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Getting Particular with False Marking Claims

Qui tam provisions, like the one in the False Mark- ing Statute, empower everyday citizens to enforce laws. The provisions, however, also provide financial incentives that can encourage frivolous lawsuits. In In re BP Lubricants USA Inc., the U.S. Court of Appeals for the Federal Circuit urged potential plain- tiffs to get particular with the factual basis of their false marking claims.

A false start

The False Marking Statute allows any person to file a qui tam action on behalf of the United States to recover the statutory penalty for marking an unpat- ented article as patented for purposes of deceiving the public. If successful, the person (the relator) receives half of the $500 penalty for each offense.

In this case, a patent attorney sued BP Lubricants for marking some products with an expired pat- ent number. BP sought to have the case dismissed because the relator’s complaint failed to allege any underlying facts indicating that BP knew its patent had expired when marking the products.

Specifically, BP claimed that the complaint failed to satisfy the “particularity” requirement in Rule 9(b) of the Federal Rules of Civil Procedure. The provision applies to all cases based on fraud or mistake and requires a plaintiff to plead “with particularity the circumstances constituting fraud or mistake.” The district court disagreed and BP appealed, hoping for a dismissal of the case.

True facts required

As the Federal Circuit explained, Rule 9(b) acts as a safety valve to ensure only viable fraud or mistake claims are allowed to proceed to discovery. But the court hadn’t previously considered whether the par- ticularity requirement applies to false marking claims.

The Federal Circuit determined that, here, it does. The plaintiff must provide some objective indication that reasonably implies the defendant was aware that the article wasn’t patented.

The court further held that conclusory allegations (such as the one made against BP) that the defen- dant is a “sophisticated company” with experience applying for, obtaining and litigating patents was insufficient. The allegation provided “no more of a basis to reasonably distinguish a viable complaint than merely asserting the defendant should have known the patent expired.”

Down but not out

The Federal Circuit noted that, when a complaint is dismissed under the particularity requirement, the plaintiff generally has the opportunity to amend its complaint to satisfy the requirement. It found that such an approach is especially appropriate here, as the court hadn’t previously addressed the applicabil- ity of the requirement in false marking cases.