Monday, May 16, 2011

Constitutional Attack on False Patent Marking Enforcement Rejected

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

The qui tam enforcement provision of the false patent marking statute was constitutional, contrary to a pharmaceutical manufacturer's contention that it violated the Take Care Clause of the U.S. Constitution, the federal district court in Chicago has ruled.

The statute (1) made it unlawful to mark a product with, or use in advertising, a patent number in connection with products that are not patented and (2) authorized private, qui tam enforcement suits for awards of up to $500 for every violation.

Take Care Clause

The manufacturer argued that the false marking statute transferred law enforcement authority to private persons without retaining sufficient control for the Executive Branch to satisfy the provision of Article II of the U.S. Constitution that the President “shall take Care that the Laws be faithfully executed.”

The manufacturer relied on Unique Product Solutions, Ltd. v. Hy-Grade Valve, Inc. (ND Ohio 2011) CCH Advertising Law Guide ¶64,196, ¶64,242, which held the false marking qui tam enforcement provision unconstitutional.

Government Control

Contrary to the ruling in Unique Product Solutions, however, the direct-control test articulated by the U.S. Supreme Court in Morrison v. Olson, 487 U.S. 654 (1988) was not the deciding factor in a civil action for qui tam enforcement of the false marking statute, the court determined.

The fact that the false marking statute is a criminal statute did not make a qui tam suit a “criminal action” requiring direct government control. The better view of the false marking statute was that it is a criminal statute with a parallel civil enforcement mechanism, the court said.

The government maintained sufficient control because the statute requires the district court clerk to apprise the Director of the Patent and Trademark Office of a qui tam false marking action, and the government may request intervention in false marking cases, the court concluded.

Pending Legislation

The battle in the courts over the constitutionality of qui tam false marking enforcement would be mooted if The America Invents Act, Senate Bill 23, is enacted. The measure was passed by the Senate on March 8.

The legislation would strike the qui tam enforcement provision of the false patent marking statute (35 U.S.C. Sec. 292(b)) and replace it with a new Sec. 292(b) providing that “[a]ny person who has suffered a competitive injury as a result of a violation of this section may file a civil action in a district court of the United States for recovery of damages adequate to compensate for the injury.”

Sec. 2(k) of S. 23 also would provide that only the United States may sue for the statutory penalty of $500 per offense authorized by Sec. 292(a) of the false marking law.

The effective date provision of Sec. 2(k) of S. 23 would make the false marking amendments applicable “to all cases, without exception, pending on or after the date of the enactment of this Act.”

The April 28 opinion in Simonian v. Allergan, Inc. will appear at CCH Advertising Law Guide ¶64,274. Further legislative developments in the area of patent marking and other topics of advertising law will be reported in the Guide.

Further information about CCH Advertising Law Guide appears here.

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