February 12, 2013
LES Insights
Authored by D. Brian Kacedon, John C. Paul, and Kevin D. Rodkey
Before the America Invents Act ("AIA") was signed into law, the Patent Act provided that any person could bring a false-marking claim and collect one-half of the penalty for that claim, the other half going to the government. The AIA, however, eliminated these suits. Specifically, the AIA clarified that only the U.S. government can sue for the penalty and that only private parties "who ha[ve] suffered a competitive injury as a result of a [false-marking] violation" can sue for damages. The AIA also explicitly stated that these changes "shall apply in all cases, without exception, that are pending on, or commenced on or after the date of enactment" of the AIA. Thus, the AIA eliminated all then-pending false-marking claims not brought either by the U.S. government or by a party suffering a competitive injury.
The Federal Circuit previously addressed the constitutionality of the AIA's retroactive elimination of false-marking claims in a nonprecedential opinion in Rogers v. Tristar Prods., Inc.1 There, the Federal Circuit suggested that the AIA's retroactive elimination of many pending false-marking suits was not unconstitutional (see here for our previous discussion of Rogers). Although providing a glimpse of the Federal Circuit's view on this issue, the Rogers decision was not binding on lower courts or the Federal Circuit itself.
In a recent precedential decision in Brooks v. Dunlop Manufacturing,2 however, the Federal Circuit held that the AIA's retroactive elimination of private false-marking suits is not unconstitutional. In Brooks, plaintiff Brooks brought a false-marking claim against Dunlop before the AIA's enactment. After enactment, Dunlop moved to dismiss the case, arguing that Brooks could no longer recover a statutory penalty and had not alleged any right to damages for competitive injury. Brooks responded by asserting that the AIA's retroactive elimination of his claim constituted a taking of his property without compensation. He later argued that the elimination of his claim also violated the Due Process Clause of the Constitution because he had "rights [that] are contractual in nature" under the earlier version of the false-marking provision. The district court disagreed and dismissed the case. Brooks appealed the Due Process claim but not the Takings claim.
On appeal, the Federal Circuit affirmed the district court's Due Process ruling, observing that Congress may give retroactive effect to legislation if it has a rational basis for doing so. And according to the Federal Circuit, it was not irrational for Congress to allow only the U.S. government and competitors who have suffered an injury to bring false-marking claims against patent owners. Congress could eliminate Brooks's ability to bring suit, the Court explained, as long as he did not have a vested interest in the litigation. According to the Court, Brooks's interests had not vested because his case was still pending. Congress enacted the AIA, the Court observed, because it was particularly interested in alleviating perceived abuses and inefficiencies resulting from the recent "surge" of false-marking suits. With Congress's goal in mind, the Court concluded that it was not irrational for Congress to implement a different enforcement system and to eliminate the pending cases.
As further support, the Federal Circuit noted that the AIA also eliminated a live question about the constitutionality of false-marking suits. In particular, Congress had discussed the constitutionality of these false-marking suits while the AIA was pending and decided to eliminate the potentially unconstitutional suits, such as the one brought by Brooks. This desire to eliminate these potentially unconstitutional suits also provided a rational basis for amending the false-marking provisions, the Federal Circuit concluded.
The Federal Circuit next rejected Brooks's argument that the AIA amendments breached a contractual obligation between Brooks and the U.S. government because legislation—such as the pre-AIA statute—generally does not create a contract with the government. And nothing in the pre-AIA statute sounded like a contract or gave the appearance of a contract. Rather it simply authorized Brooks to bring the suit in place of the government. Thus, because there was no contract, Congress could retroactively eliminate Brooks's false-marking claim.
Finally, the Federal Circuit held that the AIA's retroactive elimination of Brooks's false-marking suit did not violate the Intellectual Property Clause of the Constitution. Specifically, the Federal Circuit rejected Brooks's argument that Congress has only limited patent power under this clause and that the AIA extends its patent power, in violation of the Constitution. Dismissing this argument, the Federal Circuit reiterated that the AIA merely traded one enforcement mechanism (private civil suits) for another (suits brought by the U.S. government or parties suffering a competitive injury). Changing the enforcement mechanism, the Court held, did not implicate Congress's patent power and also provided a rational basis for implementing the AIA.
This case gives precedential effect to the Federal Circuit's earlier decision in Rogers. But it goes further than Rogers by holding that the AIA's retroactive elimination of existing false-marking claims did not violate the Due Process Clause or the Intellectual Property Clause of the Constitution. Nevertheless, patent owners should still take care to avoid falsely marking their products because the U.S. government and parties suffering competitive injuries may still bring suit. Thus, although the AIA has quelled the surge of false-marking claims brought by private parties, it remains to be seen how aggressively the United States will pursue these claims or how frequently parties will claim competitive injuries.
Endnotes
1 The Rogers decision can be found here.
2 The Brooks decision can be found here.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm’s clients.
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