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"Patent Markings" Lawsuits Could Run Into the Trillions 193

Posted by kdawson
from the who-you-callin'-a-qui-tam dept.
bizwriter writes "The latest legal bugaboo facing manufacturers is the false patent marking suit. Using what has been until recently an obscure type of legal action, individuals and enterprising law firms have targeted large manufacturers with lawsuits that can easily run million of dollars — in a case involving a drink cup manufacturer, over $10 trillion — for incorrectly including patent numbers on products. Some companies named in such suits are 3M, Cisco, Pfizer, Monster Cable, and Merck. Even expired patent numbers can be actionable." Sounds like a perfect opportunity for some enlightened appeals court to inject some sense into the debate. What do you think the chances are? Note: if ever there were a page that cries out for the Readability bookmarklet, this is it.
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"Patent Markings" Lawsuits Could Run Into the Trillions

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  • Re:Silly editor (Score:5, Informative)

    by MillionthMonkey (240664) on Monday March 01, 2010 @08:32PM (#31324724)
    Yes but judges can create precedent by presenting a finding where existing law is vague. The legislature can respond to that by further legislation. Judges can also find laws to be unconstitutional, and these rulings might require passage of an amendment to overcome.

    You hear a lot about "legislating from the bench" but this is part of the job. Judges are supposed to "legislate" by filling in gaps as cases present themselves which might have no clear precedent or no clear interpretation within existing law. (The legislature certainly can't be expected to think of everything.) And judges of both persuations do it, as they are supposed to.

    The catch is, they're supposed to do it well. When you're nominating or confirming judges, and you absorb yourself with fetish issues like abortion or gun rights, you can end up with the sort of foolish judiciary we have today.
  • Re:Monster Cable? (Score:3, Informative)

    by h4rr4r (612664) on Monday March 01, 2010 @08:47PM (#31324850)

    Monoprice sells those cables for below $4 so that would have to be a lot of postage charges to burn that.

  • Re:$10 trillion? (Score:4, Informative)

    by RabidRabb1t (1668946) on Monday March 01, 2010 @10:08PM (#31325466)
    Those are the maximum damages allowable under the statute. Actual damages may be much lower; a reward of $0.01 or even $0.10 per cup might not be so unreasonable for committing a billion counts of fraud. What is interesting to note, however, is that one must prove both that either the cups were never patented, or if they were that they were manufactured after the patent expired.
  • Re:How about.... (Score:5, Informative)

    by DarKnyht (671407) on Tuesday March 02, 2010 @12:31AM (#31326376)

    It still drives me nuts when people point to that case as evidence that our legal system is broke. It is broke, I don't deny but that case is not one to use. Here are some facts about that particular case and why the jury awarded such a large fine (that was later reduced by a judge): (from http://lawandhelp.com/q298-2.htm [lawandhelp.com] in case you want to look yourself).

    McFact No. 1: For years, McDonald's had known they had a problem with the way they make their coffee - that their coffee was served much hotter (at least 20 degrees more so) than at other restaurants.

    McFact No. 2: McDonald's knew its coffee sometimes caused serious injuries - more than 700 incidents of scalding coffee burns in the past decade have been settled by the Corporation - and yet they never so much as consulted a burn expert regarding the issue.

    McFact No. 3: The woman involved in this infamous case suffered very serious injuries - third degree burns on her groin, thighs and buttocks that required skin grafts and a seven-day hospital stay.

    McFact No. 4: The woman, an 81-year old former department store clerk who had never before filed suit against anyone, said she wouldn't have brought the lawsuit against McDonald's had the Corporation not dismissed her request for compensation for medical bills.

    McFact No. 5: A McDonald's quality assurance manager testified in the case that the Corporation was aware of the risk of serving dangerously hot coffee and had no plans to either turn down the heat or to post warning about the possibility of severe burns, even though most customers wouldn't think it was possible.

    McFact No. 6: After careful deliberation, the jury found McDonald's was liable because the facts were overwhelmingly against the company. When it came to the punitive damages, the jury found that McDonald's had engaged in willful, reckless, malicious, or wanton conduct, and rendered a punitive damage award of 2.7 million dollars. (The equivalent of just two days of coffee sales, McDonalds Corporation generates revenues in excess of 1.3 million dollars daily from the sale of its coffee, selling 1 billion cups each year.)

    McFact No. 7: On appeal, a judge lowered the award to $480,000, a fact not widely publicized in the media.

    McFact No. 8: A report in Liability Week, September 29, 1997, indicated that Kathleen Gilliam, 73, suffered first degree burns when a cup of coffee spilled onto her lap. Reports also indicate that McDonald's consistently keeps its coffee at 185 degrees, still approximately 20 degrees hotter than at other restaurants. Third degree burns occur at this temperature in just two to seven seconds, requiring skin grafting, debridement and whirlpool treatments that cost tens of thousands of dollars and result in permanent disfigurement, extreme pain and disability to the victims for many months, and in some cases, years.

  • Re:How about.... (Score:5, Informative)

    by Garridan (597129) on Tuesday March 02, 2010 @02:54AM (#31327142)

    McFact No. 9. McDonalds wouldn't make their coffee that hot if people didn't want it that hot. If its hotter than other restaurants, presumably that is their competitive advantage.

    This came up in the trial. Managers were encouraged to turn the heat up because the ultra-hot coffee wouldn't cool down enough for the customers to cash in on the free refill unless they loitered long after they'd finished eating the food they'd ordered.

  • by sjbe (173966) on Tuesday March 02, 2010 @09:01AM (#31328644)

    Citing revenue numbers and not profits is just a low blow.

    I'm sure McDonalds are a bunch of big boys and can handle it. Not really sure how this is a low blow...

    I know coffee is cheap, but time, labor, energy, buildings, equipment, management, and lawyers are not. McDonald's does not "make" $1.3M/day selling coffee, they just collect that much, based on estimates of annualized sales and the list price of a cup of coffee.

    Care to cite your source?

    $1.3M in daily profits from coffee would not be remotely shocking for a company with over 31,000 locations and 47 million customers daily. The gross margins on coffee are around 60% (look at Starbucks income statement [google.com] if you need proof) and McDonalds EBIT margin [forbes.com] in 2008/09 was 29.8%. McDonalds had revenues around $30 billion last year. If they really made $1.3M on coffee per day in profit that means their annual coffee sales were around $1.6 billion or if the gross margin is used the number is more like $780 million in sales. Big numbers but quite reasonable given McDonalds revenues and the amount of coffee they sell. Starbucks revenues by comparison were just under $10 billion last year as a quick sanity check so $1.6 billion in coffee sales from McDonalds sounds pretty reasonable. I'm actually a little surprised it's not higher.

    And even "collect" is a stretch, because not every cup of coffee sells at list price, and not every cent of every transaction is necessarily collected by McDonalds (e.g. credit card processing fees).

    The percent of losses due to these factors is minor (2-4% at most is typical in the industry) and without question quite well known to McDonalds accountants. It is accounted for (indirectly) in their financial statements so any numbers you look at will have factored this in already.

    Disclosure: I am a certified accountant.

  • by notaspy (457709) <imnotaspyNO@SPAMyahoo.com> on Tuesday March 02, 2010 @09:38AM (#31328946)

    In more recent developments, Solo is granted summary judgment. BNet's cited blog post must have missed it.

    http://www.williamsmullen.com/rocketdocketiplit/blog.aspx?topic=63&All=null&IsListParentTopic=true [williamsmullen.com]
    "Last week, in a case it described as one of "practically first impression," the Eastern District of Virginia granted summary judgment in favor of Solo Cup Co. that it was not liable for improper patent marking under 35 U.S.C. 292(a). Pequignot v. Solo Cup Co., No 1:07cv897-LMB/TCB (E.D. Va. July 2, 2009). The Court agreed with Solo that the advice of counsel it received to replace patent-marking molds with non-marking molds in a gradual fashion was reasonable. Solo's overall conduct was held to evidence a lack of intent to deceive the public. The Court also held that an "offense" under the statute is the overall decision to mark improperly, thereby rejecting Pequignot's argument that Solo should be penalized for each and every lid it marked."

    "Solo also prevailed on summary judgment with respect to its fallback position, namely, that even if there were intent to deceive the public, the offenses punishable under the statute are the decisions to mark improperly, not each and every marking of a product. Thus, in an alternative holding, the Court decided that the maximum amount of damages for which Solo could be liable is $1500."

    And in a recent article by Law Professor Thomas Field, http://www.ipfrontline.com/printtemplate.asp?id=24082 [ipfrontline.com]
    "The opinion in Pequignot v. Solo Cup Co., 646 F.Supp.2d 790 (E.D. Va. 2009) (Pequignot III), a case resolved last August, and now on appeal, signals a very different, perhaps more typical view of those who seek to recover under section 292(b). There, the court grants summary judgment for Solo because it was unable to find deceptive intent."

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