Federal Circuit Holds That False Marking Claims Must Be Pled With Particularity

March 31, 2011 Authors: Sheila Kadura, Mark Thomas Garrett

The false marking statute, 35 U.S.C. § 292, prohibits falsely marking an “unpatented” article as patented, falsely marking an article as covered by a pending patent when no application has been filed, or using such false markings in advertising if the marking was done “for the purpose of deceiving the public.” 35 U.S.C. § 292(a). Because the statute expressly requires an intent to deceive the public, false marking defendants commonly move to dismiss the complaint under Federal Rule of Civil Procedure 9(b) for failure to plead fraudulent intent with particularity. However, until now, it was unclear whether Rule 9(b)’s particularity requirement applied to false marking claims. In In re BP Lubricants USA Inc., Misc. Dkt. No. 960 (Fed. Cir. Mar. 15, 2011), the Court of Appeals for the Federal Circuit answered that question, holding that Rule 9(b) does apply to false marking claims. The Federal Circuit also provided some guidance on the level of particularity that is required to meet the Rule 9(b) standard.

The BP Lubricants Decision

The District Court Denies BP’s Motion to Dismiss

Thomas A. Simonian, a patent attorney, sued BP Lubricants USA Inc. (“BP”) for false marking in the Northern District of Illinois. In re BP Lubricants, Misc. Dkt. No. 960, slip op. at 3. Simonian accused BP of falsely marking its CASTROL® products with an expired patent. Id. Simonian supported his assertion that BP’s false marking was done with an intent to deceive the public by alleging that: (1) BP knew or should have known that the patent had expired; (2) BP is a sophisticated company with “experience applying for, obtaining, and litigating patents”; and (3) BP falsely marked the CASTROL® products with the purpose of deceiving the public into believing that they were covered by an expired patent. See id.; Complaint at ¶¶ 21–26.

BP moved to dismiss the complaint, asserting, among other things, that Simonian failed to plead specific facts sufficient to support an inference that BP marked the CASTROL® products with an intent to deceive the public. The district court denied BP’s motion, holding that Simonian met the Rule 9(b) standard by pleading “the specific who, what, when, where, and how” of the alleged fraud. In re BP Lubricants, Misc. Dkt. No. 960, at 4 (quoting Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1327 (Fed. Cir. 2009)). BP then petitioned the Federal Circuit for a writ of mandamus directing the district court to dismiss Simonian’s complaint for failure to comply with Rule 9(b). Id. at 1.

The Federal Circuit Reverses

Before reaching the merits of BP’s petition, the Federal Circuit addressed the predicate question: does Rule 9(b)’s particularity requirement apply to false marking claims? The answer is yes. Id. at 6. The court noted that Rule 9(b) “acts as a safety valve to assure that only viable claims alleging fraud or mistake are allowed to proceed to discovery.” Id. at 5. The court then explained that such a “safety valve” is necessary in false marking cases to prevent “discovery and adjudication for claims that do little more than speculate that the defendant engaged in more than negligent action.” Id. at 6.

Turning to the denial of BP’s motion to dismiss, the Federal Circuit held that the district court was “clearly incorrect” when it found the complaint to be sufficient despite the absence of any facts supporting an inference that BP knew its patent had expired. Id. at 7. Simonian’s generalized allegations—that BP is a sophisticated company and either knew or should have known about the patent’s expiration—were insufficient. Id. at 7–8. To meet the requirements of Rule 9(b), a false marking complaint must “provide some objective indication to reasonably infer that the defendant was aware that the patent expired.” Id. at 7.

The Court was unpersuaded by Simonian’s argument that deceptive intent is inherent in all acts of false marking. Id. at 9. Simonian also argued that the complaint included sufficient facts to activate the rebuttable presumption of deceptive intent that was described in Pequignot v. Solo Cup Co., 608 F.3d 1356, 1362–63 (Fed. Cir. 2010). Id. at 9–10. But the court explained that the inquiry does not end with the Pequignot presumption. Id. at 10. Instead, “the Pequignot presumption is simply a factor in determining whether Rule 9(b) is satisfied; it does not, standing alone, satisfy Rule 9(b)’s particularity requirement.” Id.

After determining that the district court had erred in denying BP’s motion to dismiss, the Federal Circuit turned to the question of whether that error warranted issuance of a writ of mandamus. The court will issue such a writ only “in exceptional circumstances to correct a clear abuse of discretion or usurpation of judicial power by the trial court.” Id. at 5, 10 (internal quotation marks omitted). The court determined that the circumstances of this case warranted a writ because the holding that Rule 9(b) applies to false marking complaints was a “basic and undecided” question that had prompted “considerable disagreement” among the trial courts. Id. at 11. Thus, the court issued a writ of mandamus directing the district court to dismiss the complaint, but with leave to amend in accordance with the pleading requirements set forth in the opinion. Id.

Looking Ahead

This case makes clear that Rule 9(b) applies to false marking claims and provides an example of a complaint that failed to meet the particularity requirements of the rule. However, it remains to be seen precisely how particular a false marking complaint must be. The Federal Circuit noted that such a complaint need not name specific individuals involved in the alleged false marking, but the court provided only two other examples of false marking behavior that would satisfy the heightened pleading requirement: suing a third party for infringement after the patent had expired, and revising the patent marking multiple times after expiration. Id. at 9.

This article was prepared by Sheila Kadura (skadura@fulbright.com or 512 536 3027) and Mark T. Garrett (mgarrett@fulbright.com or 512 536 3031) from Fulbright’s Intellectual Property and Technology Practice Group.