In December 2008, after buying some Brooks Brothers’ bow ties that were marked with two expired patents, patent attorney Raymond Stauffer brought a qui tam action against the clothing manufacturer alleging it had falsely marked the ties under 35 U.S.C. § 292 (the “false marking” statute), which provides that:

(a) . . .

Whoever marks upon, or affixes to . . . any unpatented article, the word “patent” or any word or number importing that the same is patented, for the purpose of deceiving the public

. . .

Shall be fined not more than $500 for every such offense.

(b) 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.
 (emphasis added).

By definition, a “qui tam” action permits a private party to pursue the rights of another injured party as its “relator.”  Here, as the relator of the United States, Stauffer was required to prove that the government had adequate standing to sue by suffering an injury in fact as a result of Brooks Brothers’ actions. Brooks Brothers took the position that Stauffer lacked standing to sue on the government’s behalf, and as such, it filed a motion to dismiss the case. The district court granted Brooks Brothers’ motion causing Stauffer to appeal the decision to the Federal Circuit.

On appeal, the Federal Circuit disagreed with the district court’s ruling and held that Stauffer had adequate standing to pursue the false marking claim against Brooks Brothers. In support of its position, the Federal Circuit explained that:

Congress has, by enacting section 292, defined an injury in fact to the United States. In other words, a violation of that statute inherently constitutes an injury to the United States. In passing the statute prohibiting deceptive patent mismarking, Congress determined that such conduct is harmful and should be prohibited. The parties have not cited any case in which the government has been denied standing to enforce its own law. Because the government would have standing to enforce its own law, Stauffer, as the government’s assignee, also has standing to enforce section 292. (Slip Opinion at page 9[1]).

As the Federal Circuit has seemingly confirmed that individuals suing on the government’s behalf have standing to bring false marking actions, it is very likely that this decision will spawn and potentially even encourage more lawsuits to be filed.[2] As such, unless a company has created and instituted an internal process for making sure its products are not mismarked, it is inherently running the risk of being sued. In addition, the potential impact to the company as a result of this unwanted litigation exposure can be costly, particularly as the company can face a penalty of up to $500 for each falsely marked item.

While not specifically addressing this issue here, the Federal Circuit has previously hinted that a company may be able to avoid such lawsuits by demonstrating that it did not intend to deceive its customers by mismarking its products. However, even if the accused company did not intend to deceive the public by its actions, the company is still at risk of being sued, and only thereafter will be able to defend its actions by demonstrating its non-deceptive intent. Accordingly, it is important that companies proactively take steps now and audit their product portfolios to confirm they are properly marking their goods.

Here at Taft, we are committed to helping our clients implement useful and creative strategies for eliminating patent litigation risks, including offering customized audit plans for a fixed fee amount. If you have questions regarding false marking issues, how this decision may impact your business and/or how we may be able to implement a fixed fee audit plan for you, please contact James A. Coles (Indianapolis Office), John M. Mueller (Cincinnati Office), Michael Diamant (Cleveland Office), or any one of Taft’s patent attorneys. 

Contributors: Ryan O. White and James A. Coles

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[1] A copy of the August 31, 2010 Slip Opinion can be found at: http://www.cafc.uscourts.gov/images/stories/opinions-orders/09-1428-1430-1453.pdf

[2] According to Bloomberg.com (Sept. 1, 2010 news article by Victoria Slind-Flor entitled “Brooks Brothers, Estee Lauder, Nature Publishing: Intellectual Property”), Allen Arnsten of Foley & Lardner LLP has stated that more than 350 false marking cases have already been filed and that several of these cases were put on hold awaiting a ruling in this decision.