Qui Tam Provision for False Marking Held Unconstitutional

  by: Joseph R. Carnicella, Intellectual Property associate at Picadio Sneath Miller & Norton, P.C.

Plaintiff commenced an action in the Northern District of Ohio (Civil Action No. 5:10-cv-1912) as a relator alleging that Defendant falsely marked a series of industrial valve products with a patent that expired and used the patent in advertising its products after the expiration date.  Defendant subsequently moved to dismiss the action on the grounds that the False Marking Statute, 35 U.S.C. § 292(b), violated the Appointments and Take Care Clause of the U.S. Constitution, Article II, § 3.  On February 23, 2011, the Northern District of Ohio agreed with Defendant and declared the qui tam provision of 35 U.S.C. § 292(b) unconstitutional.

The False Marking Statute provides that it is unlawful for one to mark or advertise a product with a patent number that does not exist or has expired.  Also, this statute has a provision that allows any person (a “relator”) to sue for the penalty, wherein the penalty would be divided in one-half between the person suing and the United States.  Previously, the courts have confirmed that relators have standing under Article III to bring such suits in federal court, yet have deferred in deciding whether qui tam suits violate Article II.  In this particular case, upon suggestion by the court, Defendant raised the argument that this statute failed to give the Executive Branch sufficient control over the litigation in which the United States was the real party in interest.  The Take Care Clause of Article II provides that the President “shall take Care that the Laws be faithfully executed,” and Defendant argued that the False Marking Statute violated this clause. 

In support of its holding, the court distinguished between qui tam claims brought under the False Marking Statute and qui tam claims brought under the False Claim Act, 31 U.S.C. § 3730.  Under the False Claim Act, the government (a) must be informed of cases filed and pursued by relators even if the government decides not to intervene, (b) has a right to invervene after first refusing to intervene, upon showing of good cause, (c) has a right to limit the role of the relator in the litigation, and (d) has a right to seal the relator’s filings for more than 60 days.   Thus, the court concluded that the Executive Branch retains sufficient control over the relator’s conduct.  On the other hand, the court in the present case decided that the False Marking Statute lacks any of the statutory controls necessary to satisfy the Take Care Clause of Article II.  The court noted that the False Marking Statute is unlike any other statute in the Federal Code because it allows a person to file a criminal lawsuit in the name of the United States without any approval from or notification to the Department of Justice and that such action could be litigated wihtout any control or oversight. 

Whether this decision will be appealed, whether other district courts will follow such a decision in the interim, and whether this decision will have any impact on the 2011 Patent Reform Act are just some of the questions with answers unknown, and we will continue to monitor this hot topic.

Advertisements

One response to “Qui Tam Provision for False Marking Held Unconstitutional

  1. Pingback: Eastern District of PA Holds Qui Tam False Marking Statute Unconstitutional | PIT IP Tech Blog