False marking defendants fight back

Victimized by a patent troll bringing a false marking qui tam? A review of district court dockets shows you are not alone. Defendants, however, are beating off plaintiffs taking advantage of a favorable 2009 Federal Circuit decision and may soon knock out the action with a constitutional blow.

Under the False Marking Statute, “[w]hoever marks upon, or affixes to … any unpatented article, the word ‘patent’ or any word or number importing that the same is patented, for the purpose of deceiving the public…[s]hall be fined not more than $500 for every such offense.” 35 U.S.C. § 292 (a). The Statute authorizes private plaintiffs to bring suit on behalf of the Government. 35 U.S.C. § 292 (b).

First appearing in the Patent Act of 1842, the False Marking statute became an overnight sensation in December, 2009.

Litigation exploded following the Federal Circuit’s decision in Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009). There, the Court held that the statute’s $500 penalty applies to each “article” sold, as opposed to earlier opinions which imposed for the decision to falsely mark. Id. at 1301. Cue opening of flood gates. In the year before Forest, approximately 30 false marking qui tam suits were filed. The number soared to nearly 800 in 2010. Manufacturers marking their goods with expired patents became an easy target.

Faced with crippling statutory damages, defendants have fought back. The usual defenses, failure to state a claim and lack of personal jurisdiction, have been somewhat successful. Particularly noteworthy, however, are on the constitutional challenges the 169 year-old statute is newly facing. Defendants started questioning whether the qui tam provision of the False Marking statute violates the “Take Care” and “Appointments” clauses of Article II of the Constitution. An affirmative response by two district courts signal this patent fight may soon be over. The Northern District Court of Ohio in Unique Product Solutions, Ltd. v. Hy-Grade Valve, Inc., and the Eastern District of Pennsylvania in Rogers v. Tristar Products, Inc., both found the qui tam provision was unconstitutional for lacking “sufficient controls” over the litigation by the Executive Branch.

Those decisions are emboldening other Defendants to seek dismissals and alternative stays pending a determination by the Federal Circuit. The plaintiff in Unique Product has appealed, and the Court heard oral argument in July in FLFMC v. Wham-O, Case No. 2011-1067, a lack of standing decision where the appellee also disputed the statute’s constitutionality. Extended stays may be necessary if the Supreme Court ends evasive measures and finally confronts the issue.

Congress has also joined the fray, passing amendments which will redefine the false marking plaintiff from “any person” to the Government and injured competitors. For now, clients should still keep their guard up for trolls and remember the best defense is to patent mark your products carefully.