Monday, September 13, 2010

Allegations of false marking alone give a plaintiff standing?

False patent marking has become the new quick-hit area for patent infringement litigation. I have discussed these cases and issues previously. To briefly recap, Congress enacted the false marking statute (35 U.S.C. §295) to prevent people from deceiving the public into believing their goods were patented. Thus, if you mark your widget as "patented" or covered by U.S. Patent No. 1,234,567, and it isn't and you intended to deceive the public by marking it as such, then you shall be fined not more than $500 for each offense. The statue goes on to permit any person to bring an action to enforce this right. And to encourage each of us to do so, if we bring such a suit and win, we get half the fine.

These cases made the headlines when a patent attorney sued Solo Cup for falsely marking billions of cups. The potential fine there was in the trillions of dollars. (The total exposure was $10.8 trillion -- who wouldn't want half of that?) Solo Cup won that case on summary judgment -- there was no question that Solo Cup did not intend to deceive the public by marking its cups with expired patent numbers.

Most defendants present this argument, but it is not an argument you can win at the pleading stage. Whether or not you intended to deceive the public by marking a product with an expired patent number requires you to prove you didn't. You can't dismiss a plaintiff's properly pleaded case by saying "I didn't intend to deceive anyone."

This brings in another avenue of attack defendants have used -- challenging standing. Raymond Stauffer, a patent attorney, sued Brooks Brothers (and its corporate parent) for falsely marking some bow ties. The challenged bow ties contain an "Adjustolox" mechanism and are marked with U.S. Patent Nos. 2,083106 and 2,123,620.
U.S. Patent No. 2,083,106
U.S. Patent No. 2,123,620
Brooks Brothers argued that the plaintiff did not have standing to bring the claim because Stauffer's claim that Brooks Brothers' actions wrongfully quelled competition were too hypothetical to constitute an injury. The district court agreed because there had been no "injury-in-fact" to the United States. Thus, the district court dismissed the plaintiff's complaint. Stauffer appealed.


To establish standing:
a plaintiff must show (1) that he has suffered an “injury in fact,” an invasion of a legally protected interest that is “(a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical,” (2) that there is “a causal connection between the injury and the conduct com-plained of,” and (3) that the injury is likely to be redressed by a favorable decision.
And because the false marking statute is a qui tam action, a plaintiff need not concern himself with his own injury -- he has been partially assigned the United States's injury claim:
In other words, even though a relator may suffer no injury himself, a qui tam provision operates as a statutory assignment of the United States’ rights, and “the assignee of a claim has standing to assert the injury in fact suffered by the as-signor.” Vermont Agency, 529 U.S. at 773. Thus, in order to have standing, Stauffer must allege that the United States has suffered an injury in fact causally connected to Brooks Brothers’ conduct that is likely to be redressed by the court.
The Court went on to discuss the two different types of injuries the U.S. could suffer -- proprietary and sovereign. Proprietary injury is the money the U.S. is entitled to (half of the $500 fine). Sovereign injury is the violation of a U.S. statute (i.e. the U.S. is injured if people do not respect its laws). The Federal Circuit said it did not need to state which of these injuries satisfied the injury-in-fact requirement. Stauffer properly pleaded his standing, and it was error for the district court to dismiss his complaint.

Reversed (and remanded to address the merits of the case, including Brooks Brothers's motion to dismiss on the grounds that Stauffer didn't properly plead the required intent to deceive).


  1. Great article. Thanks for posting. I'll be following what happens with the Brooks Brothers case. I think that we are just seeing the beginning of a flood of appeals that will be coming down on these false marking claims. The courts should be tightening up the case law over the next couple of years.

  2. Thanks, Mark. I agree that we are just beginning to see how this law develops. I think plaintiffs will still try for quick nuisance settlements and the next few cases will focus on the pleading requirements for intent to deceive.