The America Invents Act Retroactive Elimination of Private False-Marking Suits Seeking Civil Penalties Not Unconstitutional

Authored by D. Brian Kacedon, Douglas W. Meier, and John C. Paul

Over recent years, Courts have seen a surge in false‑marking claims brought by a private party against large companies. Under the previous false‑marking statute and the Federal Circuit's Forest Group, Inc. v. Bon Tool Co. decision, any party could seek a civil penalty of up to $500 for each falsely marked article, with one-half of that penalty (i.e., up to $250 per article) going to the party filing the suit. This, naturally, created an incentive to file false‑marking suits.

Hoping to rein in the number of these false-marking suits, Congress changed the statute with the recently enacted America Invents Act (AIA) to allow only the U.S. government to sue for the $500 civil fine and added a "competitive injury" provision to the false‑marking statute, which makes damages available only to a party that has suffered a competitive injury from the allegedly falsely marked products. For the effective date of these amendments, Congress explicitly stated that they "shall apply to all cases, without exception, that are pending on, or commenced on or after, the date of the enactment of this Act." Thus, Congress intended to eliminate currently pending false-marking suits not brought by the U.S. government or a party that has suffered a competitive injury.

The Federal Circuit recently looked at this retroactive elimination in Rogers v. Tristar Products, Inc.,¹ which, although nonprecedential, still offers some guidance into the Federal Circuit's view of false‑marking suits. In Rogers, the plaintiff, Mr. Rogers, had brought a false‑marking suit in district court before the enactment of the AIA, seeking up to $500 for each of Tristar's allegedly falsely marked articles. Tristar moved to dismiss, arguing that the false‑marking provision (at the time) violated the Take Care Clause of the U.S. Constitution. The district court agreed and granted the motion to dismiss. Rogers appealed that dismissal to the Federal Circuit.

While that appeal was pending, President Obama signed the AIA into law, which, as mentioned above, removed the provision allowing any party to bring suit. Since Mr. Rogers's suit was based on that now-removed provision, and since Mr. Rogers conceded he could not meet the new standing requirement, the Federal Circuit dismissed his appeal as moot. Mr. Rogers moved for reconsideration, arguing that the AIA's retroactive elimination of his claim violates both the Takings Clause and the Due Process Clause of the U.S. Constitution.

Noting Congress's explicitly stated intent to give the statute retroactive effect, the Federal Circuit explained that no civil litigant is entitled to insist that a law that prevailed when a case began will remain unchanged solely for that litigant's benefit. Thus, Congress acted properly in making its amendments retroactive. Nevertheless, according to Mr. Rogers, at the time the suit was initiated, it became his property, and the Takings Clause prohibits Congress from taking that property away from him. But the Federal Circuit disagreed, explaining that no vested right attaches until a final, nonreviewable judgment. Because no final judgment had been reached, Mr. Rogers had no property right in the suit.

Finally, Mr. Rogers argued that the retroactive elimination of his claim violated his due‑process rights. The Federal Circuit likewise rejected this argument, finding that Congress's stated purpose of amending the false‑marking statute to "rein[] in abuses that are reflected in a recent surge in false marking litigation" is rational and therefore does not run afoul of Mr. Rogers's due‑process rights.

In short, the Federal Circuit denied Mr. Rogers's motion for reconsideration because it found that Congress acted within its power to retroactively eliminate false‑marking suits by parties other than the U.S. government or those who suffered a competitive injury as a result of the alleged false marking.

Strategy and Conclusion

Although, as noted above, this ruling from the Federal Circuit has no precedential effect, it provides a good indication of where the courts are leaning on the issue of false‑marking suits. Indeed, it seems that false‑marking suits brought by private litigants with no real connection to the suit are no longer viable. Not only did the Federal Circuit appear to have no trouble finding the AIA properly eliminated this cause of action, but also it appeared to agree, at least implicitly, with the district court's ruling that the pre-AIA version of the false‑marking statute violated the Take Care Clause of the Constitution. False‑marking suits do remain viable, however, for parties that have suffered a competitive injury.

Endnotes 

¹ The Rogers v. Tristar Products decision: http://www.cafc.uscourts.gov/images/stories/opinions-orders/2011-1494.5-2-12.1.pdf.

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