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Justin E. Gray

IP Litigation Attorney at Foley & Lardner LLP

Former Adjunct Professor at Northwestern University School of Law

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Wednesday
Feb232011

District Court Finds False Marking Statute is Unconstitutional

Unique Product Solutions, Ltd. v. Hy-Grade Valve, Inc. (N.D. Ohio Feb. 23, 2011)

Earlier today, Judge Polster of the Northern District of Ohio found that the false marking statute is unconstitutional under the Take Care Clause of the U.S. Constitution.  The Court stated, in part:

Applying the Morrison "sufficient control" analysis to the False Marking statute, it is clear the government lacks sufficient control to enable the President to "take Care that the Laws be faithfully executed."  As discussed, supra, unlike the FCA, the False Marking statute lacks any of the statutory controls necessary to pass Article II Take Care Clause muster.  The False Marking statute essentially represents a wholesale delegation of criminal law enforcement power to private entities with no control exercised by the Department of Justice.  See Pequignot, 608 F.3d at 1363 (False Marking statute is criminal).  It is unlike any statue in the Federal Code with which this Court is familiar.  Any private entity that believes someone is using an expired or invalid patent can file a criminal lawsuit in the name of the United States, without getting approval from or even notifying the Department of Justice.  The case can be litigated without any control or oversight by the Department of Justice.  The government has no statutory right to intervene nor does it have a right to limit the participation of the relator.  The government does not have the right to stay discovery which may interfere with the government's criminal or civil investigations.  The government may not dismiss the action.  Finally, the relator may settle the case and bind the government without any involvement or approval by the Department of Justice.

The danger of this uncontrolled privatization of law enforcement is exacerbated by the financial penalties in this statute. The penalty is up to $500 for each article falsely marked. Forest Group, 590 U.S. at 1302-1303. Depending upon the number of items, this could be a staggering amount of money or a trivial amount. The statutory penalty is not calibrated to the size or economic strength of the defendant, the significance of the product, or to the degree of competitive harm the false marking may have had beyond simply the gross number of articles falsely marked. See Id. at 1303 (“[t]he more articles that are falsely marked the greater the chance the competitors will see the falsely marked article and be deterred from competing”). It is therefore essential that the government have control over when such cases are brought, and most importantly, how they are settled. Such decisions should be made by government attorneys who have no financial stake in the outcome of the litigation or settlement, not by private parties motivated solely by the prospect of financial gain."

A PDF copy of the Court's decision is available here.  Thanks go out to Joe Basenberg of Hand Arendall, L.L.C. for bringing this decision to my attention.

Gray on Claims, in conjunction with Docket Navigator®, is providing a false marking chart that is updated daily with new false marking cases as well as status updates on pending cases.  A downloadable PDF chart is available on this page as well including information on the specific patents and products at issue in each litigation.  Gray on Claims is also providing information on false marking settlements.  Other writings on false marking can be found here.