On August 31, 2010, the Federal Circuit rejected a procedural attempt to stem the recent flood of “false patent marking” lawsuits in Stauffer v. Brooks Brothers, Inc., No. 2009-1428, -1430, -1453, 2010 U.S. App. LEXIS 18144 (Fed. Cir. Aug. 31, 2010). It determined that the statutory assignment of the United States’ rights in section 292(b) operates to confer standing on an individual as long as the individual alleges that the United States suffered an injury in fact, causally connected to the defendant’s conduct that is likely to be redressed by the court.
The Stauffer decision is part of the recent surge of false marking suits filed since the Federal Circuit ruled last December that penalties in false marking actions should be imposed on a per article basis, as opposed to the previous single $500 penalty for all individual examples of a falsely marked product. This change caused concern for manufacturers who now may be exposed to large fines for inaccurately marked goods produced in large volumes. See Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009). Section 292 prohibits affixing the word “patent” to an unpatented article with the purpose of deceiving the public and specifically allows individual plaintiffs to pursue claims in the government’s stead: “any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.” 35 U.S.C. § § 292(b). The Stauffer case dealt with allegations that a mechanism contained within Brooks Brothers’ bow ties were falsely marked with patent numbers that had expired in the 1950s. In its decision, the Federal Circuit first clarified that section 292’s qui tam provision operates to confer standing on an individual based on the United States’ partial assignment of its damages claim to “any person.” “Stauffer’s standing arises from his status as ‘any person’ and he need not allege more for jurisdictional purposes.” Therefore, an individual need only allege that the United States suffered an injury in fact casually connected to the defendant’s conduct that is likely to be redressed by the court. The individual is not required to allege injuries to himself or to the public in order to satisfy standing requirements. On that basis, the Court expressly declined to address whether Stauffer’s alleged injuries to himself or alleged injuries to competition were sufficient to give him standing.
The Federal Circuit also addressed the question of what constitutes sufficient injury in fact to the United States under Article III. Brooks Brothers had argued that abstract harm, such as injury to the interest in seeing that the law is obeyed, is not sufficiently concrete to meet standing. The court disagreed, accepting the government’s argument that in enacting the false marking statute, Congress determined that violation of that act is sufficient injury in fact to confer standing on the government and thus on Stauffer as the governments’ assignee.
Additionally, although the court did not rule on the issue, amicus Ciba had argued that section 292 is unconstitutional on the basis that the government cannot assign a claim to an individual without retaining control over that individual’s actions because such an assignment would constitute a violation of the “take care” clause of Article II, Section 3 of the Constitution. While the Federal Circuit declined to address this issue, the argument may prove to be a viable defense for a business facing a challenge to its marking practices in the future.