The United States Court of Appeals for the Federal Circuit recently reversed a district court’s dismissal for lack of standing in a false marking case. Stauffer v. Brooks Brothers, 2010 U.S. App. LEXIS 18144 (Fed. Cir. 2010). The United States District Court for the Southern District of New York previously found that the qui tam1 plaintiff, Raymond E. Stauffer (“Stauffer”), lacked standing to bring a false marking suit against Brooks Brothers, Inc. (“Brooks Brothers”), and granted Brooks Brothers’ motion to dismiss.
Stauffer sued Brooks Brothers under 35 U.S.C. § 292, which prohibits falsely marking a product with a patent number. Section 292 is a qui tam statute because it allows “[a]ny person” to bring suit under the statute for violation of this provision. In this case, the Federal Circuit shed light on the standing requirement for a qui tam plaintiff, or relator, to bring an action under § 292 for false marking.
The Federal Circuit articulated the tripartite test for standing, in which a plaintiff must show (1) that he has suffered an injury in fact; (2) a causal connection between the injury and the conduct complained of; and (3) that the injury is likely to be redressed by a favorable decision. Id. at *9-*10 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (citations and quotations marks omitted)). The dispute over standing in this case revolved around the first factor – whether the plaintiff, Stauffer, suffered an injury sufficient to confer standing.
According to the Supreme Court in Vermont Agency of Natural Resources v. United States ex rel. Stevens, a qui tam plaintiff can establish standing based on the United States’ implied partial assignment of its damages claim to any person. 529 U.S. 765, 773 (2000). In other words, a qui tam provision operates as a statutory assignment of the United States’ rights. Thus, the Federal Circuit held that in order to have standing, a qui tam plaintiff must allege that the United States has suffered an injury in fact causally connected to the defendant’s conduct that is likely to be redressed by the court. Stauffer, 2010 U.S. App. LEXIS 18144 at *11.
The Federal Circuit also found that by enacting section 292, Congress defined an injury to the United States, and “a violation of that statute inherently constitutes an injury to the United States.” Id. Moreover, the Court held that “[b]ecause the government would have standing to enforce its own law, Stauffer, as the government’s assignee, also has standing to enforce section 292.” Id. at *11-*12.
In addition, the parties disputed whether section 292 addressed a proprietary or sovereign injury. A proprietary injury is an injury to the United States’ financial interests. A sovereign injury is the inherent injury sustained to the United States from a violation of its laws. Brooks Brothers argued that a claim for false marking is allowed only if the plaintiff alleges some proprietary – or monetary – harm to the United States. The Federal Circuit withheld from expressing a view as to whether section 292 addresses a proprietary injury, but also held that a relator’s standing as the government’s assignee does not depend on such a classification.2 As a result, in order to survive a motion to dismiss for lack of standing, a qui tam plaintiff need only allege that a defendant is falsely marking its products, without specifying the extent or kind of injury this inflicts on the United States.
Brooks Brothers further argued that Stauffer lacked standing because he did not allege any injury to himself or to the public. The Court rejected this argument, holding that Stauffer, as a qui tam plaintiff, need not allege individual harm or public harm. Id. at *17. “Stauffer’s standing arises from his status as ‘any person,’ and he need not allege more for jurisdictional purposes.” Id. In reversing the District Court, the Stauffer decision continues to hold the door open to the recent flood of false marking actions filed by non-practicing entities and industry competitors alike.
As a preview to the next battleground regarding false marking suits, the Federal Circuit briefly mentioned, but did not decide, the constitutionality of section 292. An amicus brief filed by Ciba Vision Corporation (“Ciba”) argued that section 292 violates the Article II, Section 3 duty of Congress to “take Care that the Laws be faithfully executed” by assigning enforcement of section 292 to private citizens without the Government retaining ultimate control of the litigation. The Court acknowledged that Ciba raised relevant points, but because the parties failed to argue the constitutionality of section 292, the Federal Circuit declined to address the issue. It is likely that defendants of false marking suits will raise this constitutional issue in future cases.