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The high pleading standard recently set by the U.S. Court of Appeals for the Federal Circuit for whistleblower cases against companies that falsely label products as patented is weeding cases out of dockets across the country. The court’s unanimous March 15 order in In Re BP Lubricants USA Inc. has thinned out at least 18 cases so far, according to lawyers involved in and watching the cases. In BP Lubricants, Judge Richard Linn wrote that the same particularity requirement that applies to fraud cases “applies to false marking claims and that a complaint alleging false marking is insufficient when it only asserts conclusory allegations that a defendant is a ‘sophisticated company’ and ‘knew or should have known’ that the patent expired.” About 890 new cases have sprouted up since the Federal Circuit’s December 2009 ruling in The Forest Group Inc. v. Bon Tool Co., according to Justin Gray, a San Diego associate at Foley & Lardner who closely tracks the cases on his blog. That case increased the potential for huge damages from the formerly obscure qui tam cases. In its ruling, the Federal Circuit stated that the false-marking law’s penalty of up to $500 is a per-item penalty for each violation, not a total penalty. But new false marking case filings have slowed to a trickle since BP Lubricants, with only nine new cases in the last two weeks of March, according to Gray’s data. So far, federal judges in California, Illinois, Missouri and Tennessee have dismissed cases, and sometimes blocks of cases, since BP Lubricants, said Joshua Slavitt, a patent partner at Philadelphia’s Pepper Hamilton. Slavitt has been closely tracking false marking cases for months. He also represented Helen of Troy Ltd. and Idelle Labs Ltd. in a Northern District of Illinois case in which the judge dismissed three out of four defendants on March 28 in Luka v. Procter & Gamble. Although only a partial dismissal, the dismissal ruling is at least the 19th that Slavitt said follows the BP Lubricants ruling. The case concerns two markings on Sure Max antiperspirant for a patent that expired in 2008 and 2009. According to the complaint, P&G sold or licensed Sure Max to the fourth defendant, Innovative Brands LLC, in 2006 and Innovative sold or licensed the product to Helen of Troy in 2010. According to Slavitt, P&G licensed the patents at issue to Innovative, and Idelle, a Helen of Troy subsidiary, later acquired the brand from Innovative. Slavitt said there’s no corporate relationship between Innovative and either Helen of Troy or Idelle. Although District Judge Matthew Kennelly noted that there’s some dispute about the corporate relationship among the non-P&G parties, he dismissed P&G and Slavitt’s clients. Kennelly wrote that the plaintiffs allegations about Helen of Troy and Idelle “do not go beyond the sort of generalized allegations that the Federal Circuit held insufficient in BP Lubricants.” P&G and its lawyers at Morgan, Lewis & Bockius declined to comment The company did not immediately respond to requests for comment. Kennelly also ruled that plaintiff Paul Luka’s “general allegation that P&G maintained control over the marking of patents on the products after licensing them is insufficient, particularly in view of the terms of the licensing agreement.” He did not dismiss Innovative because its license agreement with P&G required it “to mark the licensed products with a patent notice “‘in accordance with…applicable patent marking laws.’” “Nothing in the statute or in the Federal Circuit’s cases concerning [the false marking statute], including BP Lubricants, suggests that the court intended to impose pleading requirements that would largely write the statute out of existence,” Kennelly wrote. Innovative’s lawyers at Chicago’s Schiff Hardin did not respond to requests for comment. Jeff Friedman, a solo practitioner in Chicago and the lawyer for Luka, said he’s pleased the court carefully analyzed the licensing agreement between P&G and Innovative. “We are pleased with the ruling, and respect the court’s thorough analysis,” Friedman said. In the Northern District of California, District Judge Jeremy Fogel has dismissed 18 defendants in nine cases filed by San Francisco Technology Inc. since the BP Lubricants ruling. San Francisco Technology will have amended complaints on file within a couple of weeks, said its lawyer, Dan Fingerman, a principal at San Jose, Calif.-based Mount & Stoelker. Some of San Francisco Technology’s complaints were prepared before the BP Lubricants ruling, so they didn’t have all the things the Federal Circuit wants in a false marking complaint, Fingerman said. BP Lubricants gives plaintiffs like his client, which is suing a total of 70 to 75 defendants in the Northern District of California, a roadmap, Fingerman said. “A lot of defendants are trumpeting [ BP Lubricants] as the death knell of false marking, but it’s really just a delay of a month or two in the cases,” he said. The BP Lubricants ruling is a very significant development for false marking cases, said Rod Thompson, a litigation partner at San Francisco’s Farella Braun + Martel who represented The Glad Products Co. in one of the recently dismissed cases. “It will make it much more difficult for someone like Mr. Fingerman and other lawyer-controlled LLC plaintiffs to allege bona fide claims [in these cases],” Thompson said. “[The Federal Circuit says] you have to have a deceptive intent when you allege false marking.” Thompson also noted that there’s a congressional challenge to false marking cases in the works. After the U.S. Senate passed the Patent Reform Act of 2011, which was renamed the America Invents Act of 2011, the U.S. House of Representatives responded with companion legislation. The act to amend Title 35, United States Code, to provide for patent reform, H.R. 1249, would only allow the United States, not whistleblowers, to file such cases. It would also change the damages and allow damage awards to competitors harmed by false marking that are “adequate to compensate for the injury.” “There’s legislation in Congress that would end these cases,” Thompson said. “Even though Mr. Fingerman may be optimistic, I think he’s got some storm clouds on the horizon.” The Federal Circuit is also weighing a constitutional challenge to false marking claims. In FLFMC LLC v. Wham-O Inc., FLFMC is appealing Western District of Pennsylvania Judge Arthur J. Schwab’s August 2010 dismissal of FLFMC’s case against Wham-O. Schwab ruled that FLFMC hadn’t proved Wham-O’s false patent marking caused “actual or imminent” injury to the government or the public. Wham-O claims the false-marking statute violates the constitution’s “take care” clause, which calls for the president to “take Care that the Laws be faithfully executed.” It has argued that the statute “fails to provide for the necessary supervision of the qui tam litigant who is purporting to enforce a criminal statute on behalf of the government.” Unlike other whistleblower statutes, the false-marking law contains no provisions requiring the courts to notify the U.S. Department of Justice when such cases are filed. Sheri Qualters can be contacted at [email protected].

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