Type: Law Bulletins
Date: 02/25/2011

Ohio Federal Judge Strikes Down Private Lawsuits for False Patent Marking

Judge Dan A. Polster of the U.S. District Court for the Northern District of Ohio held on Wednesday that the portion of 35 U.S.C. §292 (the false patent marking statute) allowing for private enforcement of that statute violates Article II of the United States Constitution.  These private enforcement actions—or qui tam actions—made it possible for private parties to file suit on behalf of the United States to recover a fine of up to $500 per article sold or advertised with invalid or expired patents.   The parties bringing the qui tam cases then split any recovery with the United States.  Given the potential size of the fines (calculated on a per-article basis), approximately 1000 false marking qui tam actions were filed in 2010 alone. 

Unique Product Solutions Ltd. filed its qui tam action in 2010, alleging that defendant, Hy-Grade Valve Inc., had violated 35 U.S.C. §292 by marking and advertising industrial valve products with an expired patent number.  In granting Hy-Grade’s motion to dismiss, Judge Polster seized upon the Federal Circuit’s decision in Pequignot v. Solo Cup Co., 608 F.3d 1356 (Fed. Cir. 2010), holding that the false marking statute is a criminal one.  In sharp contrast to the district court opinion that gave rise to the Solo Cup decision (the constitutional issues were not presented on appeal), Judge Polster held that the qui tam provision of §292—as a criminal statute—violates the Constitution’s “Take Care Clause” (providing that the President “shall take care that the laws be faithfully executed”) and the Supreme Court’s decision Morrison v. Olson, 487 U.S. 654 (1988) (setting forth the “sufficient control” analysis for the delegation of authority to prosecute a criminal action).

As Judge Polster wrote, “[a]s the False Marking Statute is criminal, the Court is bound by Morrison and its ‘sufficient control’ analysis, which provides the necessary precedent for examining a statute delegating the authority to prosecute a criminal action.  Therefore, the Court must determine whether the qui tam provision of the False Marking Statute provides the Executive Branch sufficient control to ensure that the President is able to perform his constitutionally assigned duty to ‘take Care that the Laws be faithfully executed.’”

Judge Polster held that §292 does not meet that standard.  Indeed, he concluded that the qui tam provision of §292 “lacks any of the statutory controls necessary to pass Article II Take Care Clause muster.”  Judge Polster continued, “[§292] essentially represents a wholesale delegation of criminal law enforcement power to private entities with no control exercised by the Department of Justice . . .  Any private entity that believes someone is using an expired or invalid patent can file a criminal lawsuit in the name of the United States, without getting approval from or even notifying the Department of Justice.”  Leaving little doubt, Judge Polster concluded that §292 is “unlike any statute in the Federal Code with which this Court is familiar.”

Unique Product Solution’s case was dismissed with prejudice, and this decision will likely be appealed.  In the Northern District of Ohio alone, Unique Product Solutions has filed numerous qui tam cases against numerous national manufacturers over the past year.  Unless reversed on appeal, however, it seems likely that Judge Polster’s decision will shut down what has become a cottage industry in his jurisdiction.

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