Qui Tam Provision Of False Marking Statute Found Unconstitutional

Senniger Powers Attorney Michael Hartley Analyzes Unique Product Solutions, LTD. v. Hy-Grade Valve, Inc.

On February 23, 2011, Judge Dan A. Polster of the United States District Court for the Northern District of Ohio dealt a major blow to private litigants bringing false marking lawsuits. In Unique Product Solutions, LTD. v. Hy-Grade Valve, Inc., Judge Polster granted Hy-Grade’s Motion to Dismiss Unique Product’s Complaint alleging misuse of an expired patent on the ground that the qui tam provision of 35 U.S.C. § 292(b) is unconstitutional. Specifically, Judge Polster concluded that the qui tam provision violates the Take Care Clause of Article II of the United States Constitution.

The Take Care Clause provides that the President “shall take care that the laws be faithfully executed.” Hy-Grade’s motion thus presented the question of “whether the qui tam provision of the False Marking Statute provides the Executive Branch sufficient control to ensure that the President is able to perform his constitutionally assigned duty to ‘take Care that the Laws be faithfully executed.’”

Applying the standard set forth by the United States Supreme Court in Morrison v. Volson, in which the Court examined the constitutionality of the Ethics in Government Act of 1978, Judge Polster concluded that the executive branch lacks sufficient control over false marking lawsuits:

Applying the Morrison “sufficient control” analysis to the False Marking statute, it is clear the government lacks sufficient control to enable the President to “take Care that the Laws be faithfully executed.” . . .The False Marking statute lacks any of the statutory controls necessary to pass Article II Take Care Clause muster. The false marking statute essentially represents a wholesale delegation of criminal law enforcement power to private entities with no control exercised by the U.S. Department of Justice. It is unlike any statute in the Federal Code with which this Court is familiar.

In fact, Judge Polster noted, the false marking statute permitted private litigants to bring suit in the name of the United States without even providing notice of the suit to the Department of Justice. The case could be litigated without any control or oversight by the D.O.J., and the private litigants have authority to enter into a settlement that would bind not only the parties, but also the United States, without any input from the government. Judge Polster found this problematic because, when the United States is the real party in interest, “[d]ecisions should be made by government attorneys who have no financial stake in the outcome of the litigation or settlement, not by private parties motivated solely by the prospect of financial gain.”

It was the Federal Circuit’s conclusion in Pequinot v. Solo Cup Co., 608 F.3d 1356, 1363 (Fed. Cir. 2010) that “the false marking statute is a criminal one, despite being punishable only with a civil fine” which bound Judge Polster to apply the Morrison test. This was the case despite a previous 2009 ruling by the Eastern District of Virginia in Pequinot that the qui tam provision was constitutional. If Judge Polster’s approach and ruling is adopted by other districts, the recent spike in false marking filings may soon begin to tumble.