Cross-posted by Forbes.com at “On the Docket”
The National Law Journal reported online yesterday that Wham-O, creator of such iconic toys as the Frisbee® and the Hula-Hoop,® has alerted the U.S. Court of Appeals for the Third Circuit that it will challenge the constitutionality of 35 U.S.C. § 292, the section of the federal patent law which empowers any person to sue any entity which marks their products with a false (i.e. expired) patent number. What is particularly interesting about the challenge is that Wham-O succeeded in getting the bounty hunter’s claim thrown out at the federal trial court on the grounds that the complaint alleged no concrete injury. In the aggressive and innovative spirit of Wham-O’s founders, rather than simply argue that the district court’s reasoning was correct, Wham-O’s lawyer is taking a “best defense is a good offense” approach. Whether the Third Circuit will rule on an argument not addressed by the lower court is uncertain.
As The Legal Pulse related this past September, the bounty hunter patent law provision has been challenged on constitutional grounds previously. Pioneer Hi-Bred International advanced that argument, in addition to others, seeking dismissal of a patent marking suit in North Carolina. The court dismissed the claim, but declined to address the constitutional challenge, ruling instead that the complaint “fails to state with particularity the circumstances constituting fraud.”
According to its petition to the Third Circuit, Wham-O will argue that the patent statute “fails to provide for the necessary supervision of the qui tam litigant who is purporting to enforce a criminal statute on behalf of the government” and is thus in violation of Article II’s requirement that the president “take Care that the Laws be faithfully executed.”
More supervision of these lawyer-driven lawsuits is certainly needed. The plaintiffs’ bar approaches the suits as yet another money-making enterprise, going in some instances to the length of creating front businesses to act as plaintiffs. In the Wham-O case, the plaintiff is FLFMC, incorporated in Pennsylvania this past January and housed in the same office as its law firm, Parish Law Offices. Three-hundred patent marking suits have been filed in the past three years, many in the notoriously pro-plaintiff Eastern District of Texas. They target companies of all sizes from every imaginable industry. Such abusive suits can be devastating to small businesses and entrepreneurs.
For instance, Hold-Up Suspender Co., a three-person Southfield, Michigan company, has been forced to defend itself against a false marking suit brought by a “company” which describes itself in the complaint as existing “to conduct all lawful business, including but not limited to enforcing the false marking statute.” The company’s founder explained to the Detroit Free Press that he has had to spend $30,000 on six temporary workers to physically file off the patent number from every product in his inventory, and that the suit, if he loses it, could cost him $50 million “for two years of selling 40,000 pairs of suspenders, plus legal fees.”