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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
Jun082011

Second District Court Finds False Marking Statute Unconstitutional

Rogers v. Tristar Products, Inc. (E.D. Penn. June 2, 2011)

A second district court has found that the false marking statute is unconstitutional under the Take Care Clause of the U.S. Constitution.  Judge Robreno of the Eastern District of Pennsylvania recently made this ruling, stating, in part:

Applying Morrison, the Court finds that section 292(b) fails to provide the Executive Branch sufficient safeguards “to ensure that the President is able to perform his constitutionally assigned duties.” 487 U.S. at 696.

...

The False Marking Statute, by contrast [to the False Claims Act], contains no such statutory limitations on its qui tam provision. Broadly permitting “any person” to “sue for the [$500] penalty” in section 292(a), it requires no notice to the United States, and provides no means by which the United States may control the initiation, prosecution, or termination of litigation commenced on its behalf. 35 U.S.C. § 292(b). The what, when, where, and how of the litigation remain subject to the whims of whomever sees fit to bring the suit. Under these circumstances, the statute “essentially represents a wholesale delegation of criminal law enforcement power to private entities with no control exercised by the Department of Justice.” Unique, 2011 WL 649998, at *6. And given the available financial penalties under Forest Group, this lack of control is all the more troubling. See id.

Moreover, the supposed protections created by other sources of law simply do not suffice to ensure that the President can take care that the laws of the United States be properly carried out. Cf. Simonian, 2011 WL 1599292, at *5 (concluding that “the government maintains a sufficient level of control over qui tam actions brought under Section 292(b)”). First, the fact that notice of all pending patent cases is provided to the PTO within one month of filing, see 35 U.S.C. § 290, does not constitute sufficient notice to the Executive Branch. This notice is not expedient enough to provide the United States with sufficient time to protect its interests, and is not directed to the Department of Justice—the agency responsible for representing the United States’ interests in a false marking suit. See Unique, 2011 WL 649998, at *5 (“[B]y the time the government is informed by the clerk of an action being filed, the case may have already been settled. This presents a unique problem with False Marking qui tam actions because relators are likely to be interested in a quick settlement without the delay and expense of protracted litigation.”).

Second, the availability of intervention under the Federal Rules of Civil Procedure and the corresponding protections associated with intervention do not go far enough. While the United States could prevent a section 292(b) relator from voluntarily dismissing the case upon intervention, see Fed. R. Civ. P. 41(a)(1)(A)(ii), this requires the Court to order intervention on the United States’ motion in the first instance, see Fed. R. Civ. P. 24. Although the Federal Circuit has reversed a district court for refusing to permit intervention in a false marking suit under Rule 24(a)(2), see Stauffer, 619 F.3d at 1328, it is not clear to the Court that intervention will or must be ordered in any given case. Moreover, as noted, a section 292(b) relator could voluntarily dismiss a case before the United States even has the opportunity to seek intervention at all. See Fed. R. Civ. P. 41(a)(1)(A)(i); Unique, 2011 WL 649998, at *5.

Thus, despite the external protections available, the United States is not able to effectively exercise even a basic degree of control over a section 292(b) relator’s case.  The relator, by bringing the suit, is the master of the suit and—unlike in the False Claims Act context—remains as such. Indeed, unlike the rights it enjoys in False Claims Act qui tam litigation, the United States has no ability to (1) control the litigation by seeking dismissal or settlement over objection; (2) limit discovery in any meaningful way; or (3) take primary control over the litigation.

A PDF copy of the Court's decision is available here.  Thanks go out to the Docket Report blog for its initial reporting of this decision.

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.