleged that Wrigley owned the patent and employed the inventors, and thus knew "since at least 1988 that the [] Patent would expire on May 5, 2008."  Furthermore, Herengracht imputed knowledge of the expiration of the patent on Wrigley based on Wrigley's "accounting and budgeting," alleging that Wrigley paid maintenance fees on the patent until 2008.

Herengracht further alleged that Wrigley is "a sizeable and sophisticated company, with approximately 16,000 employees and yearly revenues of over $5 billion" and experience with patent matters. Herengracht suggested that Wrigley's in-house legal department, in addition to "large firms as outside counsel" had  some responsibility for Wrigley's knowledge of the expiration of the patent. Herengracht also named four Wrigley in-house lawyers whose Internet webpages list practice areas of intellectual property, alleging that these individuals are responsible for ensuring that Wrigley complies with patent laws.

Wrigley moved to dismiss Herengracht's complaint under 12(b)(6) for failure to plead an intent to deceive the public by marking their product with an expired patent.

The district court granted the motion, with Judge Gold stating that

Taking all factual allegations as true, as I must on a 12(b)(6) motion to dismiss, Herengracht's allegations center upon Wrigley's knowledge of the patent expiration as assignee of the '175 Patent, by employing inventors of the '175 Patent in May 1988 when the patent application was filed, through paying maintenance fees on the '175 Patent until 2008, vis-a-vis its status as a "sophisticated company," and by employing in-house counsel with patent backgrounds. These circumstances are inadequate allegations of Wrigley's intent to deceive the public under Rule 8, and fall considerably short of the heightened pleading requirements of pleading fraud under Rule 9(b).

Where a qui tam relator alleged that the defendant was "a sophisticated company and has many decades of experience applying for, obtaining, and/or litigating patents," there was inadequate pleading of "intent to deceive." Simonian, supra, 2010 WL 2523211 at *'3 (N.D. III. 2010).
Interestingly, Gold also called out Herengracht for essentially lifting arguments from the pleadings of other false-marking plaintiffs (Simonian, Brinkmeier) and incorporating them into the present case:
I note that Herengracht's allegations are a near-verbatim recitation of [the language used in the Simonian case] . . . By failing to allege more than simply Wrigley's sophistication and experience and knowledge regarding patents, Herengracht has failed to plead an actual intent to deceive.

Herengracht's attempt to base Wrigley's intent to deceive on allegations of its sophistication as a company, as well as in-house counsel and outside retained counsel's experience with patents, is also misplaced.  I note that these allegations - proffered in support of Wrigley's intent to deceive - are also particularly similar to the allegations at issue in a recent case, Brinkmeier v. BIC, supra, 2010 WL 3360568.  In Brinkmeier v. BIC, also a qui tam case, the relator alleged that: (1) "as [the defendant] well knows, after a patent issues, a maintenance fee must be paid or else the patent will expire;" and (2) "[a] sophisticated company such as BIC likely would not inadvertently include expired patents in its patent markings[.]" . . . However, the court in Brinkmeier v. BIC determined that "allegations that [defendant] is sophisticated and employs experienced counsel do not suggest intent to deceive," granting the motion to dismiss.

Likewise, in this case, Herengracht bases its allegations regarding Wrigley's intent to deceive on the same arguments. For example, Herengracht alleges that Wrigley, "a sizeable and sophisticated company, with approximately 16,000 employees and yearly revenues of over $5 billion," has "decades of experience with applying for, obtaining, licensing, and litigating patents, and knows that patents expire." . . . Herengracht further alleges that Wrigley paid a total of $5,970 in maintenance fees following the issuance of the '175 patent. . . . Accordingly, Herengracht's allegations of sophistication and experience are insufficient to demonstrate the requisite "intent to deceive" standard under 35 U.S.C. § 292.
Read/download a copy of the order here (link)

2 Comentários:

patent litigation said...

Thankfully, if Congress passes some version of the current patent reform bill with a "competitive injury" provision limiting standing in false marking suits, we should soon start to see less of such trollery in the courts.

Anonymous said...

You say that like such "trolls" are a bad thing.

Quite simple - mark properly (respect the law) and you don't have to worry.

You are even protected if you are somewhat lazy - intent is a key part of these suits (standing is an overblown red herring).

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