false patent marking doesn’t presumptively cause injury even in 2-player market

John Bean Technologies Corp. v. Morris & Assoc., Inc.,
No. 15-CV-02211, 2018 WL 3039734 (W.D. Ark. Jun. 19, 2018)
JBT’s predecessor asserted Patent Act false marking claims,
Lanham Act false advertising claims, and various North Carolina and Arkansas State
law claims against Morris, its sole competitor in selling auger chillers to
poultry processors in the United States. An auger chiller takes chicken
carcasses in the middle stages of the butchering process and cools them to
prevent contamination.  Cold water runs
from the far end to the receiving end and the auger slowly rotates on a shaft,
driving the chickens against this current to the far end of the tank, where
they enter the next stage of the processing line. These are expensive and
durable machines; sales are therefore rare and lucrative.  
Morris uses vertical openings in the auger blades of its
chiller to increase the flow of water (a desirable feature) and advertised its
chiller as patented (the ’529 patent). JBT’s chiller also had openings for
water in the blades, though its didn’t run to the edge of the blade as Morris’s
Morris’s website advertised that its auger chiller was
patented. It also included caricatures of the parties’ chillers (JBT’s
recognizable from the openings in the auger blades) and a statement that “In
other systems, water circulates only around the shaft and through a narrow gap
between the auger flights and the tank wall.” JBT alleged that the openings on
the caricature were disproportionately small compared to their size on an
actual JBT chiller, and that the image plus the statement about water flow in
“other systems” were literally false comparative ads.
The false marking claims failed because JBT couldn’t show
competitive injury, as is now required:
If an article that is within the
public domain is falsely marked, potential competitors may be dissuaded from
entering the same market. False marks may also deter scientific research when
an inventor sees a mark and decides to forego continued research to avoid possible
infringement. False marking can also cause unnecessary investment in design
around or costs incurred to analyze the validity or enforceability of a patent
whose number has been marked upon a product with which a competitor would like
to compete.
JBT argued that competitive injury necessarily occurred from
false marking in a two-player market because Morris’s auger chillers gained
value from being marked as patented, causing the value of JBT’s chillers to
decrease. In addition, JBT argued that its reputation and goodwill with a
customer were injured when the customer declined to purchase a JBT auger
chiller with openings because Morris’s auger chillers were marked as patented,
but subsequently asked JBT to retrofit the auger chiller with openings.
The two-player market supported a rebuttable presumption of
economic injury in false advertising cases where a two-player market
necessarily makes ads comparative. But such a presumption was inappropriate for
false marking, given that the Patent Act now affirmatively requires a plaintiff
to demonstrate competitive injury as part of a false marking claim.
The evidence about the one customer who wanted a retrofit
was just hearsay and speculation. (Even if it had been admissible, it tended to
show that Morris’s past patent litigation practices led to the request, not
false patent marking.)  Anyway, JBT made
that sale, and additional sales to that customer, meaning that there wasn’t
evidence of lost reputation or goodwill. 
(It seems like retrofitting was likely to be more costly than initially
manufacturing the auger with the openings, but I guess JBT didn’t say
that?)  There was no other evidence of
deterred market entry, deterred research, design-around investments, or costs
incurred to analyze the validity or enforceability of the marked patent.
Likewise, there was insufficient evidence of harm on the
false advertising claims. Again, even assuming the customer experience above
were admissible, there was no evidence the customer was affected by Morris’s
advertising.  The “two-player market”
principle created a rebuttable presumption of economic injury, but such
presumptions serve only “to control the result where there is an entire lack of
competent evidence.” When sufficient proof has been offered to rebut a
presumption, “it falls out of the case.” Even assuming that JBT was entitled to
the presumption of injury, Morris rebutted it: “Multiple deponents familiar
with selling auger chillers testified that whether equipment is advertised as
patented is all but meaningless to customers seeking to purchase.”  There was also evidence that customers do not
make equipment purchases based on websites. There was also evidence that Morris
didn’t hurt JBT’s reputation or goodwill, and that any relevant decline
happened because JBT’s predecessor was sold to JBT, whose sales remained strong
nonetheless. All this rebutted any presumption of injury and of irreparable
Morris won summary judgment on these claims; the coordinate state
claims also failed.

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