Legal quirk lets anyone sue firms over old patents :: CHICAGO SUN-TI... http://www.suntimes.com/business/1612309,w-legal-quirk-old-patents-0...

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Legal quirk lets anyone sue firms over old patents

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June 8, 2009

FROM THE ASSOCIATED PRESS

ALEXANDRIA, Va.---- Look carefully at the lid to your coffee cup or the
handle of your disposable razor. A recent ruling on an obscure, century-old
statute has opened the door for people familiar with the finer points of
patent law to sue companies that stamp their products with expired patent
numbers.

A couple of sharp-eyed lawyers are shooting for a financial windfall through

the nearly forgotten law, and the Justice Department says they have a
case.

The ruling in federal court in Alexandria appears to be the first of its kind
upholding the constitutionality of a law allowing anyone to sue in the name
of the government if they have evidence that a company is guilty of "false
markings" -- namely, claiming patent protections that have expired or never
existed.

The person who sues gets to keep half of any money awarded, with the
rest going to the government. Damages of up to $500 per violation are
allowed, which for mass-produced items with "Patent" stamped on every
product could theoretically run into billions of dollars.

Despite the financial incentive to sue, lawyers in the Virginia case say no
one other than businesses with a financial stake availed themselves of the
law.

No one, that is, until Matthew Pequignot.

A Washington patent attorney, Pequignot (PECK'-eh-naw) noticed the

patent marks on the lid to his daily cup of coffee, did some research and
found that the lid's maker, Solo Cup Co., was continuing to claim patent
protections for disposable lids that had expired nearly 20 years ago.
Depending on a variety of factors, most patents expire after a set period of
time, often after 14 to 20 years.

In 2007, he sued Highland Park, Ill.-based Solo Cup, which makes the red
and blue plastic cups seen at parties and barbecues and also supplies
disposable cups and lids to retailers like Starbucks and McDonald's.

Pequignot says the lawsuit addresses a problem in the patent community:

companies using false marks to make products look impressive or to scare
off competitors, who must do significant legal work to research the patents.
He likens false patent marks to placing "No trespassing" signs in public
park lands.

Pequignot followed the Solo Cup case by suing razor company Gillette,
owned by Cincinnati-based Procter & Gamble Co., and Arrow Fastener Co.
Inc., a manufacturer of staplers and similar products. The case against
Saddle Brook, N.J.-based Arrow has been withdrawn, but Pequignot
retains the right to revive it.

Gillette is seeking to dismiss the case, arguing Pequignot shouldn't be

allowed to sue unless he can show Gillette acted with "an intent to
deceive."

"False markings claims come cheap: They damage defendants' reputations.

... Numerous complaints can be filed at almost no cost," Gillette's lawyers
wrote, noting Pequignot's multiple lawsuits.

In the Solo Cup case, court papers indicate Pequignot offered to settle for
$9 million. Instead, Solo Cup argued that allowing a private citizen to sue
on behalf of the government is an unconstitutional violation of separation of
powers. Solo Cup also argued the law violates constitutional requirements
that a plaintiff must suffer some type of harm to bring a lawsuit.

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Legal quirk lets anyone sue firms over old patents :: CHICAGO SUN-TI... http://www.suntimes.com/business/1612309,w-legal-quirk-old-patents-0...

U.S. District Judge Leonie Brinkema concluded in March that the provision
allowing Pequignot to sue in the name of the government, though rare, is
constitutional. Called "qui tam" statutes, most have been repealed because
of concerns they were being abused.

Despite Brinkema's ruling, there are still concerns over the law's use. In
May, a federal judge in New York tossed out a similar lawsuit filed by a
patent attorney who sued Brooks Brothers over expired patents on its
"original Adjustolox" bow tie.

The judge ruled that if the plaintiff, Raymond E. Stauffer, wants to sue on
behalf of the United States, he must prove the government suffered harm, a
standard he said Stauffer failed to meet.

Brinkema, on the other hand, said in her ruling that the U.S. suffered harm
by the very fact that its laws were being broken.

The Justice Department is siding with Brinkema. On May 29, the

government moved to intervene on Stauffer's behalf and said the New York
judge's analysis is flawed.

Neil Friedman, the lawyer who represented Brooks Brothers, likened

Stauffer and Pequignot to "bounty hunters" looking to collect an easy
payoff. He said he is aware of several similar lawsuits that have been filed
since the Pequignot and Stauffer's cases.

Pequignot, for his part, says he does not expect an avalanche of false
markings lawsuits, despite the fact that Stauffer and some others have
already followed in his footsteps. He said that, even as a patent attorney, it
took him many hours of research to be able to file his lawsuit.

Dennis Crouch, a law professor at the University of Missouri and author of

the Patently-O blog, said lawsuits like Pequignot's had been "almost
unheard of" before his filing. He said the effect could be significant, though,
since he estimates there are millions of false markings in the marketplace.

In her ruling, Brinkema suggested Congress may want to close the

loophole.

"It is likely an accident of history that (the law) survives as one of the few
remaining qui tam statutes in American law," Brinkema wrote in her opinion
which grudgingly acknowledged Pequignot's right to move forward with his
case.

With the law's constitutionality upheld, Solo Cup says it plans to offer a
"good-faith" defense that it relied on lawyers' advice and did not intend to
deceive.

Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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