United States: Retroactive Elimination Of The "Qui Tam" Provision Of The Federal False Marking Statute Does Not Violate The Due Process Clause Of The Constitution

In Brooks v. Dunlop Manufacturing Inc., No. 12-1164 (Fed. Cir. Dec. 13, 2012), the Federal Circuit affirmed the constitutionality of the retroactive elimination of the qui tam provisions of the federal false marking statute effectuated by the Leahy-Smith America Invents Act ("AIA").

35 U.S.C. § 292 makes it unlawful for any person to engage in specified acts of false patent marking, including falsely marking products as patented, with the intent to deceive the public.  Historically, § 292 has included a qui tam provision allowing any person to sue for the false marking penalty, with the proceeds to be split evenly with the United States.  The prevalence of false marking suits by private qui tam plaintiffs increased rapidly in 2009 after the Federal Circuit held that § 292 requires a penalty for false marking on a per article basis.

On September 16, 2011, the AIA eliminated the qui tam provisions of § 292.  Section 292 now only allows false marking suits by either (1) the United States or (2) any person "who has suffered a competitive injury as a result of a violation" of § 292.  35 U.S.C. § 292(b).  This provision is expressly made applicable to cases commenced prior to the passage of the AIA.

Before passage of the AIA, qui tam plaintiff Kenneth Brooks filed suit against Dunlop Manufacturing Inc. ("Dunlop"), alleging that Dunlop marked a guitar string winder with the number of a patent that expired and had been invalidated.  Dunlop initially moved to dismiss the case, arguing, among other things, that the qui tam provision of § 292 violated the Take Care Clause, U.S. Const. art. II, § 3.  While the Federal Circuit considered this constitutional question in a different case, Brooks's case against Dunlop was stayed.  During the pendency of the stay, Congress enacted the AIA, eliminating the qui tam provision of § 292.  Dunlop then moved to dismiss the case, arguing that Brooks could not show a right to damages based on competitive injury.

Brooks opposed Dunlop's motion to dismiss, arguing that Congress's retroactive elimination of the qui tam provision of § 292 was unconstitutional because (1) it constituted a taking of his property without just compensation, and (2) was a violation of the Due Process Clause of the Constitution.  The district court found that there was no unconstitutional taking or violation of the Due Process Clause and granted Dunlop's motion to dismiss.

On appeal, the Federal Circuit affirmed the constitutionality of the retroactive provisions of § 292 as amended by the AIA.  Brooks abandoned his unconstitutional takings argument on appeal.  As to Brooks's due process argument, the Federal Circuit rejected that the retroactive provisions of the AIA violated the Due Process Clause.  The Court explained that Congress is free to give retroactive effect to economic legislation so long as doing so is a rational means of pursuing a legitimate legislative purpose.  The Court found two independently sufficient rational legislative purposes for retroactive elimination of the qui tam provisions of § 292.  First, the Court found ample support for Congress's determination that the cost of qui tam actions under § 292 exceeded their benefits.  Additionally, the Court found that because of unresolved questions about the constitutionality of the qui tam provision of former § 292, "it was rational for Congress to pass legislation eliminating a potential constitutional issue and sparing the courts, private parties, and the United States the litigation burdens and risks associated with such issues."  Slip op. at 10.

The Court went on to consider Brooks's "primary argument" that Congress violated the Due Process Clause by repudiating a contract alleged to have arisen between Brooks and the United States when he filed suit against Dunlop.  The Court made clear that Brooks did not bring an actual "breach of contract" claim against the United States.  The Federal Circuit applied the "well-established presumption" that "a law is not intended to create private contractual or vested rights, but merely declares a policy to be pursued until the legislature shall ordain otherwise."  Id. at 12 (quoting Nat'l R.R. Passenger Corp. v. Atchinson, 470 U.S. 451, 465-66 (1985)).  The Court found nothing in the language of former § 292 to overcome this presumption.  Further, the Court found no evidence of congressional intent surrounding the passage of § 292 to enter into a contract with qui tam plaintiffs under § 292. 

Brooks relied on a Ninth Circuit case involving the False Claims Act for the general proposition that qui tam provisions create enforceable unilateral contracts.  The Court rejected this proposition as unsupported by case law and inapplicable to false marking suits.  The Court also noted that "federal courts have consistently recognized that amendments to qui tam statutes that interfere with a [qui tam plaintiff's] pending action do not 'deprive him of rights guaranteed by the Constitution.'"  Id. at 14 (quoting United States ex rel. Rodriguez v. Weekly Publ'n, Inc., 144 F.2d 186, 188 (2d Cir. 1944)).  Instead, "a qui tam plaintiff has 'no vested right' and his 'privilege of conducting the suit on behalf of the United States and sharing in the proceeds of any judgment recovered, [i]s an award of statutory creation, which, prior to final judgment, [i]s wholly within the control of Congress.'"  Id. (alterations in original) (quoting Rodriguez, 144 F.2d at 188).  The Court held that Brooks could not overcome the presumption that former § 292 did not create private contractual or vested rights.  Accordingly, the Court held that Brooks had no contract and his due process claim failed.

The Court considered an additional argument by Brooks that Congress's powers under Intellectual Property Clause of the Constitution are subject to "a more searching analysis" than Congress's other enumerated powers.  Id. at 15 (citation omitted).  The Court rejected this argument, reasoning that "the AIA's retroactive amendments to § 292 do not implicate the scope of the patent power, but rather, Congress's judgment in effectuating and maintaining a patent system."  Id. at 16.

Judges: Newman, Prost (author), Moore

[Appealed from N.D. Cal., Judge Breyer]

This article previously appeared in Last Month at the Federal Circuit, January 2013

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