Patent lawsuits on rise as court decision increases possible awards
The Business Journal of Milwaukee - by Stacy Vogel Davis
Friday, April 2, 2010
A December court decision has touched off a flurry of patent lawsuits across the country, including several against Wisconsin companies.
S.C. Johnson & Son Inc., Racine, Kimberly-Clark Corp., Appleton, and A.O. Smith Corp., Milwaukee, all face accusations they deliberately marked products with improper or expired patents.
Until recently, the federal statute allowing citizens to sue companies on behalf of the government for false patents was little used. The law states that citizens get half of the damages if a lawsuit is successful, with the government getting the other half.
The statute states a company could be liable for up to $500 for each false marking offense. But the courts traditionally interpreted "offense" as the decision to mark the product, meaning a company was only liable for a $500 fine no matter how many articles it marked.
But a federal appeals court ruled in December that each article constitutes a separate offense, meaning a company can be liable for up to $500 per item marked.
Since then, more than 120 false marking cases have been filed nationwide, according to Justin Gray, an attorney at Foley & Lardner LLP, Milwaukee. Gray counted 20 false marking cases filed in all of 2009.
Many of the cases involve household items. Wisconsin companies, for example, are accused of falsely marking shaving cream, razors and Ziploc bags in the S.C. Johnson cases, Depends Underwear for Women and GoodNites Sleep Shorts in the Kimberly-Clark case and water heaters in the A.O. Smith case. The A.O. Smith case was filed in 2008 and has been stayed, but the rest were filed after the December ruling.
Only S.C. Johnson responded to a request for comment. In a statement, Chris Beard, the company’s director of public affairs, said: "S.C. Johnson is committed to compliance with the law and takes these allegations very seriously. It is investigating the allegations asserted in this suit. S.C. Johnson believes that the products were marked as required by law and intends to vigorously defend this suit."
Most of the lawsuits were filed by individuals, often attorneys, and several attorneys have filed multiple cases, said Cynthia Franecki, chairwoman of the Milwaukee intellectual property office of Foley & Lardner.
"You’ve got folks who are sort of walking up and down the aisles of Walgreens picking up items on the shelf" looking for companies to sue, Franecki said.
Franecki and others argue false marking doesn’t harm anyone, least of all the person bringing the suit.
"These plaintiffs are just looking to try to capitalize on this reward, and in (the cases I’ve seen) they can’t identify anybody who has been confused or deceived by these patent markings," said Ed Sarskas, a partner at Milwaukee-based Michael Best & Friedrich SC who has followed the proliferation of false marking cases.
The firm represents A.O. Smith in its inactive case, but Sarskas declined to comment on that case.
Anyone who’s interested in a patent can search online for the patent number to find out if it’s expired, Franecki said.
But a patent label could encourage consumers to buy a product if they think that product is new and different, said Beth Winston, who teaches patent law at The Catholic University of America Columbus School of Law in Washington, D.C.
Winston opposes proposed legislation that would require someone to show a competitive injury when bringing a suit for false marking.
It’s hard to pinpoint exactly who is harmed in a false marking case, but it discourages innovation in general, Winston said.
"A judge described false marking as a no-trespassing sign," she said. "You are, in fact, telling your competitors and the public that your item has gone through the rigorous (patent) process."
Eric Holland of Holland, Groves, Schneller & Stolze LLC, St. Louis, said plaintiffs in false marking cases protect the integrity of the patent system. Holland represents Arthur Yarbough, a Texas man suing S.C. Johnson for allegedly marking false patents on Skintimate shaving products.
"It’s important to remember that what we’re doing here is protecting the integrity of the entire patent system, so folks are using legitimate patents and we’re not discouraging or scarecrowing other innovators from the market," Holland said. "Is there a potential financial gain in this? Yes there is. And that is their reward for helping the government protect the integrity of the system."
But plaintiffs have another hurdle to overcome before receiving financial gain. The law says they must show the company intended to deceive the public when falsely marking the product.