Qui Tam Claims? Constitutional or Not?

A common tactic in IP litigation is the assertion of a False Marking Statute claim. The False Marking Statute basically states that you can’t stamp the word “patented” on a product that, in fact, does not have a patent. Sounds simple enough. The problem is that for each distributed product that contains a false product marking, a fine of $500 can be awarded. But wait! There’s more. The right to the fine proceeds gets split between the litigant and the federal government.

So, under these circumstances, guess what happens? Right. If possible, litigants always assert these so-called qui tam claims to increase the case’s settlement value and/or the respective leverage.

Courts have begun to question whether allowing civil litigants to wield, in effect, prosecutorial powers by seeking fines for qui tam violations is constitutional. In the Eastern District of Pennsylvania, a split exists on the district level. In the most recent decision on point, Judge Baylson ruled that the statute is, in fact, constitutional. If this decision stands, it can greatly increase the cost of settling an IP case since the penalty value of the case can easily exceed the actual damages at issue.

If you have any questions about this post or WCM’s intellectual property practice, please contact Bob Cosgrove at rcosgrove@wcmlaw.com.