As readers should have discerned from our previous blog entries on the subject, we strongly disapprove of the recent deluge of lawsuits brought under 35 U.S.C. §292, the so-called “false marking statute.” It is, therefore, with great pleasure that we report on a district court decision finding this statute to be unconstitutional. (Unique Product Solutions, Ltd. v. Hy-Grade Valve, Inc.) On a further happy note, we present some startling, and gratifying, statistics compiled by the fine folks at Mayer Brown LLP.
Unique sued Hy-Grade, on behalf of the government, alleging that Hy-Grade was marking a series of its industrial valves with the number of a patent which had expired in 2005. As if this was not horrific enough, Hy-Grade was also, allegedly, using the number of this patent in its product advertising. The fiends!
Hy-Grade responded that the qui tam provisions of the statute, allowing private enforcement on behalf of the government, were unconstitutional. There have been previous – unsuccessful – efforts to challenge the constitutionality of this statute. Hy-Grade, however, presented a novel argument, namely that the statute violated the “take Care” clause of Article II.
For the reader who slept through high school civics and, hence, may be unfamiliar with this constitutional provision, it provides, in §2, that the President “shall take Care that the Laws be faithfully executed.” Hy-Grade’s argument was that the qui tam provision fails “because the Executive Branch lacks sufficient control of litigation in which the United States is the real party in interest.”
The trial judge in the United States District Court for the Northern District of Ohio, Eastern Division, agreed with Hy-Grade, holding that “it is clear that the government lacks sufficient control to enable the President to ‘take Care that the Laws be faithfully executed.’ The False Marking statute essentially represents a wholesale delegation of criminal law enforcement power to private entities with no control exercised by the Department of Justice.” So, at least in the Eastern Division of the Northern District of Ohio, and at least for the moment, manufacturers need not fear qui tam actions for false marking.
As an interesting footnote, we report the results of an analysis of the 114 false marking cases resolved to date. The TOTAL amount recovered is only $6.8 million, of which half went to the government – which clearly could use the money. Individual settlements ranged from $2,000 to $350,000 with an average of only about $60,000. That is hardly enough to enrich a troll.
THE LESSON TO BE LEARNED: False marking suits are not a key to riches.
I'm not sure whether I agree
I'm not sure whether I agree with the constitutional argument, but that's rather beside the point, because false marking patent litigation will likely go away before much more time has passed, especially in the wake of recent rulings. The recent BP Lubricants decision requiring "particularity" was one more nail in the coffin. At least maybe this short-lived false marking suit craze may have helped make a (very small) dent in the federal deficit.
Control vs Ownership
If something is your own property then you are free to do whatever you want with it (with certain restriction as allowed by law, of course). You may use it, modify it, you may sell it, you may gift it to someone else, etc. And of course, your name will be on the title of ownership. If you have control over something, you pretty much can fully use it as if you own it, although with certain limitation. One of important keys to riches is understanding the concept of Control versus Ownership.
There are only two reasons why a company will be sued for false marking on the basis of expired patents: (1) either they intentionally falsely marked their product for purposes of deceiving the public or (2) a registered patent attorney whose responsibility it was to watch his docket and advise his client of the approach of the patent’s expiration and the need to proactively plan for the cessation of product marking on the expiration date committed malpractice by failing to so act.
Hey Congress, in addition to section 292 we need a qui tam statute that allows any person to sue such malpracticing patent attorneys and split the recovery with their clients when those clients are just too blind to see who is responsible for their legal woes.
Hey Corporate America, if you are being sued for false marking call one of the plaintiff parties / attorneys involved in the "deluge of lawsuits brought under 35 U.S.C. §292" for malpractice representation or expert testimony thereon, but under no circumstances should you throw good money after bad by retaining as defense counsel the fools who got you into this mess.