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September 1, 2010

Fit To Be Tied

Raymond E. Stauffer, esquire, hankers to look dapper, in idiosyncratic fashion, preferring bow ties to the normal skinny bib known as a necktie. A man with taste such as Stauffer's may sojourn to a classy clothier such as Brooks Brothers. But in his shopping excursion, Stauffer was bemused to find that bow ties he had purchased were marked, with numbers of patents expired over 50 years ago (1955). Umbrage drove Stauffer to the courthouse, where he sallied forth with "a qui tam action under 35 U.S.C. § 292, alleging that Brooks Brothers had falsely marked its bow ties."

Raymond E. Stauffer v. Brooks Brothers and Retail Brand Alliance v. United States (CAFC 2009-1428, 1430, 1453) precedential

The statute -

Section 292, the "false marking" statute, 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.

Id. (emphasis added).

The action -

Brooks Brothers moved to dismiss Stauffer's complaint pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of standing and pursuant to Rule 12(b)(6) for failure to allege an intent to deceive the public with sufficient specificity to meet the heightened pleading requirements for claims of fraud. The district court granted Brooks Brothers' motion pursuant to Rule 12(b)(1), concluding that Stauffer lacked standing. According to the court, all plaintiffs, including qui tam plaintiffs (or "relators"), must establish (1) that they have suffered an injury in fact (2) that is causally connected to the defendant, and (3) that is likely to be redressed by the court. Standing Op., 615 F. Supp. 2d at 253. The court further noted that the qui tam provision of section 292(b) operates as a statutory "assignment" of the rights of the United States, so Stauffer must prove that the government, rather than he, satisfies the requirements for standing, including that it has suffered an injury in fact. Id.

The district court further found Stauffer's allegation of injury insufficient.

Then the Feds weighed in, but the district court waved them off as well.

After the district court's decision on standing, Standing Op., 615 F. Supp. 2d 248, the government moved to intervene, arguing that the court's opinion called into question the constitutionality of section 292 and that the government was therefore entitled to defend the statute pursuant to Rule 24(a)(1) and 28 U.S.C. § 2403. The government also argued that its interest in seeing the patent laws enforced gave it a right to intervene pursuant to Rule 24(a)(2) and that it should be permitted to intervene pursuant to Rule 24(b)(1)(B). The court denied the motion, finding no basis for the government to intervene as of right and finding the showing for permissive intervention insufficient. Intervention Op., 2009 U.S. Dist. Lexis 51166.

The district court reasoned that it had not decided any constitutional issue that would give the government the right to intervene pursuant to Rule 24(a)(1), as it had only decided the case on its facts. Id. at *8-9. The court added that, contrary to the government's argument, it was entitled to rule on Brooks Brothers' motion before the government's deadline to decide whether it would seek to intervene had expired, as the court had not held the statute unconstitutional. Id. at *9-10 n.4. The court further found that the government did not have a sufficient interest in the action to have a right to intervene pursuant to Rule 24(a)(2) because the court had denied standing only to Stauffer, not to the United States itself. Id. at *12.

So, to appeal, where the government argued that Stauffer was an agent of lawfulness, not to mention the government's share of the loot from bow ties boldly proclaiming balderdash - patent protection long past.

The government asserts that Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (2000), controls the outcome in this case, and that decision held that a qui tam relator has standing without an injury to the relator himself, a proposition that, according to the government, the court stated but did not follow. Furthermore, the government argues that the United States' interest in seeing its laws enforced itself leads to an injury in fact when those laws are not obeyed. In other words, according to the government, in enacting the false marking statute, Congress determined that such conduct is harmful and should be prohibited, which is a sufficient injury in fact to confer standing on the government and therefore on Stauffer as the government's implicit assignee of the action to recover for injury. Finally, the government asserts that even if a proprietary injury involving the federal treasury's being directly diminished were required under Vermont Agency, as opposed to solely a sovereign injury based on the United States' interest in seeing its laws enforced, the United States has a proprietary interest in receiving half of the recovery in a suit under section 292.

Stauffer touted the travesty of false marking as economic injustice to bow tie wearers everywhere.

Stauffer separately argues that, according to this court's decision in Clontech Labs., Inc. v. Invitrogen Corp., 406 F.3d 1347 (Fed. Cir. 2005), the public is injured by false marking, which misleads and wrongly imposes the costs of evaluating patents on the public. Thus, he argues, the public has suffered an injury in fact sufficient to confer standing. Stauffer adds that his complaint alleged that Brooks Brothers had "wrongfully quelled competition with respect to . . . bow tie products thereby causing harm to the economy of the United States." J.A. 66, para. 129. That, he argues, further demonstrates an injury to the public. Stauffer also asserts that he has individually been injured as a member of the public, thereby demonstrating another injury to the public.

The appeals court stood by standing.

We agree with the government and Stauffer that Stauffer had standing to sue Brooks Brothers. "The question of standing to sue is a jurisdictional one, which we review de novo." Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1551 (Fed. Cir. 1995) (en banc) (citation omitted). Every plaintiff must demonstrate standing, a jurisdictional prerequisite under Article III's case-or-controversy requirement. Vermont Agency, 529 U.S. at 771. Thus, a plaintiff must show (1) that he has suffered an "injury in fact," an invasion of a legally protected interest that is "(a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical," (2) that there is "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. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (citations and quotations marks omitted); see Vermont Agency, 529 U.S. at 771. We conclude that Stauffer has met that test and hence has standing in this case.

We are all aggrieved: to an old patent in the weave; aghast to eye: false marking of a tie.

As the government points out, 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.

Further, the government had a right to intervene for bow tie booty, as it had skin in the game.

Furthermore, the government would not be able to recover a fine from Brooks Brothers if Stauffer loses, as res judicata would attach to claims against Brooks Brothers for the particular markings at issue. See United States ex rel. Mergent Servs. v. Flaherty, 540 F.3d 89, 94 (2d Cir. 2008) ("[T]he United States might become bound by res judicata or collateral estoppel as a result of the actions of a pro se in bringing and losing a qui tam action.") (citing Stoner v. Santa Clara County Office of Educ., 502 F.3d 1116, 1126-27 (9th Cir. 2007) ("[Q]ui tam relators are not prosecuting only their 'own case' but also representing the United States and binding it to any adverse judgment the relators may obtain.")).

Reversed and remanded.

Posted by Patent Hawk at September 1, 2010 8:10 PM | Standing


"Fit to be tied"

...if only I had some string.

Posted by: Pedantic Pete at September 2, 2010 10:38 AM


With tea ball attached?

Posted by: EG at September 2, 2010 12:40 PM

Nah, that would be obvious.

Posted by: Pedantic Pete at September 2, 2010 3:45 PM

I agree with the CAFC's ruling here, and am glad the district court decision was reversed. Although many of us would like to rid patent litigation of the scourge of false marking trolls, undermining statute and judicial precedent is not the way to do it. Proving scienter (intent to deceive, which is an element of liability) is likely a sufficient burden that, if courts properly apply the law, the nuisance value of trolls will be limited.

Posted by: patent litigation at September 6, 2010 3:31 PM