Pequignot v. Solo Cup Com.

• Decision Date: 25 August 2009
• Docket Number: No. 1:07cv897 (LMB/TCB).,1:07cv897 (LMB/TCB).
• Citation: 646 F.Supp.2d 790
• Parties: Matthew A. PEQUIGNOT, Plaintiff, v. SOLO CUP COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

646 F.Supp.2d 790

Matthew A. PEQUIGNOT, Plaintiff, v. SOLO CUP COMPANY, Defendant.

No. 1:07cv897 (LMB/TCB).

United States District Court, E.D. Virginia, Alexandria Division.

August 25, 2009.

Mia Kathryn Poston, Pequignot & Myers LLC, Ellen D. Marcus, Zuckerman Spaeder LLP, Washington, DC, for Plaintiff.

Mary Catherine Zinsner, Syed Mohsin Reza, Troutman Sanders LLP, McLean, VA, for Defendant.

MEMORANDUM OPINION

LEONIE M. BRINKEMA, District Judge.

Before the Court are the parties' cross-motions for summary judgment. For the reasons stated in open court, as supplemented by this Memorandum Opinion, defendant's motion has been granted, and plaintiff's motion has been denied.

I. Background.

A. Introduction.

Plaintiff Matthew Pequignot ("Pequignot") has brought this qui tam action under 35 U.S.C. § 292 against defendant Solo Cup Company ("Solo"), a manufacturer of disposable cups, bowls, plates, and utensils. Section 292 prohibits false patent marking done "for the purpose of deceiving the public," and imposes a maximum fine of $500 for each "offense," half of which goes to the plaintiff and half to the United States. Pequignot claims that Solo has violated § 292 in three manners:

1. Solo has marked billions of plastic cold drink cup lids with Reissue Patent No. 28,797 (the "'797 patent"), despite knowing that it expired on June 8, 1988.

2. Solo has marked billions of plastic "Traveler" lids for hot drink cups with Patent No. 4,589,569 (the "'569 patent") despite knowing that it expired on October 24, 2003.

3. Solo has marked packages for certain cups, bowls, and utensils with the phrase "This product may be covered by one or more U.S. or foreign pending or issued patents. For details, contact www.solocup.com,"¹ despite knowing that the products were not covered by any pending or issued patents.

Solo concedes these facts as alleged, but contends that it is not liable under § 292 because it did not act "for the purpose of deceiving the public." Both parties have moved for summary judgment on two issues: (1) whether Solo acted with intent to deceive, and (2) what constitutes an "offense" for the purpose of assessing the statutory fine.²

B. Drink Cup Patents.

The cup lids at issue in the '797 and '569 patents are produced by thermoforming stamping machines. Each machine has a "mold base" that contains between 16 and 128 "mold cavities." A cavity contains three parts, one of which, the "inner ring," contains the patent engravings. Every time the machine cycles—generally every four to six seconds—each mold cavity produces a lid. The cavities can last 15 to 20 years, and sometimes longer.

1. The '797 Patent.

The '797 patent, which applies to certain lids for cold drink cups, issued on May 4, 1976. Shortly afterwards, Solo added the patent number to the inner rings of the mold cavities that produce these items.

The patent expired on June 8, 1988. There is no evidence that Solo was aware of the expiration until June 2000.³ At that time, Steven Smith, who had been hired in April 2000 as Solo's Director of Product Development, noticed the '797 patent number on some of Solo's lids. Solo lacked in-house patent counsel; accordingly, Smith contacted Robert Diehl, an associate with Wallenstein & Wagner, Solo's outside intellectual property counsel, who informed him that the number reflected an expired patent. A month later, Smith e-mailed Diehl, asking him whether Solo should use the number if it built new mold cavities for the lids. Diehl responded that there was "[n]o need to mark the new cavities because the patent has expired." Smith asked, "`No need to mark new cavities', but are we wrong in doing so? I think we just did." Diehl answered, "When a patent expires you don't have to take the old number off. However, I'm going to do a little research to see if the situation is different when adding an already expired number to a product. My gut feel [sic] is that as long as the patent claims would have covered the product, there isn't a problem. I'll have a more definitive answer for you soon." Diehl e-mailed Smith the next day, telling him, "The false marking of a product with a patent number does create liability for the offender. However, it appears liability hinges on `intent to deceive the public' Best case scenario is to remove the number, if possible. If not, it is important that Solo not further any unintentional falsity in product literature or the like. If you want to discuss, please give me a call."

These e-mails in 2000 are the only documentary evidence of the legal advice Solo received on marking products with expired patent numbers. However, according to testimony by Smith and Linda Kuczma, a Wallenstein & Wagner partner who also advised Solo, Solo had regular meetings and phone calls with Wallenstein & Wagner attorneys regarding intellectual property, and discussed the expired patent issue further orally. According to Smith and Kuczma, shortly after the exchange between Smith and Diehl in 2000, Solo, based on Wallenstein & Wagner's advice, developed a policy under which it would not immediately replace the mold cavities containing the '797 patent. Rather, under the policy, when cavities needed to be replaced due to wear or damage, the new cavities would not include the expired patent marking. Because the cavities can last many years, Solo continues to use cavities today that imprint the expired patent numbers.⁴

According to deposition testimony, this policy was grounded in two primary factors. First, Solo's attorneys believed that it was permissible under § 292. Second, it was commercially difficult and costly to replace all of the cavities at once. Solo estimates that it would have cost over $500,000 to replace all of the inner rings— the parts containing the patent engravings—and $1.5 million to replace the cavities in their entirety.⁵ According to Solo, these figures represent only the costs of the replacement parts and not the potential costs of labor, production downtime, and other factors. Solo admits that it never conducted a formal cost analysis before developing its policy. Rather, Solo indicated to its attorneys that a wholesale replacement of the cavities would be costly and burdensome, and the attorneys concluded that such steps were not necessary under § 292 as long as Solo took reasonable steps to replace the cavities over time and did not otherwise manifest an intent to deceive the public.

The development of Solo's policy is detailed in the deposition testimony of Smith, Diehl, and Kuczma. The record also contains considerable evidence of the policy's implementation, including: (1) a drawing of one of the '797 lids, dated April 30, 2001, with the patent number scratched out; (2) an e-mail dated June 24, 2003 from Smith to a tooling employee, Rajenda Chauhan, asking him to confirm that the "RE Patent" (i.e., the '797 patent) number would not be engraved on any new cavities; (3) testimony by two tooling employees, Chauhan and Matthew Banach, that Smith instructed them that new cavities could not contain the expired numbers;⁶ (4) testimony that no new cavities were ordered or made with the '797 patent since June 2000; (5) undisputed evidence that many of Solo's current mold cavities do not contain the patent numbers; (6) testimony by Douglas Eveleigh, Solo's chief IP counsel since 2006, that he reviewed the policy shortly after he was hired and found it permissible; and (7) an October 26, 2006 e-mail from Eveleigh to Banach confirming the policy and stating that its purpose was "to conserve costs."

2. The '569 Patent.

The '569 patent, which covers Solo's "Traveler" lids for hot drink cups, was issued on May 20, 1986 and expired on October 24, 2003. Like the '797 patent, it was added to the cavities that produced the lids shortly after the patent issued.

The evidence indicates that Solo adopted the same policy for the expired markings on the Traveler lids that it did for lids covered by the '797 patent. Because Smith had begun to track all of Solo's patents, Solo was aware of the impending expiration of the '569 patent and took certain steps accordingly. On January 28, 2003, Smith e-mailed Kuczma to confirm that Solo would not be adding the '569 patent number to the new set of Traveler lid cavities it was ordering. Kuczma testified that she gave Solo advice consistent with this e-mail. On March 9, 2004, soon after the '569 patent's expiration, Smith sent another e-mail, instructing Solo employees that because the patent was no longer valid, "reference to it should be removed during any outer ring retooling," and product drawings for all Traveler lids should be updated to remove any references to the patent. The e-mail further stated that the "tooling does not need to be changed all at once," but that instead, cavities would be replaced when they wore out. The evidence also includes a cover sheet documenting the agenda of an IP committee meeting on November 29, 2004. The agenda included an item called "Lid markings in view of expired patents," and the sheet included a handwritten note, "remove when re-tool," which Kuczma testified she wrote to reflect Solo's policy, consistent with her advice. According to undisputed testimony, Solo did not order or make any new cavities with the '569 engraving after the patent expired.

C. Conditional "May be Covered" Language.

The "may be covered" language originated in 2004. Kuczma testified that she drafted the language and that it was added to Solo's packaging at her advice and the advice of other Wallenstein & Wagner attorneys, who were concerned that Solo was not giving notice to potential infringers pursuant to 35 U.S.C. § 287.⁷ An e-mail from Smith to Solo employees on September 14, 2004 confirms that the language was developed and added at this time.

Kuczma testified that she recommended that Solo place this language on all of its packaging, including packaging for numerous products that were not protected by any current patents or...