The False Marking Statute Survives Another Constitutional Challenge
The False Marking Statute has a qui tam provision, Section 292(b), under which any person may bring suit against a person or company that "marks upon, or affixes to . . . any unpatented article, the word 'patent' or any word or number importing that the same is patented for the purpose of deceiving the public . . . ." Marking a product with an expired patent constitutes marking an unpatented article. Whoever violates this statute is liable up to $500 per offense, and the person filing suit is entitled to collect the penalty on a per article basis. Under the current statute, the person filing suit need not have personally suffered an injury-in-fact to have standing to sue.
This statute has been subject to a number of constitutional challenges. In Hollander v. Ranbaxy Laboratories, Inc., No. 10-793 (E.D. Pa. July 18, 2011), the plaintiff initiated a qui tam action in connection with Ranbaxy's marking of certain dermatology products with expired patent numbers. The plaintiff alleged that Ranbaxy has marked these products with, and used in advertising, expired patent numbers for the purpose of deceiving the public.
Ranbaxy filed a motion to dismiss, arguing that the False Marking Statute violates the Take Care Clause of Article II by failing to afford the Executive Branch to comply with the constitutionally assigned duty "to take Care that the Laws be faithfully executed." Ranbaxy argued that the False Marking Statute is actually a criminal statute and, therefore, the Supreme Court decision in Morrison v. Olson, 487 U.S. 654 (1988), establishes the controls sufficient under the Take Care Clause. Ranbaxy concluded that the qui tam provision of the False Marking Statute lacks the controls necessary under Morrison and, moreover, that it lacks the controls found sufficient for the False Claims Act, a civil statute, to survive constitutional scrutiny.
In denying Ranbaxy's motion to dismiss, the U.S. District Court for the Eastern District of Pennsylvania cited other jurisdictions - a total of ten cases - that have held Section 292(b) to be constitutional, as opposed to just two cases holding that it unconstitutional. The Court held that Morrison addressed the use of "prosecutorial powers" in criminal actions. Although Ranbaxy argues that the False Marking Statute is criminal in nature, Section 292(b) does not permit prosecution of criminal actions, but instead creates a stand-alone civil action with a separate criminal companion. Therefore, the Court refused to assign Morrison much weight in determining whether Section 292(b) is constitutional.
The Court also looked to the False Claims Act, which also created a criminal action with a civil enforcement provision. In 1943, Congress amended the False Claims Act to implement a number of safeguards that are present today to enable the United States control over False Claims Act litigation. As the Supreme Court has recognized, qui tam statutes are "entrenched in our nation's history." Moreover, whistleblowers who report fraud on the government lead to the reimbursement of millions of dollars paid as a result of false and fraudulent claims.
Ultimately, the Court concluded that the concerns of Ranbaxy are more appropriately addressed by Congress and declined to declare the False Marking Statute unconstitutional under the circumstances.
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