In Raymond E. Stauffer v. Brooks Brothers, Inc. and Retail Brand Alliance, Inc. v. United States, 2010 U.S. App. LEXIS 18144 (Fed. Cir. August 31, 2010), Raymond E. Stauffer brought a qui tam lawsuit in the U.S. District Court of New York, Southern District under 35 U.S.C. §292. In the lawsuit, Stauffer alleged that bow ties purchased by Stauffer from Brooks Brothers were falsely marked with the patent numbers of patents that were long expired.
The district court dismissed the complaint under Rule 12(b)(1) for lack of standing and under Rule 12(b)(6) for failure to allege an intent to deceive the public with sufficient specificity to meet the pleading requirements for claims of fraud. The district court stated that all plaintiffs must establish (1) that they have suffered an injury in fact (2) that is causally connected to the defendant and (3) that is likely to be redressed by the court. After the decision, the government moved to intervene, and the district court denied the motion to intervene.
The Federal Circuit reversed both the dismissal of the action and the denial of the motion to intervene. In particular, referring to Vermont Agency of Natural Resources v. United States ex rel Stevens, 529, U.S. 765 (2000), the Federal Circuit stated that a qui tam plaintiff can establish standing based on the statutory assignment of the damage claims of the United States to “any person.” Accordingly, in order to have standing under 35 U.S.C. §292, the plaintiff only has to allege that the U.S. has suffered an injury in fact causally connected to the defendant’s conduct. The Federal Circuit further stated that violation of Section 292 inherently constitutes an injury to the United States, since by enacting Section 292, Congress determined that deceptive false patent marking is harmful and should be prohibited. In particular, the Federal Circuit stated that it is not necessary to show that the government suffered a proprietary injury. Instead, a violation of a law by itself constitutes an injury to the sovereignty of the United States and that the government has standing to enforce its own laws. The Federal Circuit stated that since the government would have standing to enforce its own law, Stauffer, as the government’s assignee, would also have standing to enforce section 292. The Federal Circuit emphasized that a standing inquiry is separate and distinct from a consideration of a case on the merits and that standing does not depend on the merits of the case.
The Federal Circuit reversed the district court’s decision that Stauffer did not have standing. The case was remanded to the district court to consider the case on the merits. Moreover, the Federal Circuit reversed the denial of the government’s motion to intervene, since the government has an interest in the enforcement of its laws and under Section 292, would be entitled to half of the damages claimed by Stauffer.
Significance for Patent Owners
As noted in greater detail in Feature Comment: New and Expanded Uses of Patent Marking Liability, SteinMcEwen Newsletter Vol. 6, Issue 2, pp. 13-17, false patent marking lawsuits have been attracting a great deal of notice from the patent community. One of the charges leveled against these suits is that the qui tam relator jurisdiction is improper as there is no showing of damage to the relator. However, as is evident from Stauffer, damages are based upon damage to the United States as a whole as opposed to damages suffered by the relator. Thus, the better defense remains to attack the intent to deceive prong of test for finding false marking in violation of 35 U.S.C. §292.