Court of Appeals Upholds Amendment to False Marking Statute

January 9, 2013 | Intellectual Property News

In the America Invents Act, Congress amended the false marking statute to remove the “qui tam” provision allowing any member of the public to file a complaint based on false patent marking. In a recent ruling, the court of appeals held that the amendment was constitutional.

The false marking statue generally provides that products bearing patent numbers must do so properly. If a person marks a product with an erroneous patent number with an intent to deceive the public through the incorrect marking, that person (or company) can be liable for damages. An unusual aspect of the statute is that it includes a “qui tam” provision allowing members of the public at large to file such lawsuits, even if they have no connection with the product and suffered no injury. For decades this provision was seldom used because the remedy was understood to be trivial. But after a key court decision allowing for the possibility of large monetary awards to plaintiffs filing such cases, a cottage industry was born. Almost overnight, hundreds of cases were filed by plaintiffs asserting false marking and hoping to recover large damages as a result.

In the America Invents Act, Congress amended the false marking statute to require a plaintiff to show a competitive injury in order to recover damages. This amendment would allow a competitor in the same industry to file a false marking lawsuit, but makes it virtually impossible for a random individual to file such a lawsuit, as had been the case previously. In addition, the amendment to the law was written to affect current lawsuits, already filed. As a result, many cases were immediately and summarily dismissed. Some of those plaintiffs challenged the new law as being unconstitutional by violating due process or amounting to a taking without compensation. In Brooks v. Dunlop Mfg., Inc., the Federal Circuit Court of Appeals held that the statute was proper, and was not unconstitutional even though it had retroactive effect.