Forest Group, Inc. v. Bon Tool Co.

• Decision Date: 28 December 2009
• Docket Number: No. 2009-1044.,2009-1044.
• Citation: 590 F.3d 1295
• Parties: The FOREST GROUP, INC., Plaintiff-Appellee, v. BON TOOL COMPANY, Defendant-Appellant, and Cibon Industrial and Shanghai Honest Tool Co., Inc., Defendants.
• Court: U.S. Court of Appeals — Federal Circuit

590 F.3d 1295

The FOREST GROUP, INC., Plaintiff-Appellee, v. BON TOOL COMPANY, Defendant-Appellant, and Cibon Industrial and Shanghai Honest Tool Co., Inc., Defendants.

No. 2009-1044.

United States Court of Appeals, Federal Circuit.

December 28, 2009.

Kristin K. Tassin, Dry & Tassin, P.L.L.C., of Houston, TX, argued for plaintiff-appellee. Of counsel was Cheri Duncan, Cheri Duncan Attorney at Law, of Houston, TX.

Richard A. Ejzak, Cohen & Grisgy, P.C., of Pittsburgh, PA, argued for defendant-appellant. With him on the brief was Alicia M. Passerin.

Carl S. Kravitz, Zuckerman Spaeder LLP, of Washington, DC, for amicus curiae Paul Hletko.

Before RADER, PLAGER, and MOORE, Circuit Judges.

MOORE, Circuit Judge.

Bon Tool Company (Bon Tool) appeals a final decision from the United States District Court for the Southern District of Texas. After a bench trial, the district court found that the Forest Group, Inc. (Forest) falsely marked its stilts with intent to deceive the public, and the district court fined Forest $500 for a single decision to falsely mark. The district court also determined that U.S. Patent No. 5,645,515 (the '515 patent) was not invalid, that Bon Tool did not infringe the '515 patent, and that Forest had not violated the Lanham Act. The court declined to find the case exceptional or award attorney fees. For the reasons set forth below we affirm in part, vacate in part, and remand.

BACKGROUND

William Armstrong and Joe Lin are the named inventors on the '515 patent, which claims an improved spring-loaded parallelogram stilt of the type commonly used in construction. See '515 patent fig.1. The claimed stilt contains a floor platform, a shoe platform, and extendable vertical supports that can be used to move the shoe platform to different heights. These platforms and supports are pivotally connected in a parallelogram configuration. A leg support is attached to the side of the rear vertical support and is attached to the shoe platform by a clamp, referred to in the '515 patent as a yoke (50). The patent discloses improvements in the design of the yoke structure and the design of the strap for attaching the leg support to a user's leg. The independent claims of the '515 patent require a "resiliently lined yoke."

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Mr. Lin and Mr. Armstrong each formed a company for selling stilts covered by the '515 patent. Mr. Lin created Forest, and Mr. Armstrong created Southland Supply Company (Southland).¹ Southland sold stilts to Bon Tool, a tool reseller. Bon Tool later stopped purchasing from Southland and started purchasing stilts from a foreign supplier, Shanghai Honest Tool Co., Ltd. (Honest Tool), which manufactured identical replicas of Southland's stilts without a license from Forest.

In December 2005, Forest sued Bon Tool for infringement of the '515 patent. Bon Tool counterclaimed alleging false marking pursuant to 35 U.S.C. § 292, a Lanham Act violation pursuant to 15 U.S.C. § 1125, and seeking a declaratory judgment that the '515 patent was invalid. In February 2007, the district court issued its claim construction. The district court construed the term "resiliently lined yoke" to mean "a yoke or clamp lined with a material that is capable of being elastically or reversibly deformed," and the court concluded that the claim term required a lining distinct from the yoke itself. On August 3, 2007, the district court concluded that Forest presented no evidence that the yoke in Bon Tool's stilts had a separate lining as required by the court's claim construction and granted summary judgment of noninfringement in favor of Bon Tool. The district court then held a bench trial on Bon Tool's counterclaims.

The district court found that Forest falsely marked its S2 stilts with its '515 patent number after November 15, 2007 and assessed Forest a $500 fine for a single offense of false marking.² The district court found that Forest had the requisite knowledge that its S2 stilt was not covered by the '515 patent after a district court in a related case granted summary judgment of noninfringement. In 2001, Forest had accused Warner Manufacturing Company (Warner) of selling stilts that infringed the '515 patent. In 2003, Warner asserted that its stilts did not infringe because they did not include a "resiliently lined yoke." Warner filed a declaratory judgment action in 2005 in the United States District Court for the District of Minnesota seeking a judgment of noninfringement. On March 30, 2007, the district court construed the term "resiliently lined yoke" in a manner nearly identical to the construction in the present case. On November 15, 2007, the district court granted summary judgment of noninfringement in favor of Warner because Warner's stilts did not have a resiliently lined yoke as defined by the court.

By the time Warner was granted summary judgment, Forest had hired new patent counsel, who advised Forest to modify its stilts to include a resilient lining. The district court considered the evidence relating to Forest's alleged intent to deceive and found that Forest knew as of November 15, 2007—the date of the summary judgment of noninfringement in the Warner case—that its S2 stilts were not covered by the '515 patent. The district court found that Forest placed at least one order to its manufacturer for additional S2 model stilts marked with the '515 patent number after November 15, 2007 and fined Forest $500 for a single offense of false marking.

The district court granted summary judgment for Forest on Bon Tool's remaining counterclaims, deciding that Forest did not violate § 43 of the Lanham Act and that the '515 patent was not invalid. Further, the district court found that the case was not exceptional and denied claims for attorney fees by both parties. Bon Tool appeals. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

DISCUSSION

Bon Tool appeals the district court's decision on three grounds. First, Bon Tool asserts the district court erred when it concluded that Forest did not have the requisite knowledge to falsely mark prior to November 15, 2007. Second, Bon Tool argues that the district court erred in its interpretation of the false marking statute, 35 U.S.C. § 292, when it determined that the statute provided for a penalty based on each decision to mark rather than on a per article basis. Third, Bon Tool argues that the district court clearly erred in finding the case not exceptional and abused its discretion in denying attorney fees.

I. False Marking—Knowledge

The two elements of a § 292 false marking claim are (1) marking an unpatented article and (2) intent to deceive the public. See Clontech Labs. Inc. v. Invitrogen Corp., 406 F.3d 1347, 1352 (Fed.Cir.2005). "Intent to deceive is a state of mind arising when a party acts with sufficient knowledge that what it is saying is not so and consequently that the recipient of its saying will be misled into thinking that the statement is true." Id. (citing Seven Cases of Eckman's Alterative v. United States, 239 U.S. 510, 517-18, 36 S.Ct. 190, 60 L.Ed. 411 (1916)). A party asserting false marking must show by a preponderance of the evidence that the accused party did not have a reasonable belief that the articles were properly marked. Id. at 1352-53. An assertion by a party that it did not intend to deceive, standing alone, "is worthless as proof of no intent to deceive where there is knowledge of falsehood." Id. at 1352.

The district court found that Forest had the requisite knowledge to falsely mark by November 15, 2007 when it received the second summary judgment determination. Bon Tool claims that the district court clearly erred because Forest had the requisite knowledge at a much earlier date. We review a finding of false marking after a bench trial for clear error. Id. at 1353. Under a clearly erroneous standard of review, we reverse where after review we are "left with the definite and firm conviction that a mistake has been committed." Id. (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)).

The district court did not clearly err in finding that Forest lacked intent to deceive prior to November 15, 2007. The district court found that Forest genuinely believed its stilts were covered by the '515 patent prior to this date. The district court noted that the patent application was written by experienced patent counsel who had an exemplar of the stilt on which Messrs. Lin and Armstrong sought the patent. The court further noted that neither Mr. Lin nor Mr. Armstrong had "strong academic backgrounds" or "in-depth appreciation of patent law" and that Mr. Lin was not a native English speaker. Forest Group, 2008 WL 2962206, at **4-5, 2008 U.S. Dist. LEXIS 57134, at *15 n. 5. Based on the facts in this case, the district court did not clearly err in finding that Forest did not have the requisite knowledge that its own S2 stilts did not fall within its patent claims until November 15, 2007. No doubt the quantum of proof regarding Forest's knowledge in this case is quite high. We do not suggest that multiple claim constructions or summary judgments are required before the requisite knowledge for false marking can be found. Even if we would have found such knowledge at an earlier date, we cannot conclude that the district court's fact finding on this issue was clearly erroneous.

II. False Marking—Offense

Bon Tool argues that the district court misinterpreted 35 U.S.C. § 292 when it assessed only $500 in penalties against Forest for a single "decision to mark its stilts after it knew the stilts did not meet all the claims of the '515 Patent." See Forest Group, 2008 WL 2962206, at *5, 2008 U.S. Dist. LEXIS 57134, at *21. Statutory interpretation is a question of law that we review de novo. Fina Tech., Inc. v. Ewen, 265 F.3d 1325, 1327 (Fed.Cir. 2001). Section 292 provides a civil penalty for false marking of goods....