Wednesday, March 16, 2011

False marking claims must satisfy heightened pleading standard

There's been some back and forth on this issue. To plead a claim for false marking, a plaintiff must allege that the defendant marked something as patented with an "intent to deceive the public." Does a plaintiff asserting a false making claim need to satisfy the heightened pleading requirements of Rule 9? The Federal Circuit provided an answer yesterday:
This court holds that Rule 9(b)'s particularity requirement applies to false marking claims and that a complaint alleging false marking is insufficient when it only asserts conclusory allegations that a defendant is a "sophisticated company" and "knew or should have known" that the patent expired.
Here, BP Lubricants was sued for its CASTROL brand motor oil. It had a design patent which protected the ornamental design of the bottle. BP marked the bottles with this patent number. According to the complaint, BP continued to mark the bottles after the patent expired and, on the plaintiff's information and belief: (1) BP knew or should have known the patent was expired; (2) BP is a sophisticated company; and (3) BP marked the products for the purpose of deceiving the public.

At the trial level, the Court held that this pleading did satisfy Rule 9(b). Applying Federal Circuit law (Exergen), the trial Court held that this pleading provided the specific who, what, when, where, and how required to state a claim. Specifically, BP (who) had deliberately and falsely marked (how) at least one line of motor oil (what) with an expired patent, and continues to do so (when) throughout the US (where) with an intent to deceive.

But the Federal Circuit said this wasn't enough. To plead a claim:
a complaint must in the 292 context provide some objective indication to reasonably infer that the defendant was aware that the patent expired.
So, just saying the Defendant is a sophisticated player who "should have known better," isn't enough. A plaintiff must allege some objective indication that the defendant did know better. Without that, the pleading falls short of Rule 9(b), and is ripe for dismissal.

This case is also interesting from a procedural standpoint. BP lost its motion to dismiss at the trial level. Typically, you can't appeal that decision because it is not final. Instead, BP petitioned the Federal Circuit for a writ of mandamus -- an extraordinary remedy. An appellate court can issue a writ -- ordering someone (here, the trial court) to do something -- only when there has been a "clear abuse of discretion or 'usurpation of judicial power.'"

The Court found such extraordinary circumstances here. It had not yet decided the issue of whether Rule 9(b) applied to false marking cases. And this issue has been causing quite a bit of attention and disagreement lately. So, by granting the writ, the Federal Circuit is able to decide an "issue important to 'proper judicial administration.'"

And a last saving point for plaintiffs -- the Federal Circuit reminded trial courts that they should freely grant leave to plaintiffs to amend their complaints.

Petition for a writ of mandamus, directing the district judge to grant defendant's motion to dismiss granted in part.

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