Another Late Season Christmas Gift to False Marking Plaintiffs?

It was the end of December 2009 when the Federal Circuit issued its decision in The Forest Group Inc. v. Bon Tool Company, 590 F.3d 1295 (Fed. Cir 2009), wherein the Court addressed the following prescient point:

Forest argues that interpreting the fine of § 292 to apply on a per article basis would encourage “a new cottage industry” of false marking litigation by plaintiffs who have not suffered any direct harm. This, however, is what the clear language of the statute allows.

As if the Federal Circuit's decision alone was not enough to encourage the "new cottage industry," on remand, the Southern District of Texas set the per article amount of the damages award at "the highest point of the price range" ($180) for the falsely marked article (a spring-loaded stilt used in the construction industry). The per article amount is viewed as an anomaly because there were only 38 articles at issue, making the total fine $6840.

Another late season holiday gift has been given to false marking plaintiffs (qui tam relators). The Northern District of Georgia granted a default judgment award in a false marking case involving Christmas tree stands, Polytree (Hong Kong) Co., Ltd., et. al. v. Forests Manufacturing, Ltd., 1-09-cv-03377 (GAND December 20, 2010, Order). The Northern District of Georgia cited to the District Court decision in Forest Group to support its determination of an award based on the middle price point of the falsely marked articles ($84.75). Ironically, the false marking award is nearly 30x greater ($2,339,100) than the infringement damages award ($79,200) granted to Polytree in the same case. While the false marking award is striking (especially when compared to the infringement award), this case is probably another anomaly. It was a default judgment against a competitor/counterfeiter that, in addition to copying the stand design, copied the plaintiffs' patent numbers and implicitly admitted this after an exchange of cease-and-desist letters by Polytree. The case was also unusual because it involved a violation under the first clause of the False Marking Statute (35 U.S.C. § 292), which the Court referred to as "patent mismarking," for claiming specific patent coverage without the consent of the patentee.

Regardless of the distinctions, expect even non-competitor false marking relators to raise Polytree in addition to Forest Group if they ever make it to the damages phase of a false marking case.

Happy Holidays!

Permalink: http://falsepatentmarking.blogspot.com/2010/12/another-late-season-christmas-gift-to.html

Texas Split on Applicability of Rule 9(b) to False Marking Pleadings

Yesterday's Opinion and Order from the Northern District of Texas (Patent Compliance Group v Wright Medical) applies the heightened pleading requirement of Rule 9(b) to false marking claims, in stark contrast to the current position of the Eastern District of Texas, refusing to apply Rule 9(b) to false marking claims. NDTX was somewhat persuaded by the explicit remand language of the Federal Circuit in the Stauffer case and the several district courts that have lined up in favor of the higher pleading standard.

In other interesting false marking news out of Texas, Judges Ward and Everingham of the Eastern District recently granted (orally) two transfer requests by false marking defendants under 1404, leading several other defendants to file transfer motions. While it may be difficult to win dismissal of a false marking claim in EDTX currently, many of these recently filed actions may be ripe for transfer. Michael Smith of Siebman Reynolds put it this way in his blog (http://mcsmith.blogs.com/eastern_district_of_texas/2010/11/false-marking-cases-in-marshall-routine-cases-and-wrinkles.html): “as for now, plaintiffs are 0-2 on venue rulings, with two pending, one being briefed, and four more being drafted as a result of the courts' granting of the two.”

Permalink: http://falsepatentmarking.blogspot.com/2010/12/texas-split-on-applicability-of-rule-9b.html

The United States Amicus in BP Lubricants May Be the Game Changer

It has been nearly two months (October 20th) since the United States filed its amicus brief , supporting the petition of false marking defendant, BP Lubricants, to obtain a writ of mandamus compelling dismissal of the suit filed by Thomas Simonian in the North District of Illinois.

Filings at the Federal Circuit are not available through their PACER site, therefore, many litigants and courts may be unaware of this significant development. The brief is significant because, despite being procedurally and financially aligned with false marking plaintiff's as qui tam relators on behalf of the government, the United States sided with the false marking defendant in its amicus brief. Through its brief the United States effectively acknowledges that the trend of suits under 35 USC 292 has gone too far, with scores of inadaquately pled false marking claims dominating the landscape since the Federal Circuit’s decision in Forest Group v. Bon Tool, at the end of last year.

While the United States offered tangential support to qui tam relators in other false marking litigation earlier this year (e.g., supporting Stauffer's attempt to reverse the dismissal of his suit against Brooks Brothers on the question of standing and supporting similar opposition in San Francisco Technologies v Adobe, et al., in the Northern District of California), it has line up squarely against the plaintiff, Thomas Simonian, in this matter. “The position of the United States is that, consistent with other cases "sounding in fraud," False Marking cases should be subject to the pleading requirements of Rule 9(b).” The United States goes on to explain that while intent to deceive may be averred generally, pleadings must still “allege sufficient underlying facts from which a court may reasonably infer that a party acted with the requisite state of mind." In this vein, the United States rejects the attempt by Simonian to obtain the inference by merely pleading that a defendant is a "sophisticated company" which "knows, or should know" the patent at issue were expired. It argues that these types of allegations are insufficient to satisfy Rule 9(b)'s pleading standard, even if relaxed.

After initial skepticism about whether BP Lubricants' mandamus petition would be substantively addressed by the Federal Circuit, the amicus of the United States leads to an expected ruling on the merits of the pleading question. In fact, since the filing of the amicus, at least two district courts have stayed false marking actions pending the outcome of In Re BP Lubricants (e.g., San Francisco Tech. Inc. v. Graphic Packaging Int't, No. 1:10-cv-1195 (N.D. Ga. Nov. 10, 2010), D.I. 229; NEWT LLC v. Nestle USA, Inc., No. 1:09-cv-04792 (N.D. Ill. Nov. 1, 2010), D.I. 56) and the District of Delaware openly pondered the question during oral argument last week (see last post).

Permalink: http://falsepatentmarking.blogspot.com/2010/12/it-has-now-been-two-months-october-20.html

Oral Argument in Brinkmeier v Graco

Oral argument was held today in the matter of Brinkmeier v Graco, a case that holds significant weight for its original dismissal of false marking claims for insufficient pleading under Rule 12(b)(6). That dismissal decision has been relied upon by several district courts and the Department of Justice, in a recent amicus brief, as a guide post for measuring the sufficiency of false patent marking allegations.

The original dismissal tossed the majority of Brinkmeier's false marking claims but allowed one claim based on the fact that the patent at issue had been the subject of prior litigation by Graco. The additional allegations of Brinkmeier's Second Amended Complaint were at issue today. During argument the Court questioned whether the false marking statute allows for claims based on allegations of what a defendant "should have known" about the scope and expiration of its patents, rather than what is actually known.

The parties appeared to concede that the heightened pleadings standard of Rule 9(b) does apply to false marking allegations. The parties differed over whether Brinkmeier's allegations were sufficient to allow for the reasonable inference of not only knowledge of falsity, but Graco's intent to deceive.

Among other things, Graco pointed to the fact that its markings included conditional language (e.g., "may be covered by one or more of the following patents ...") which, Graco says, negates not only intent but the allegation that the marking was even "false". Graco pointed out that Brinkmeier never asserted that the conditional statement itself was inaccurate. Instead Brinkmeier focused on case law suggesting that conditional language does not excuse a marking that otherwise lists inapplicable or expired patents.

The Court suggested it might be beneficial to withhold ruling on the sufficiency of the Second Amended Complaint until the Federal Circuit resolves a similar issue in the mandamus petition of In Re BP Lubricants.

The case argued today is Brinkmeier v. Graco Children's Products Inc., Civil Action No. 1:09-cv-00262-LPS.

Permalink: http://falsepatentmarking.blogspot.com/2010/12/oral-argument-in-brinkmeier-v-graco.html

False Marking Relator, Raymond Stauffer, Goes On Record

Raymond Stauffer, the qui tam false marking relator that sued Brooks Brothers over their marking of bowties with expired patent numbers, gives his plaintiff perspective on false patent marking here:

http://www.pharmalot.com/2010/12/false-patent-markings-big-fines-ray-stauffer-explains/

We'll leave it to you to weigh the truth/falsity of his suppositions.

Note that Mr. Stauffer recognizes that the Federal Circuit did not remand his case to decided whether the Rule 9(b)'s specificity requirement applies, but "to what degree rule 9b is satisfied." Ironically, while both Mr. Stauffer and the Department of Justice (through their amicus in support of BP Lubricants' mandamus petition to the Federal Circuit) recognize the applicability of Rule 9(b) to false marking claims, district courts continue to split on this important question. The Federal Circuit's decision in In Re BP Lubricants, expected in the coming months, should resolve this split once and for all.

Permalink: http://falsepatentmarking.blogspot.com/2010/12/false-marking-relator-raymond-stauffer.html