Patently-O Patent L.J.: Overlapping Plaintiffs in False Marking Litigation

In the newest Patently-O Patent Law Journal publication, Robert Matthews discusses the law controlling false-marking suits when multiple plaintiffs sue for the same act of false marking. Matthews extrapolates the case-law to make two primary points: (1) a false-marking defendant cannot be subjected to multiple penalties for the same act of patent false marking; and (2) based on the first-to-file tradition, federal comity, and standing principles, the second-filed suit should be dismissed.

Cite as Robert A. Matthews, Jr., When Multiple Plaintiffs/Relators Sue for the Same Act of Patent False Marking, 2010 Patently-O Patent L.J. 95 [File Attachment: Matthews.FalseMarking.pdf (234 KB)].

32 thoughts on “Patently-O Patent L.J.: Overlapping Plaintiffs in False Marking Litigation

  1. 32

    I have also trouble using its and it’s before until now a very simple and fairly explanation. I’ve bookmarked your site for further exploration and reference.thanks again,and now link my name to see something of mine.

  2. 31

    Because we all know the advantages of the patented invention stop existing once the patent expires.

    And the winner of the Non-Sequitur of the Day award goes once agian to Mal- what? that was IANAE that posted that?

    Has someone drugged my hero?

  3. 30

    And of course they claimed that they had no idea the markings were false when they purchased those marked items, and they honestly believed they were getting a better product.

    Because we all know the advantages of the patented invention stop existing once the patent expires. The invention is free for the public to use now, so how good can it really be?

  4. 28

    Their Qui Tam complaint is a form letter, with the blanks filled in!

    How many more to come??

  5. 26

    Has anybody else noticed the suits commenced in EDTX by “Patent Group”?

    12 false-marking suits filed on August 9 alone.

    Patent Group claims individual “harm” or “loss” by purchasing a marked item, then claiming that it paid an artificially inflated price therefor, said price inflation solely the result of the allegedly false representation of patented quality.

  6. 25

    You raise great questions regarding a false marking qui tam plaintiff’s authority to settle. I have not researched these issues. The False Claims Act includes statutory provisions specifically addressing the government’s right to dismiss or settle a suit. But the Patent False Marking statute noticeably does not have similar provisions. Hence, to answer the question requires digging through old qui tam jurisprudence to see if one can find a federal common law principle that applies to “informer actions” regarding the government’s right to participate in settling if the particular qui tam statute is silent on that point. From some prior research, I have a vague recollection of seeing some of older qui tam cases suggesting that the government may have a say in settling an “informer action,” and referencing the “district attorney” being apprised of the suit with the power to intervene and join or to participate in decisions to settle. But whether that remains true today, and will apply to a 292 suit, I can’t opine on at present.

    If the government truly assigns its right to bring the penalty suit to the qui tam plaintiff, one could argue that the government also assigns to the qui tam plaintiff the sole right to settle any litigation. The qui tam plaintiff acts as a private attorney general. Arguably, inherent in that role should be the right to settle the litigation.

    Undoubtedly, this will be another issue for false marking claims that will need to be addressed, and provides a good topic for another paper.

    Dennis, time to get your law students working.

  7. 24

    Mr. Matthews, thanks again. On the question of assignment of right and analogizing to the patent claim brought against Juniper, does a relator in one of these false marking qui tam suits have the power to settle the claim without the consent of the government? Or could the government argue it has not fully assigned the right of action, decide the settlement penalty was not large enough, and move a court to set aside such a settlement agreement?

    There appear to be well over 400 corporate defendants at the moment. I’m sure some would be willing to settle for something in the range of the typical cost of getting to MTD stage, just for reasons of reducing business disruption. But it seems very few have settled. I’m wondering if there are concerns about the government not accepting the settlement as final?

  8. 22

    I have not had that chance to review the briefs in Stauffer. I believe the standing issues in Stauffer address the standing of the first qui tam plaintiff. The overlapping or multiple plaintiffs scenario presents a different aspect to the standing analysis.

    Basically, the San Francisco Tech court held that once the first qui tam plaintiff files its suit, the federal government has assigned the right of action for the false marking claim to that plaintiff. Therefore, any later filing plaintiffs lack standing since there is nothing left of the government’s claim that could be assigned to the second plaintiff.
    In a way this is similar to a standing dispute in patent infringement where an accused infringer argues that the patentee has assigned all substantial rights to a first entity, where the suit is brought only by the patentee or even a second entity who alleges it holds an exclusive licensee from the patentee. See e.g., Enhanced Security Research, LLC v. Juniper Networks, Inc., No. 09-871-JJF, 2010 WL 2898298, *4-*5 (D. Del. Jul. 20, 2010) (granting motion to dismiss an infringement action brought solely by the patentee and finding that the patentee had transferred all substantial rights in the patent to a litigation finance/investment firm, therefore the patentee no longer had standing to bring the suit).

  9. 21

    Mr. Matthews, thanks again for the explanation; much appreciated.

    As for, “…raise the issue again if it presents it as an issue of Article III standing…”, have you had a chance to review all the briefing in Stauffer v. Brooks Brothers? Some interesting Ar.III (and II) grist there.

  10. 20

    The narrow line of argument consider by the Hunter court, probably contributes greatly to the differing results in the two cases. The court in Hunter found waiver of the first-to-file arguments. Simonian v. Hunter Fan Co., No. 10 C 1212, 2010 WL 2720749, *2-*3 (N.D. Ill. Jul. 8, 2010) (“Finally, in its reply, Defendant argues that ‘[35 U.S.C. § 292 only provides for a single lawsuit and a single recovery’ and that ‘even assuming that the ‘first-to-file’ rule for qui tam actions is not directly applicable to false marking suits, the reasoning behind the ‘first-to-file’ rule applies equally to [a] qui tam action under 35 U.S.C. § 292 and further supports the plain language of § 292 as only authorizing a single qui tam action for false marking.’ Defendant, however, has waived these arguments by raising them for the first time in its reply brief.”)

    The district court’s finding waiver may be open to challenge. Many cases hold that a party waives arguments it raises for the first time in a reply brief. Annotated Patent Digest (“APD”), § 43:60 Issues Raised for First Time in Reply Brief are Waived. So at least initially, the law supports the court’s finding of waiver. But, since subject matter jurisdiction goes to a court’s power to hear a case, a defendant can’t waive a defense of lack of subject matter jurisdiction. See Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 701-02 (1982). This applies to standing, since standing goes to an Article III court’s power to hear a plaintiff’s claim. United States v. Hays, 515 U.S. 737, 742 (1995) (“The question of standing is not subject to waiver…”); see generally, APD § 9:35 Requirement of Standing may Not be Waived. To the extent the defendant in Hunter raised the first-to-file arguments as a matter of federal comity, the district court may have properly found waiver. But in view of the standing analysis adopted by the N.D. Cal. court in San Francisco Technology, Inc. v. Glad Products Co., No. 10-CV-00966 JF (PVT), 2010 WL 2836775, *4 (N.D. Cal. Jul. 19, 2010), and in view of the N.D.Ill. dismissal for lack of standing in Quigley, perhaps the Hunter defendant has some wiggle room to raise the issue again if it presents it as an issue of Article III standing, and not as a matter of federal comity.

  11. 19

    Hello Mr. Matthews, thanks for the follow up information.

    So are we seeing disparate results week-to-week on essentially* the same issue, out of the same court (NDIL) with the same plaintiff (Simonian loses with Quigley, goes forward with Hunter)?

    (* I do gather that Hunter may have shot itself in the foot a bit with its selected line of argument.)

  12. 18

    One of the recent district court cases cited in the paper, Simonian v. Quigley Corp., No. 10 C 1259, 2010 WL 2837180, *2 (N.D. Ill. Jul. 19, 2010), addressed the scenario where the second filed 292 suit was filed only hours after the first filed suit. The court having the second filed suit dismissed it’s suit for lack of standing.

    FYI, under the first to file rule, courts apply absolute time. So filing in the Eastern time zone may have an advantage. E.g., Third Dimension Semiconductor, Inc. v. Fairchild Semiconductor Intern., Inc., No. 6:08-CV-200, 2008 WL 4179234, *2 (E.D. Tex. Sept. 4, 2008) (ruling that first-to-file rule applies absolute time in determining who filed first, and therefore suit filed at 12:01 am Eastern Time was first-filed to a suit filed at 12:00 am Central time, and applying first-to-file rule to transfer patentee’s second-filed infringement action to the forum of the first-filed declaratory judgment action)

  13. 17

    Either that, or a Mad Max Relator-On-Relator Thunderdrome.

    With half the proceeds going to the loser’s widow and the other half to the government? That seems more than fair.

  14. 15

    And otherwise, the fate of the two innocent relators is at the mercy of the judges’ respective dockets.

    It has to be at the mercy of something, since we already know only one of the two can proceed. If there’s no more substantial basis for establishing priority between them, I figure it’s just as well we hear the case where the docket is less overburdened, and where the case will apparently be resolved more quickly.

    Besides, courts don’t like giving up jurisdiction, so it’s likely the judge in the first case to come up for hearing will find some reason why he’s entitled to hear the case anyway.

    If you have a better idea, I consist of ears.

  15. 14

    IANAE writes, “…how about the first of the two to proceed to an actual hearing gets heard, and the other one is dismissed because there’s one already pending.”

    Not sure I follow you, neighbor. The suits are both pending regardless of whether the judge has held a scheduling hearing or some such (aren’t they?). And otherwise, the fate of the two innocent relators is at the mercy of the judges’ respective dockets.

  16. 13

    IANAE writes, “It happens to be the case (one hopes) that the looming specter of a qui tam action for false marking will keep markers in line,”

    One would hope. However, the buzz is that the looming specter of defending the suits is making companies decide to stop marking entirely.

  17. 12

    then what do you do with those suits filed by multiple plaitiffs on the same day?

    A veritable comity of errors!

    I’m sure those cases are rare enough that it’s not particularly important what rule we apply, but how about the first of the two to proceed to an actual hearing gets heard, and the other one is dismissed because there’s one already pending.

  18. 11

    So… if “and (2) based on the first-to-file tradition, federal comity, and standing principles, the second-filed suit should be dismissed.”, then what do you do with those suits filed by multiple plaitiffs on the same day?

    Argue clerk time stamps?

    What if one was filed in Calif and the other in NY?

  19. 10

    Would this be illegal?

    I should hope so. Sounds like an abuse of process, and quite possibly a lack of standing to bring the qui tam action – if such a thing can ever be said to occur.

    I thought it would be obvious to everyone that fraudulent and near-fraudulent false marking actions shouldn’t count. As between two apparently good-faith relators bringing the same action, the first filer should be allowed to proceed.

  20. 9

    IANAE: What if the relator secretly offers to the defendant that they’ll do a poor job pursuing the suit in exchange for real cash money?

    I’m assuming that the relator is not a member of the bar and is pro se, of course. Would this be illegal?

  21. 8

    Oh my stars and garters – I’m siding with Ned over my idol IANAE.

    The problem with a pure – first to file, is that it is way too easy to abuse. Filing don’t mean squat to the public, unless the challenge is vigorously pursued. If first to file is recognized, then those who want to run all wily-nily over the false marking statutue would set up an “independent” company to strike first and strike poorly (or settle on “confidential” terms)such that the false marking statute is defeated in its intent.

  22. 6

    the purpose is to deter false marking. The reward is important as an incentive.

    The reward is not an incentive to avoid false marking. The reward is an incentive to bring qui tam actions against false markers. It should go to the first person who brings the action.

    A patent is an incentive to promote disclosure of inventions, not invention itself. It happens to be the case (one hopes) that the looming specter of a qui tam action for false marking will keep markers in line, and that a patent will encourage people to invent new things so they can disclose them, but let’s not forget the indirect mechanism by which these incentives are designed to operate.

    But if the first filer will not adequately represent the public interest, the second or better filer should be the one to proceed.

    This is not a class action, where the public will be entitled to a compensatory award if it is well represented. It’s also not such a complex type of action that adequacy of representation is a major issue. The relator is bringing the action solely for personal gain, and it’s probably safe to presume that he’s up to the task of showing that a particular patent has expired.

  23. 5

    PSA for the “cite as” notation both in this post and in the “cite as” footnote in the article: the title of the article contains the word “reLAtors,” not “reALtors.” I wouldn’t ordinarily nitpick, but this one seems worth pointing out. A qui tam plaintiff is a relator, as Mr. Matthews himself correctly states in the article.

  24. 4

    IANAE, the purpose is to deter false marking. The reward is important as an incentive. But if the first filer will not adequately represent the public interest, the second or better filer should be the one to proceed.

  25. 3

    so the real question is adequacy of representation, not who filed first.

    Isn’t the real question who first came up with the idea to bring the action, as long as that person diligently undertook the steps required to file the action thereafter?

    Or can we accept that as between multiple parties who are equally and mutually exclusively entitled to a particular statutory benefit, it’s only fair to give it to the first person who asked so long as he can demonstrate his entitlement?

    The reward is for the act of filing. Filing, with its eventual consequences, is what benefits the public, and is the conduct the statute is designed to encourage. Let’s go first-to-file on this one.

  26. 1

    I asked this question in a prior thread and received no answer.

    Clearly, false marking is “criminal” in nature. Double Jeopardy should apply.

    But, similarly, we cannot allow multiple qui tam plaintiffs. I suggest the appropriate theory be that of a class action plaintiff. The first represents the entire class. Every other member will be bound by the outcome — so the real question is adequacy of representation, not who filed first.

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