Mayer Brown’s Partner James R. Ferguson passed along this article he wrote with colleagues Richard M. Assmus and Emily C. Melvin on the recent Unique Product Solutions v. Hy-Grade Value decision wherein Judge Polster of the U.S. District Court for the Northern District of Ohio struck down the false marking statute as violating the “Take Care” Clause of Article II of the U.S. Constitution. The article discusses how the decision could affect the numerous false patent marking cases pending in district courts throughout the country.

The Northern District of Ohio has become the first court to strike down the qui tam provision of 35 U.S.C. § 292. Employing the “Take Care” clause of the Constitution, Judge Dan Aaron Polster ruled on February 23, 2011, that the false marking statute lacks the statutory controls necessary to pass constitutional muster. Unique Product Solutions, Ltd. v. Hy-Grade Valve, Inc., Case. No. 5:10-cv-1912 (N.D. Ohio, Feb. 23, 2011).

In the decision, the court distinguished the false marking statute from the False Claims Act (FCA)—another qui tam provision that has been repeatedly upheld by circuit courts—by explaining that, unlike the false marking statute, the FCA contains provisions that enable the government to maintain control over the case, such as the right to discovery and the authority to restrict the relator’s role in litigation. The court explained that because many relators are interested in quick settlements, the government may be bound by res judicata before the Department of Justice is even aware of the suit. On this basis, the court ruled that the government lacked sufficient control over false marking enforcement actions, impeding the President’s ability to “take Care that the Laws be faithfully executed.” US Const. Art. II § 3.

Other district courts have previously upheld the statute’s constitutionality, and the Northern District of Ohio is the first to reach the opposite result. For example, in Pequignot v. Solo Cup Co., 640 F. Supp. 2d 714 (E.D. Va. 2009), the Eastern District of Virginia upheld the statute based in part on the fact that the statute is civil rather than criminal, and that the government has an ability to intervene as a matter of right. The court in Unique Product Solutions found this analysis unpersuasive, particularly in light of language in a recent Federal Circuit decision describing the statute as criminal. The court was also unpersuaded by the Pequignot court’s reliance on the history of false marking statutes, explaining that “history alone is an insufficient justification, particularly when the issue is whether the False Marking Statute’s qui tam provision is constitutional, not whether all qui tam provisions are unconstitutional.”

The Federal Circuit has not yet ruled on the constitutionality of the statute under the Take Care clause. The parties in Pequignot did not appeal the district court’s constitutional decision, and in Stauffer v. Brooks Brothers, Inc., No. 2009-1428 (Fed. Cir. Aug. 31, 2010), the Federal Circuit expressly declined to resolve the issue when it held that qui tam plaintiffs have standing to bring false marking claims. However, this issue will likely reach the Federal Circuit soon as another false marking defendant, Wham-O, Inc., has challenged the constitutionality of the statute in response to the plaintiff’s appeal from the district court’s dismissal for lack of standing. FLFMC v. Wham-O, No. 2011-1067 (Fed. Cir.). Meanwhile, the surge of false marking litigation continues, with more than 120 cases filed in the first two months of 2011 alone.

Tags: "Take Care" Clause, False Claims Act, false patent marking, Judge Polster, Northern District Of Ohio, qui tam provision, Unique Product Solutions v. Hy-Grade Value Decision

This entry was posted on Monday, March 7th, 2011 at 18:19 and is filed under False Marking. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.