US Will Intervene In Another Take Care Challenge

The United States District Court for the Western District of Pennsylvania, yesterday, granted the Department of Justice's request to intervene in the matter of USA ex rel Alchemy Asset Services Inc. v. GlaxoSmithKline LLC et al., Civ. No. 10-680. See Order, entered January 25, 2011. One day prior, the Department of Justice filed a Notice of Intervention, "respectfully request[ing] that this Court permit the United States to intervene to address the question of the [False Marking] [S]tatute’s constitutionality pursuant to 28 U.S.C. § 2403." GSK moved to dismiss a complaint alleging its "Fiber Choice" product was falsely marked with an expired patent. GSK's motion alleged that the factual allegations were insufficient under Rule 12(b)(6) and that the False Marking Statute violates the Take Care Clause of Article II of the Constitution. In November, a magistrate judge recommended dismissal under Rule 12(b)(6) because the complaint failed to meet the heightened pleadings requirements of Rule 9(b) with respect to the "intent to deceive" prong of the claim. The magistrate did not address the constitutional challenge. Later in November the United States was granted an extension of time to decide whether to intervene regarding the constitutional challenge. Yesterday's order, granting the intervention request, sets the United States' response deadline for this Friday, January 28, 2011.

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Representative Latta's Amendment to Change False Marking Statute Reintroduced

U.S. Congressman Robert Latta of Ohio has reintroduced his bill to amend the False Patent Marking Statute. See http://www.patentdocs.org/2011/01/rep-latta-reintroduces-false-marking-bill-in-the-house.html The Latta Amendment proposes to limit enforcement rights only to "[a] person who has suffered a competitive injury as a result of a violation of [the statute]" and to cap the total available recovery to "not more than $500 in damages ...." Id.

The former proposal is generally more popular than Latta's latter. An amendment proposal approved by the Senate Judiciary Committee in 2010 was solely directed to limiting enforcement rights to competitors.

I recently spoke with newly elected Senator Chris Coons of Delaware about the latest proposed amendments to the False Patent Marking Statute. He indicated that the "competitive injury" limitation may be acceptable but the $500 total cap on damages would not. Senator Coons also acknowledged that amending the False Patent Marking Statute may have become a pawn in the larger political battle over the Patent Reform Legislation.

Permalink: http://falsepatentmarking.blogspot.com/2011/01/latta-amendment-to-change-false-marking.html

The Troll Busters® Irony: from "buster" to "troll"

Troll Busters® LLC filed suit last week against a dozen biotech companies alleging that each falsely marked expired patents on their "Taq products and probes to practice polymerase chain reaction ("PCR") and real time PCR." Troll Busters, LLC v. Roche Diagnostics GMBH et al, 3-11-cv-00056 (S.D. CA), p. 10.

Troll Busters® describes itself as an entity that "invalidates patents ... being asserted by patent trolls ... [who] tend to obtain over-broad and largely invalid patent claims and then try to charge a toll to entire industries or even try to charge royalties for even the act of conducting research." See http://www.troll-busters.com/whatDoWeDo.html. Troll Busters® is therefore not an entity that actually competes with other companies to provide a better product or service to the market. Instead, they characterize themselves as "assassins" who work for the greater good of defeating patent trolls. Id.

The irony is that such non-competitor, qui tam relator-plaintiffs are themselves considered "marking trolls". See, e.g., Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295, 1303 (Fed. Cir. 2009) ("Commentators have discussed a surge of such actions in recent years, noting the possible rise of “marking trolls” who bring litigation purely for personal gain.") (citing Donald W. Rupert, Trolling for Dollars: A New Threat to Patent Owners, 21 No. 3 Intell. Prop. & Tech. L.J. 1 (2009); and A. Justin Poplin, Avoiding False Patent Marking Claims, Law 360, October 9, 2009, http:// www. law 360. com/ articles/ 116798). And while the Department of Justice urges the Federal Circuit to adopt a higher pleading standard for false marking claims to stem the tide of nuisance troll litigation, Troll Busters® fails to plead the facts to demonstrate that its cause is anything but profiteering through patent loopholes, which it purports to condemn.

Regardless of its name or motives, Troll Busters® must address this dilemma for the licensee defendants named in its suit: how can a patent licensee who is required by license to mark the listed patents be presumed to have marked those patents for the purpose of deceiving the public? The Middle District of North Carolina touched on this issue and also found plaintiff's implication of deceit troubling where the licensee marks because of a legal obligation. The N.C. Farmers' Assistance Fund, Inc. v. Monsanto Co., --- F.Supp.2d ----, 2010 WL 3817349, *10 (M.D.N.C. 2010) ("... each of the remaining Defendants are alleged to be licensees who are required by contract to mark their soybean seed bags with the ′605 Patent number. (Doc. 1 ¶ 20.) The complaint fails to allege any facts demonstrating how it is plausible that such licensees, who are bound by contract, would have marked their product with an intent to deceive.").

Permalink: http://falsepatentmarking.blogspot.com/2011/01/troll-busters-irony-from-buster-to.html

When Does a Rule 68 "Offer of Judgment" Makes Sense in a False Patent Marking Case?

Offers of judgment under Rule 68 of the Federal Rules of Civil Procedure are rarely used, according to Professor Eaton of Mercer University School of Law, who describes the Rule as not providing "enough of a carrot or stick to move the parties to the prompt resolution of their dispute." Thomas A. Eaton, Rule 68 Offers of Judgment, ADVOCATE, Spring/Summer 2007, at 4. Essentially, "costs" are viewed as too insignificant to warrant making an offer under the Rule.

In essence Rule 68 allows a defendant to make an offer of judgment at any point earlier than 10 days before trial. If the plaintiff/offeree does not accept the offer and obtains a judgment that is not "more favorable" than the offer, the plaintiff/offeree must pay the defendant/offeror's costs incurred after the offer was made. In Marek v. Chesny, 473 U.S. 1 (1985), the Supreme Court construed "costs" to include the attorney's fees the plaintiff/offeree might otherwise be entitled to as part of the judgment. This interpretation has little impact on most federal civil litigation where there is no statutory basis for an award of attorney's fees.

A statutory basis for attorney's fees does exist, for "exceptional cases", in the Patent Statutes. See 35 U.S.C. § 285. These awards generally require a finding of "inequitable conduct" in the procurement of a patent or a pattern of litigation misconduct.

Many False Patent Marking complaints under 35 U.S.C. § 292 seek an award of the plaintiff/qui tam relator's attorney's fees as part of the requested relief, some explicitly referencing 35 U.S.C. § 285. Most False Marking defendants rightfully discount the threat of such an award when assessing their case. In fact no reported decisions could be found, in our research, showing an award of attorney's fees to a False Marking relator. Nonetheless, the threat may exist in certain circumstances. For example, late last week in U.S. Rubber Recycling, Inc. v. Encore International Inc., et. al., 2-09-cv-09516 (CACD January 7, 2011, Order), the Central District of California expressly retained jurisdiction to potentially award attorney's fees. The court dismissed a declaratory judgment of patent invalidity and unenforceability in light of the patentee's covenants not to sue on the patents at issue. But the court refused to dismiss plaintiff's claim for attorney's fees under 35 U.S.C. § 285, finding that "it would be premature and inappropriate for the Court to hold that Plaintiff, as a matter of law, cannot be a 'prevailing' party [under § 285] for its claim of false patent marking[.]" Id. at 12.

Permalink: http://falsepatentmarking.blogspot.com/2011/01/when-does-rule-68-offer-of-judgment.html

Transfers: a common trend in false marking actions

The District of Delaware is one of the latest courts to grant a false marking defendant's request for transfer. In Brinkmeier, et al., v Exergen, Civ. No. 10-176-SLR, the court granted defendant's request to transfer the action to the District of Massachusetts where an action involving the same patents is pending, "although it is not a related first-filed action." Id. at 6. The court was further persuaded by the fact that "Exergen is not a Delaware corporation and that Delaware represents a very small market for Exergen's products." Id. While the court was not persuaded by Exergen's arguments regarding the inconvenience of litigating in Delaware, particularly "given electronic discovery, electronic means for recording depositions, and the fact that trials go forward in less than 20% of all cases," the court found, "[nevertheless ... [that] Massachusetts is the more appropriate trial forum for this case." Id.

The following are just some of the recently reported decisions transferring false marking actions pursuant to 28 USC 1404(a): U.S. ex rel. Heathcote Holdings Corp., Inc. v. Leapfrog Enterprises, Inc., Civ. No. 10-C-1471, (N.D.Ill., December 27, 2010); Seely v. Cumberland Packing Corp., Civ. No. 10-CV-02019-LHK (N.D.Cal., December 20, 2010); Just Intellectuals, PLLC v. Clorox Co., Civ. No. 10-12415 (E.D.Mich., December 10, 2010); Hollander v. Hospira, Inc., Civ. No. 2:10-CV-00235-JD (E.D.Pa., November 22, 2010); Simonian v. Monster Cable Products, Inc., Civ. No. 10-C-1269 (N.D.Ill., November 22, 2010); Clip Ventures LLC v. U-Dig-It Enterprises, Inc., Civ. No. C-10-3227 CRB (N.D.Cal., October 25, 2010); U.S. v. T.F.H. Publications, Inc., Civ. No. 2:10CV437 (W.D.Pa., October 20, 2010); Lightspeed Aviation, Inc. v. Bose Corp., Civ. No. 10-CV-239-BR (D.Or., October 01, 2010); Unique Product Solutions, Ltd. v. Otis Products, Inc., Civ. No. 5:10CV1471 (N.D.Ohio, September 22, 2010).

In addition, although no written opinions have yet issued, several transfers have been orally granted in the Eastern District of Texas as described by Michael Smith here: http://mcsmith.blogs.com/eastern_district_of_texas/2011/01/tyler-false-marking-cases-heard-at-scheduling-conferences.html ("the five cases in which defendants sought transfer were transferred ... .").

Permalink: http://falsepatentmarking.blogspot.com/2011/01/transfers-common-trend-in-false-marking.html

DOJ Defends the Constitutionality of 35 USC § 292 Under the "Take Care" Clause

The Department of Justice recently filed a brief in the Eastern District of Texas defending against a Constitutional challenge to the False Marking Statute (35 USC § 292) under the "Take Care" Clause of the Constitution. See BRIEF OF THE UNITED STATES DEFENDING THE CONSTITUTIONALITY OF 35 U.S.C. § 292, Promote Innovation LLC v. Medtronic, Inc., 10-cv-00233-TJW-CE (EDTX, filed 12-1-10) (attached), p. 11.

While the Federal Circuit is expected to rule shortly on BP Lubricants' mandamus petition on the standard for pleading the intent prong of a false patent marking claim, this next challenge is looming. Wham-O signalled it will be the first to raise the "Take Care" challenge to the Federal Circuit in the appeal by FLFMC of its dismissed false marking suit, but the court below only reached the Constitutional question of standing under Article III. While it may not occur in the FLFMC appeal, the merits of the "Take Care" challenge will eventually be addressed by the Federal Circuit because so many false marking defendants are now raising it.

The "Take Care" Clause simply says that the President "shall take Care that the Laws be faithfully executed[.]" U.S. CONST. art. II, § 3. While some have argued in the past that qui tam schemes in general violate this clause because of the abdication of statutory enforcement authority, many current challenges focus on the details of the False Marking Statute. In contrast to other qui tam statutes, like the Federal False Claims Act (31 U.S.C. § 3729–3733), the False Marking Statute fails to provides the Executive with any authority over a qui tam relator's false marking action. In its brief, the DOJ admitted that the United States lacks the authority to "to intervene in or terminate a qui tam suit" in situations where it wishes to resume control of enforcement, but argued that this was not an issue in the present case. Thus, it argued, the question was not ripe for Constitutional challenge.

The DOJ is attempting to walk a fine line here. Just a few months earlier, in supporting the mandamus petition of BP Lubricants, it argued that it had "a substantial interest in the interpretation of qui tam statutes," and that "any interpretation of the False Marking Statute ...
is of significant interest to the United States." RESPONSE OF THE UNITED STATES AS AMICUS CURIAE IN SUPPORT OF PETITIONER, In Re BP Lubricants USA Inc., No. 2010-960 (Fed. Cir., filed Oct. 20, 2010), pp. 2-3. While a distinction can be drawn between enforcement and interpretation of the statute, the line is thin when we talk about the DOJ having a "substantial interest" in "any interpretation," yet lacking any control over individual enforcement actions. It will be interesting to see how these views are reconciled and how the DOJ's position evolves in the face of judicial scrutiny.

Permalink: http://falsepatentmarking.blogspot.com/2011/01/department-of-justice-again-weighs-in.html