The United States Court of Appeal for the Federal Circuit has issued a ruling of importance in the recently rejuvenated issue of false patent marking: Stauffer v. Brooks Brothers, Inc.[i]
Section 292 of the US patent law provides that it is an offence to falsely mark a product as being patented, for the purpose of deceiving the public. A fine of up to $500 per offence may be imposed. The same section provides that "any person" may sue for the penalty, with half going to that person and the other half going to the United States. Because the plaintiff acts in part for the United States, this type of action is commonly called a "qui tam" (who as well) action. Recent court rulings have prompted a flood of qui tam actions. A recent Information bulletin on the subject provides a useful overview.
In Stauffer, the Federal Circuit discussed the issue of standing to sue. The United States District Court for the Southern District of New York had dismissed Stauffer's qui tam action against Brooks Brothers on the ground that Stauffer lacked standing in that (i) he had not sufficiently alleged any injury to the United States due to the false marking; and (ii) any injury Stauffer himself may have suffered due to the false marking could not be the basis for standing. After dismissal of the action, the government moved to intervene. Its motion was denied by the District Court.
Federal Circuit Decision
On appeal, the Federal Circuit reversed the District Court's decision, ruling that both Stauffer and the government had standing, and that the government should be allowed to intervene.
Stauffer's standing is based on the implicit partial assignment of the United States' interest in the claim against Brooks Brothers. The United States' interest and standing stem from the statutory violation, which Congress has determined is harmful and should be prohibited. Brooks Brothers argued that the Court should distinguish this type of injury to United States sovereignty, arising from any violation of its laws, from a concrete proprietary injury arising from the specific alleged violation, adding that standing to sue requires an allegation of the latter type of injury. However, the Federal Circuit refused to draw a distinction between these two types of injuries.
The Federal Circuit ruled that it was not necessary in order to establish standing for Stauffer to show any specific injury either to himself or to the public, or the traceability of the patent marking to Brooks Brothers rather than the manufacturer of the products in issue. The Court said the comments of the District Court on these points conflated the requirement for standing to sue with the merits of the case.
The Court also ruled that the government was entitled to intervene in the qui tam action because (i) it has an interest in half the fine that might be awarded in the action; and (ii) if Stauffer were to lose his action, the government would be prevented by the principle of res judicata from suing Brooks Brothers in a separate action concerning the same markings.
The Federal Circuit refused to consider arguments made by an amicus curiae (friend of the court) that the provision for the qui tam action is unconstitutional. The Court was concerned that the issue had not been raised or argued by the parties. Therefore, judicial comment on this issue will have to wait for another day.
Possible Statutory Amendment
In the background of false patent marking lawsuits are proposals in both houses of Congress, in the context of broader patent reform bills, to amend section 292 to repeal the provisions permitting qui tam actions. As proposed, the repeal would terminate any qui tam actions pending at the date of enactment. However, the nature and the timing of any amendments to US law defy prediction because they are subject to many variables.
The main effect of the Stauffer decision is that someone accused of false marking in a qui tam action cannot expect to have the action dismissed at a preliminary stage on the basis that the plaintiff does not appear to have a particular interest or that no resulting injury has been shown.