Remember how “false marking” cases were all the rage a couple of years ago, before Congress killed them off in the America Invents Act of 2011? It turns out a handful of lawyers have kept the dream of milking expired patents for money alive, and they’re trying to revive the false marking frenzy by arguing that Congress acted unconstitutionally. The courts, however, don’t seem so keen on the notion of a false-marking comeback.
In a brief order issued on Wednesday, U.S. District Judge Sidney Stein in Manhattan dismissed one of the most written-about false marking cases–a 2008 lawsuit alleging that Brooks Brothers Inc. marked its bow ties with misleading patent information. Stein ruled that the AIA, which changed the requirements for bringing false marking cases, deprived the plaintiff, Chatham, N.J.-based attorney Raymond Stauffer, of his standing to sue. The judge rejected Stauffer’s argument that Congress effectively pardoned Brooks Brothers when it passed the patent reform legislation and therefore grabbed power reserved for the executive branch. The ruling comes six days after the U.S. Court of Appeals for the Federal Circuit held that Congress’s false marking crackdown didn’t violate the due process rights of an attorney that brought a similar case against the guitar string-manufacturer Dunlop Manufacturing Inc.
For more than a century, the Patent Act has prohibited manufacturers from stamping their products with misleading, false, or expired patent information. The false marking rules–including qui tam provisions that gave plaintiffs a 50 percent stake in any recoveries–didn’t generate much litigation until late 2009, when the Federal Circuit ruled that manufacturers have to pay a fine of up to $500 per misleading product. That ruling was a big headache for manufacturers, who have a tendency to stamp their products with labels like “patent pending” and “protected by patent 222,222,222″ and then never bother to update the labels when the relevant patents lapse.
Back in 2008, Stauffer, a bow-tie aficionado, did some research and realized that patent information Brooks Brothers slapped on a tightening mechanism used in its bow ties was woefully out-of-date. He brought suit in 2008, representing himself pro se.
Judge Stein dismissed the case in 2009, ruling that Stauffer lacked standing to sue because he didn’t suffer any injury from Brooks Brothers’ (alleged) false marking. Under Stein’s reading of the false marking provision, only a direct competitor could bring suit. The Federal Circuit reversed Stein in 2010, however, temporarily vindicating Stauffer and other patent lawyers who jumped on the false marking litigation bandwagon. We named Stauffer, who worked at the firm Carella Byrne Cecchi Olstein Brody & Agnello at the time, Litigator of the Week.
False marking cases generated $22.6 million in settlements, according to statistics compiled by Justin Gray of Foley & Lardner, but Congress put an end to the suddenly-hot niche practice when it passed the AIA in September 2011. The bill stated that only the United States may sue for false marking violations, so whistleblowers are out of luck. The law, which applied retroactively, also mandates that only someone “who has suffered a competitive injury as a result of [false marking] may file a civil action. . .for recovery of damages.”
Stauffer urged Stein not to dismiss his case against Brooks Brothers. The new rules “constitute an unconstitutional usurpation and exercise by Congress of the President’s pardon power,” he argued in an emphatic 45-page brief. This is “[Alexander] Hamilton’s divided pardon power run amok. . .What would Hamilton say?” [The bolding, italicizing, and underlining are Stauffer's. We'd link to Stauffer's brief, but he slapped the following copyright notice on it: "© Raymond E. Stauffer all rights reserved (that means do not copy and sell without permission Westlaw, Lexis, RFC Express, and others--be forewarned)."]
Stein quickly dispensed with Stauffer’s arguments, which he called “patently flawed.” Citing U.S. Supreme Court precedent, the judge held that “even assuming that the amendments here effectively immunize certain law breakers, Congress may do so without encroaching on the President’s exclusive powers. Indeed, contrary to Stauffer’s suggestion that Congress has usurped a power of the Executive Branch, the elimination of qui tam standing places the authority to seek sanctions for [false marking] solely in the hands of the Executive.”
Brooks Brothers was represented by Stephen Bakers of Baker & Ranells. “I hope this will be the end. But Stauffer could appeal,” he told us. Stauffer didn’t return a call seeking comment.
On Dec. 13, meanwhile, the Federal Circuit rejected a different constitutional argument for reviving false-marking litigation when it ruled that that the AIA didn’t violate plaintiffs’ due process rights. That decision came in a case a solo practitioner in California named Kenneth Brooks brought against Dunlop manufacturing. PatentlyO has a rundown of the ruling here. Foley & Lardner associate Gina Bibby represented Dunlop.
When we spoke to Brooks on Wednesday, he vowed to appeal to the Supreme Court. “The problem with this decision is that it’s un-American,” he told us. “It’s just another example of the federal government turning its back on ideas of constitutionality. . .you have a federal government that openly admits its spies on you, that can incarcerate you without judicial review,” he said.
“My wife totally backs me doing this, even though its costing us money,” Brooks added. “When I have a grandson, I want to be able to put him on my knee and tell him that I tried to do something about our out-of-control government. I want to be able to look myself in the mirror.”