Written by Scott Daniels (partner in Westerman Hattori Daniels & Adrian and Practice Center Contributor)
The CAFC (Lourie, Rader & Moore) today removed one of the major hurdles facing individuals pursuing qui tam actions against others for false patent marking. In Stauffer v. Brooks Brothers, the CAFC ruled that 35 U.S.C. § 292 permits individuals to “stand in the government’s stead, as assignees of the government’s own claims.” There is no requirement for standing under Rule 12(b)(1) that the individual qui tam plaintiff have, itself, suffered injury from the alleged false marking.
Raymond Stauffer had sued Brooks Brothers and its parent company, Retail Brand Alliance, for marking the mechanism on their bow ties with the numbers of two patents, both of which had expired in the 1950’s. Stauffer asserted that this identification of the patents constituted false marking under § 292, which provides for a fine of not more than $500 per violation. It also provides that “any person” may sue for that fine, splitting any recovery with the United States.
Defendants moved to dismiss under Rule 12(b)(1), arguing that Stauffer lacked standing. The trial judge first stated that Stauffer, as a qui tam plaintiff representing the United States, must establish that U.S. has suffered “an injury in fact,” that the injury was caused by Brooks Brothers, and that a court could redress that injury. The trial judge then found that Stauffer had failed to allege injury to the U.S. in his complaint, and any assertions that Stauffer himself had been injured would not satisfy the standing requirement. The judge therefore dismissed the case.
The CAFC reversed, first stating that § 292 is “a qui tam provision.” (See “Oral Argument in Key False Marking Case: Stauffer v. Brooks Brothers, Inc.“ for a recap of the oral arguments on the case). The Court then cited Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (2000) for the proposition that a qui tam plaintiff need not show that he, himself, has been injured. A “qui tam provision operates as a statutory assignment of the United States’ rights,” and the individual plaintiff has standing if the United States has been injured by defendants and that injury can be redressed by the courts. The CAFC determined that by enacting § 292, Congress had concluded that false marking was an injury to the United States.
The CAFC therefore concluded that Stauffer’s complaint had properly alleged injury to the United States, injury caused Brooks Brothers’ alleged false marking, which injury could be redressed by the courts. Standing was therefore proper, and the CAFC therefore reversed and remanded.
Today’s decision leaves a number of questions unanswered, for instance, whether § 292 is constitutional. Amicus Ciba Vision Corp. had argued that the provision, by assigning the right to sue to individuals, robs the Executive Branch of its power to “take Care that the Laws be faithfully executed,” as provided by Article II, § 3 of the Constitution.
Also left unanswered is the question, raised by Brooks Brothers at the trial level but not addressed there, of how specific the allegations of intent to deceive must be to survive a motion under Rule 12(b)(6) for failure to state a claim on which relief can be granted, or under Rule 9(b) for failure to plead fraud with sufficient particularity.
In the meantime, false marking plaintiffs now have one less obstacle to overcome.