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United States ex rel FLFMC, LLC v. Wham-O

August 3, 2010


The opinion of the court was delivered by: Arthur J. Schwab United States District Judge



I. Introduction

Plaintiff FLFMC, LLC, a Pennsylvania Limited Liability Corporation, has brought this qui tam suit on behalf of the United States of America against Wham-O, Inc. under 35 U.S.C. § 292, the false marking statute, for allegedly marking upon its products phrases referring to patents that are expired or do not apply to the products.*fn1 Before the Court is defendant's Motion to Dismiss (Doc. No. 13) this false marking - qui tam action for want of jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1), because of plaintiff's lack of constitutional and jurisprudential standing.*fn2

Section 292(b) provides: "Any person may sue for the [$500.00 per violation] penalty, in which event one-half shall go to the person suing and the other to the use of the United States." 35 U.S.C. § 292(b). Defendant contends that, despite this qui tam provision,*fn3 FLFMC does not have standing to bring the section 292 action because it has sustained no injury-in-fact. The Court agrees.

A. Standing Prerequisites

The doctrine of standing "consists of both a 'case or controversy' requirement stemming from Article III, Section 2 of the Constitution, and a subconstitutional 'prudential' element." Pitt News v. Fisher, 215 F.3d 354, 359 (3d Cir. 2000). Constitutional standing is a threshold issue that should be addressed before examining issues of prudential standing and statutory interpretation. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998). Plaintiffs must bear the burden of proving standing. Storino v. Bor. of Point Pleasant Beach, 322 F.3d 293, 296 (3d Cir. 2003).

The United States Court of Appeals for the Third Circuit set forth the parameters of the constitutional standing analysis many times, including in Danvers Motor Co., Inc. v. Ford Motor Co., 432 F.3d 286 (3d Cir. 2005), which provides:

Constitutional standing requires (1) injury-in-fact, which is an invasion of a legally protected interest that is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical; (2) a causal connection between the injury and the conduct complained of; and (3) it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) . . . .

A "legally and judicially cognizable" injury-in-fact must be "distinct and palpable," not "abstract or conjectural or hypothetical." Raines v. Byrd, 521 U.S. 811, 819 (1997) . . . . While it is difficult to reduce injury-in-fact to a simple formula, economic injury is one of its paradigmatic forms. In Havens Realty Corp. v. Coleman, for example, an organization devoted to fair housing practices suffered a "concrete and demonstrable injury" when a realty company's racial "steering" practices "perceptibly impaired [its] ability to provide counseling and referral services for low-and moderate-income homeseekers," resulting in a "drain on the organization's resources." 455 U.S. 363, 379 (1982); see also San Diego County Gun Rights Comm. v. Reno, 98 F.3d 1121, 1130 (9th Cir. 1996) ("Economic injury is clearly a sufficient basis for standing."); Wright and Miller, Federal Practice and Procedure, § 3531.4 at 830 (2005 Supp.) ("Standing is found readily, particularly when injury to some traditional form of property is asserted.").

The injury-in-fact requirement exists to assure that litigants have a "personal stake" in the litigation. See The Pitt News v. Fisher, 215 F.3d 354, 360 (3d Cir. 2000). By ensuring that litigants present actual cases and controversies, it is also keeps the judicial branch from encroaching on legislative prerogatives, thereby preserving the separation of powers. See Valley Forge v. Americans United for Separation of Church and State, 454 U.S. 464, 473-74 (1982). 432 F.3d at 290-91 (additional citations omitted).

B. Standing in Section 292 Qui Tam Actions

Recently, district courts in different circuits have considered the threshold constitutional standing issue in the context of section 292 qui tam actions involving third party entities which have suffered no injury-in-fact but seek damages and attorneys fees for false marking on behalf of the United States from corporate entities which continue to use or display expired patents or patents that do not cover marked products. One district court has denied standing. See Stauffer v. Brooks Brothers, Inc., 615 F. Supp. 2d 248, 254 (S.D.N.Y. 2009). Two district courts have hesitantly found standing. See Pequignot v. Solo Cup Co., 640 F. Supp. 2d 714, 724, n. 15 (E.D. Va. 2009); and Juniper Networks v. Shipley, 2009 U.S. Dist. Lexis 40978 (N.D. Cal. 2009) (granting motion to dismiss on failure to state a claim, not on standing issue). Still another district court has stayed multiple cases pending the anticipated definitive ruling by the United States Federal Circuit Court in the Brooks Brothers appeal.*fn4 See, e.g. San Francisco Technology, Inc. v. Adobe Systems Inc., 2010 U.S. Dist. Lexis 40216 (N.D. Ca. 2010) (collecting cases).

After due consideration of WHAM-O, Inc.'s Motion to Dismiss,FLFMC's response thereto, and the briefs and supporting materials in support and in opposition, this Court will grant defendant's Motion to Dismiss because neither FLFMC nor the United States of America has suffered any concrete injury-in-fact, and the government cannot assign its "sovereign injury" to a private plaintiff; consequently, plaintiff cannot establish an injury-in-fact sufficient to establish Article III standing.

II. Facts Alleged in Complaint

For purposes of deciding defendant's Motion to Dismiss, the Court assumes the truth of the factual assertions of the Complaint and gives plaintiff the benefit of all reasonable inferences arising therefrom. Plaintiff is a Pennsylvania limited liability corporation with its principal place of business in Pennsylvania. Complaint (Doc. No. 1) at ¶ 1. Defendant Wham-O, Inc. is a Delaware corporation with its principal place of business in California. Id. at ¶ 2.

FLFMC brings this action on behalf of the United States and itself pursuant to 35 U.S.C. § 292(b) of the false marking statute, which authorizes "any person" to sue for the penalty of $500.00 per violation, and to retain one-half of any penalty awarded for the effort. The false marking statute is a quasi-criminal statute because it is penal in nature, punishing the violator with defined monetary penalties. U.S. Gypsum Co. v. Pacific Award Metals, Inc., 438 F.Supp.2d 1101, 1105 n.3 (N.D.Ca. 2006) (citing Mayview Corp. v. Rodstein, 620 F.2d 1347, 1359 (9th Cir. 1980).

Plaintiff asserts this Court has subject matter jurisdiction over its qui tam claims pursuant to 28 U.S.C. §§ 1331, 1335(a), and 1338(a)(b), and that venue is proper in the Western District of Pennsylvania pursuant to 28 U.S.C. §§ 1391(b)(c) and 1395(a). Moreover, plaintiff asserts that this Court has personal jurisdiction over Wham-O because it has "sold its falsely marked products in Pennsylvania and in this District and/or in the stream of commerce with knowledge that they would be sold in Pennsylvania and in this District. Upon information and belief, such sales in Pennsylvania and in this District of defendant's products are substantial, continuous and systematic." Complaint, ¶ 5.

The substance of plaintiff's Complaint consists solely of the following 15 paragraphs:

6. United States Patent No. 3,359,678 ("the '678 patent") was filed on November 1, 1965, issued on December 26, 1965 and assigned to Wham-O, Inc.

7. United States Patent No. 3,354,678 ("the '4,678 patent") was issued ...

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