Backlash Against False Patent Marking Cases Grows as District Court Finds Statute Unconstitutional

United States patent law provides, in 35 U.S.C. Section 292, that it is unlawful to mark a product with, or use in advertising, a patent number in connection with products that are not patented. This once obscure code section has recently come to life in a dramatic way, with a proliferation of lawsuits filed around the country.

Until very recently, almost all lawsuits filed involving United States patents were either declaratory judgment actions seeking courts to find patents invalid or not infringed, or actions accusing parties of patent infringement. That changed in 2009 when the United States Court of Appeals for the Federal Circuit issued a decision in Forest Group, Inc. v. Bon Tool Company, 590 F.3d 1295, 1301-1303 (Fed. Cir. 2009). The Federal Circuit held that violators of the false patent marking statute faced a $500 fine for each article improperly marked. The Federal Circuit found that the statute explicitly encourages lawsuits under a sub-section of Section 292 authorizing private “qui tam” actions in which one-half of any recovery goes to the United States government.

Those who have tracked lawsuits filed in the wake of the Forest Group decision know that defendants and their counsel have been fighting hard and looking for ways to limit their exposure and reduce the number of these lawsuits now flooding district courts. Gray on Claims has done a fantastic job compiling a list of all such litigation. Numerous cases are now currently pending, and many defendants have already settled rather than face uncertainty over how the law is developing with regard to Section 292.

The latest ammunition for defendants comes from the Northern District of Ohio, which just issued a significant ruling  finding the statute unconstitutional. In that case, the district court held that the qui tam provision in Section 292(b) violates the Appointments and Take Care Clauses of Article II of the United States Constitution, by failing to give the Executive Branch sufficient control over the litigation – and eviscerating the ability of private parties to sue on behalf of the United States.

If upheld on appeal to the Federal Circuit, the ruling may put an end to the numerous false marking cases now pending. Indeed, defendants may wish to consider either a motion to transfer their cases to the Northern District of Ohio, if possible, and move to dismiss immediately once transferred, or motions to stay the litigation in their particular district while any appeal of the decision awaits adjudication at the appellate court level.

Motions to stay the litigation may prove even more receptive in light of other cases currently pending. The Federal Circuit is considering another case challenging the constitutionality of Section 292 under the same issue decided by the Northern District of Ohio in FLFMC v. Wham-O. The Federal Circuit is also weighing In re BP Lubricants USA Inc., a case involving a different issue – whether plaintiffs are required to plead supporting factual allegations sufficient to infer an intent to deceive.