Champion Laboratories, Inc. v. Parker-Hannifin Corp et al

Filing 42

MEMORANDUM, DECISION RE: Defendants 16 Motion to Dismiss signed by Judge Oliver W. Wanger on 5/16/2011. (Kusamura, W)

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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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CHAMPION LABORATORIES, INC,

1:10-CV-02371-OWW-DLB

Plaintiff,

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11

v.

12

PARKER-HANNIFIN CORPORATION, et
al,

13

MEMORANDUM DECISION RE:
DEFENDANTS PARKER-HANNAFIN
AND PARKER INTANGIBLES
LLC’S MOTION TO DISMISS
(Doc. 16)

Defendants.

14
I.

15

INTRODUCTION.

16

Plaintiff Champion Laboratories, Inc. ("Champion") filed this

17

action on December 20, 2010, alleging two violations of the False

18

Marking Statute, 35 U.S.C. § 292, by Defendants Parker-Hannafin

19

Corp. and Parker Intangibles, LLC (collectively "Parker").

20

Complaint also alleges violations of the Lanham Act § 43(a), 15

21

U.S.C. § 1125(a), and California Business & Professions Code §§

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17200 et seq.

23

Defendants

move

to

dismiss

for

lack

of

The

subject-matter

24

jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) and for failure

25

to state a claim pursuant to Fed. R. Civ. P. 12(b)(6).

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substance

27

limitation on false patent marking qui tam actions jurisdictionally

28

bars Plaintiff’s actions.

of

Parker’s

challenge

1

is

that

a

The

“first-to-file”

II. BACKGROUND.

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2

The following background facts are taken from the parties'

3

submissions in connection with the motions and other documents on

4

file in this case.

5

Champion is a Delaware corporation that has its principal

6

place of business in Albion, Illinois.

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Delaware corporation that has its principal place of business in

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Cleveland, Ohio.

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filter business in Modesto, California (referred to as the “Racor

10

Division”).

Id. ¶ 2.

Compl. ¶ 1.

Parker is a

Parker operates a division of its

Id. ¶¶ 3, 22.

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Both Champion and Parker are automotive suppliers engaged in

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the business of producing and selling automobile parts to car

13

manufacturers.

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Ford trucks equipped with the “Powerstroke” diesel engine.

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was designated as the original equipment supplier for Ford’s

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filtration system and its replacement filter is designated model

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number “PF-L2016.” Id. ¶ 11.

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patents relevant to the PF-L2016 filter, including Patent No.

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7,086,537 (“the '537 Patent”) and Patent No. 6,837,993 (“the '993

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Patent”).1 Parker also designs, makes and sells other components of

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the filtration system and allegedly “has the ability to control the

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design of the [filtration] system.”

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Both parties produce fuel filtration products for
Parker

Parker owns and licenses a number of

Id. ¶ 30.

Champion’s replacement filter is designated by the model
number “LP-2017.”

Id. ¶ 29.

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1

Parker claims that its patents “disclose a new and unique
filter assembly that prevents an improper filter element from being
used,” resulting in the “reduction of mess and environmental issues
that can occur during an elemental change.”
2

1

This lawsuit presents one more chapter in the litigation

2

between Champion and Parker concerning alleged patent infringement

3

and

4

recitation of the varied disputes between the parties is found in

5

Parker-Hannifin Corp. v. Wix Filtration Corp., Nos. 1:07 CV 1374,

6

1:07

7

Parker-Hannifin

8

1:06-CV-2616, 2008 WL 3166318 (N.D. Ohio Aug. 4, 2011) and Champion

9

Laboratories, Inc. v. Parker-Hannifin Corp., 616 F. Supp. 2d 684

10

anti-competitive

CV

1375,

2011
Corp.

business

WL
v.

practices.

976559

(N.D.

Champion

Ohio

A

more

Mar.

Laboratories,

thorough

17,

2011),

Inc.,

No.

(E.D. Mich. 2009).2

11

The Complaint, filed on December 20, 2010 at 11:18 p.m. PST,

12

arises out of Champion's claims that Parker marked its product, the

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Parker 2016 replacement filter, with the '537 and '993 patent

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designations despite the fact that “the claims of the ['537 and

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‘993] Patent[s] are inapplicable to the Parker 2016 Filter.”

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Compl. ¶¶ 15-16.

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includ[ing] the [‘537 and ‘993] Patent[s] in the patent markings of

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the Parker 2016 Filter in an attempt to deter competitors from

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attempting to design, produce, market, or sell a competing filter.”

20

Id. ¶¶ 59, 74.

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to recover civil fines on behalf of the United States Government.3

The complaint accuses Parker of “intentionally

Champion brings this action as a qui tam proceeding

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23
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25
26
27
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2

Champion Laboratories, Inc. v. Parker-Hannifin Corp., 616 F.
Supp. 2d at 687, involved Champion’s claims that Parker and/or its
Racor affiliate unlawfully “disparaged its product” to General
Motors “in an effort to recover the GM fuel filter business Racor
had previously lost to Champion.”
3

Pursuant to 35 U.S.C. § 292, Champion seeks, inter alia, an
award of monetary damages against Parker in the amount of $500 per
false marking offense, one half which is to be paid to the United
States. Id. ¶¶ 15-16. Plaintiff also seeks injunctive relief and
3

1

Plaintiff’s third and fourth claims allege violations of

2

federal and state unfair competition and false advertising laws,

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predicated

4

applicability of the ‘537 and ‘993 patents to the Parker 2016

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filter elements.

on

Parker’s

alleged

misrepresentations

of

the

Id. ¶¶ 85-106.4

6

Parker moves to dismiss this action based on a provision of

7

the False Claims Act, 31 U.S.C. § 3730(b)(5), which purportedly

8

creates a

9

Plaintiff’s action.

first–to-file

limitation

that

jurisdictionally

bars

Parker claims that nearly three weeks before

10

Plaintiff filed the present suit, a different Plaintiff filed a

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separate false patent marking qui tam action against Parker based

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on the same material allegations.

13

Specifically, on December 2, 2010, Tex Pat, LLC (“Tex Pat”)

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filed a qui tam action against Parker as a relator on behalf of the

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United States in the U.S. District Court for the Eastern District

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of Texas, Tex Pat, LLC v. Parker-Hannifin Corp., No. 5:10-CV-00202

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(E.D. Tex.).

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2010 at 9:35 p.m. PST, alleged that Parker’s 2016 filter element

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was

20

represents that the Tex Pat action was settled on December 21, 2010

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and the action was dismissed with prejudice on January 11, 2011.5

falsely

Tex Pat’s amended complaint, filed on December 20,

marked

with

the

‘537

and

‘993

patents.

Parker

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attorneys' fees pursuant to 35 U.S.C. § 285.
4

The unfair competition and false advertising claims are
brought on behalf of Plaintiff only.
5

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Compl. ¶¶ 17, 69, 84.

In determining whether a complaint states a claim upon which
relief can be granted, the Court can take judicial notice of the
docket and files in other judicial proceedings. See Shaw v. Hahn,
56 F.3d 1128, 1129 n. 1 (9th Cir. 1995) (when assessing whether a
complaint states a claim, courts may take judicial notice of
4

1

Doc.

16-2.

Parker

submits

that

the

Tex

Pat

settlement

was

2

acknowledged and accepted by Mr. John Fargo of the Commercial

3

Litigation Branch of the Department of Justice.

4

Champion opposed the motion on March 11, 2011, contending that

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its false marking claims are not subject to the first-to-file bar.

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According to Champion, the motion should be denied to “allow

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discovery into the circumstances surrounding the negotiation of the

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settlement.”

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III.
A.

LEGAL STANDARD

Motion to Dismiss

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Under Federal Rule of Civil Procedure 12(b)(6), a motion to

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dismiss can be made and granted when the complaint fails “to state

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a claim upon which relief can be granted.”

15

12(b)(6) is appropriate where the complaint lacks a cognizable

16

legal theory or sufficient facts to support a cognizable legal

17

theory.

18

(9th Cir. 1990).

Dismissal under Rule

Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699

19

To sufficiently state a claim to relief and survive a 12(b)(6)

20

motion, a complaint “does not need detailed factual allegations”

21

but the “[f]actual allegations must be enough to raise a right to

22

relief above the speculative level.”

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550 U.S. 544, 555 (2007).

Bell Atl. Corp. v. Twombly,

Mere “labels and conclusions” or a

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27
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matters of public record); MGIC Indemnity Corp. v. Weisman, 803
F.2d 500, 504 (9th Cir. 1986) (same); Fed. R. Evid. 201(b) & (c)
(permitting judicial notice of adjudicative facts). Pursuant to
this rule, the Court takes judicial notice of the dockets, files,
and records in the “Tex Pat” litigation, Tex Pat, LLC v.
Parker-Hannifin Corp., No. 5:10-CV-00202 (E.D. Tex.).
5

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“formulaic recitation of the elements of a cause of action will not

2

do.”

3

relief that is plausible on its face.”

4

a motion to dismiss, a complaint must contain sufficient factual

5

matter, accepted as true, to state a claim to relief that is

6

plausible on its face.”

7

S.Ct. 1937, 1949 (2009) (internal quotation marks omitted).

8

plausibility standard is not akin to a probability requirement, but

9

it asks for more than a sheer possibility that a defendant has

Id.

Rather, there must be “enough facts to state a claim to
Id. at 570.

“To survive

Ashcroft v. Iqbal, --- U.S. ----, 129
“The

10

acted unlawfully.

Where a complaint pleads facts that are merely

11

consistent with a defendant's liability, it stops short of the line

12

between possibility and plausibility of entitlement to relief.”

13

Id. (internal citation and quotation marks omitted).

14

In deciding whether to grant a motion to dismiss, the court

15

must accept as true all “well-pleaded factual allegations.” Iqbal,

16

129 S.Ct. at 1950.

17

true allegations that are merely conclusory, unwarranted deductions

18

of fact, or unreasonable inferences.”

19

Warriors, 266 F.3d 979, 988 (9th Cir. 2001); see, e.g., Doe I v.

20

Wal-Mart Stores, Inc., --- F.3d ----, 2009 WL 1978730, at *3 (9th

21

Cir. July 10, 2009) (“Plaintiffs' general statement that Wal-Mart

22

exercised control over their day-to-day employment is a conclusion,

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not a factual allegation stated with any specificity. We need not

24

accept Plaintiffs' unwarranted conclusion in reviewing a motion to

25

dismiss.”).

A court is not, however, “required to accept as

Sprewell v. Golden State

26

The Ninth Circuit has summarized the governing standard, in

27

light of Twombly and Iqbal, as follows: “In sum, for a complaint to

28

survive a motion to dismiss, the non-conclusory factual content,
6

1

and reasonable inferences from that content, must be plausibly

2

suggestive of a claim entitling the plaintiff to relief.”

3

U.S. Secret

4

quotation marks omitted).

Service,

572

F.3d

962

(9th Cir.

2009)

Moss v.

(internal

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IV.
A.

DISCUSSION

False Marking Causes of Action (Claims 1 and 2)

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1. Constitutionality of Qui Tam Actions Under 35 U.S.C. 292

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On February 23, 2011, Judge Polster in the Northern District

10

of

Ohio

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unconstitutional.6

12

Valve, Inc., --- F. Supp. 2d ----, No. 5:10-CV-1912, 2011 WL 649998

13

(N.D. Ohio Feb. 23, 2011).

14

analysis set forth in Morrison v. Olson, 487 U.S. 654 (1988) and

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applied in United States ex rel. Taxpayers Against Fraud v. General

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Electric Co., 41 F.3d 1032 (6th Cir. 1994), the Court found that

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the

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Appointments and Take Care Clauses of Article II of the United

19

States

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sufficient control over the litigation. The Court held that unlike

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the False Claims Act, “the False Marking statute lacks any of the

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statutory controls necessary to pass Article II Take Care Clause

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muster” and represents “a wholesale delegation of criminal law

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enforcement power to private entities with no control exercised by

qui

found

tam

the

qui

tam

provision

of

35

U.S.C.

§

292(b)

See Unique Product Solutions, Ltd. v. Hy-Grade

provision

Constitution

by

of

Applying the “sufficient control”

35

U.S.C.

failing

to

§

give

292(b)

the

violated

Executive

the

Branch

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26
27
28

6

Section 292(b)'s constitutionality was first raised by the
Court during oral argument on March 28, 2011.
Supplemental
briefing was requested at that time to allow the parties to address
the issue.
7

1

the Department of Justice [...] [i]t is unlike any statute in the

2

Federal Code with which this Court is familiar.”

3

Since Unique Product Solutions was decided, several federal

4

district courts have held that Section 292(b) is constitutional.

5

See Ford v. Hubbell, Inc., No. 10–CV–513, 2011 WL 1259707, at 3

6

(S.D. Ill. Mar. 31, 2011);

7

10–CV–2511, 2011 WL 1118689, at 5–8 (N.D. Ill. Mar. 28, 2011); Pub.

8

Patent Found., Inc. v. GlaxoSmithKline Consumer, Healthcare, L.P.,

9

No. 09–CV–5881, 2011 WL 1142917, at 4 (S.D.N.Y. Mar. 22, 2011); Hy

10

Cite Corp. v. Regal Ware, Inc., No. 10–CV–168, 2011 WL 1206768, at

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4 (W.D. Wis. Mar. 15, 2011).

12

Luka v. The Procter & Gamble Co., No.

While the weight of the district court case law has found

13

Section

292(b)

constitutional,

a

court

need

not

“decide

14

constitutional questions where other grounds are available and

15

dispositive of the issues of the case.”

16

Austin Mun. Utility Dist. No. One v. Holder, --- U.S. ----, ----,

17

129 S.Ct. 2504, 2506, 174 L.Ed.2d 140 (2009).

18

avoid if it can the issue of section 292(b)’s constitutionality,

19

because the complaint is jurisdictionally barred under the “first-

20

to-file” provision.7

See, e.g., Northwest

Here, the Court must

21
22

2.

First-to-File Bar

23

On December 20, 2010, at 11:18 p.m. PST, Champion filed this

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qui tam action, alleging Parker marked certain of its filtration

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product with two inapplicable patent numbers in violation of 35

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27
28

7

Section 292(b)'s constitutionality is presently pending
before the Federal Circuit in FLFMC, LLC v. Wham-O, Inc., Case No.
11-1067.
8

1

U.S.C. § 292(a).

It is undisputed that Tex-Pat filed an identical

2

lawsuit against Parker in the Eastern District of Texas several

3

weeks before Champion filed this action in the Eastern District of

4

California. Parker argues that because it had already been sued in

5

the Texas case, Champion lacked standing to bring his identical

6

action here.

7

Section

292(a)

prohibits

marking

unpatented

8

patented for the purpose of deceiving the public;

9

marking offense is punishable by a $500 fine.

articles

as

each such false

See Forest Group,

10

Inc. v. Bon Tool Co., 590 F.3d 1295, 1303-04 (Fed. Cir. 2009).

11

statute provides that “[a]ny person may sue for the penalty, in

12

which event one-half shall go to the person suing and the other to

13

the use of the United States.”

14

The

35 U.S.C. § 292(b).

The false marking statute is one of four qui tam statutes

15

remaining on the books;

all were enacted over a century ago.

See

16

Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, 529

17

U.S. 765, 768 n. 1, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000).

18

tam laws permit private citizens to file enforcement actions on

19

behalf of the government, in return for a bounty.

20

Hall v. Tribal Dev. Corp., 49 F.3d 1208, 1212 (7th Cir. 1995).

21

permitting members of the public to sue on behalf of the government

22

[under 35 U.S.C. § 292], Congress allowed individuals to help

23

control false marking.”

Qui

See U.S. ex rel.
“By

Forest Group, Inc., 590 F.3d at 1303-04.

24

Parker argues that only one private individual can assert a

25

cause of action on behalf of the government in a qui tam action

26

under

27

Champion, lack standing to bring the same claims against the same

28

defendant.

35

U.S.C.

§

292,

and

that

9

subsequent

filers,

such

as

1

The few cases analyzing the false marking statute support

2

Parker’s interpretation.

3

Corp., No. 10-C-1259, 2010 WL 2837180 (N.D. Ill. July 19, 2010)

4

held that the plaintiff lacked standing to assert a qui tam false

5

marking claim because the operative complaint was identical to an

6

earlier-filed action against the same defendant.

7

court in Simonian relied on United States v. B.F. Goodrich Co., 41

8

F. Supp. 574, 575 (S.D.N.Y. 1941), which recognized a first–to-file

9

limitation in an earlier version of the False Claims Act.

The

10

court

tam

11

provision

12

substantially similar, and then applied the B.F. Goodrich reasoning

13

to hold that the plaintiff lacked standing to bring a false marking

14

claim:8

15

compared

§

analyzed

On similar facts, Simonian v. Quigley

292(b)’s
in

B.F.

qui

tam

provision

Goodrich,

finding

The district

to

the

the

qui

provisions

When confronted with multiple similar actions brought
against the same defendant, the B .F. Goodrich court
noted that “[o]bviously, under the general rule well
known and so long adhered to, one plaintiff should not
be permitted to bring and maintain at the same time more
than one action for the same relief.” Id. Because the
statute provided for “but one action and one division”
of any proceeds, the court concluded that “[t]he first
plaintiff has sole control of the action” and “second or

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18
19
20
8

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23
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Simonian identified the similarities between the qui tam
provisions of False Claims Act and the false marking statute:
[An action] may be brought and carried on by any
person, as well for himself as for the United States;
the same shall be at the sole cost and charge of such
person .... The person bringing the suit and
prosecuting it to final judgment shall be entitled to
receive one-half the amount of such forfeiture, as well
as of damages recovered and collected, and the other
one-half shall belong to and be paid over to the United
States ....
Id. at 1 (citing B.F. Goodrich Co., 41 F. Supp. at 575).
10

1
2
3
4
5
6

subsequent attempts by others can have no standing.”
Id. Congress later amended the False Claims Act to add
an explicit “first-to-file” provision, see 31 U.S.C. §
3730(b)(5); the Act's legislative history explains that
“[w]hile there are few known instances of multiple
parties intervening in past qui tam cases ..., the
Committee wishes to clarify in the statute that private
enforcement under the civil False Claims Act is not
meant to produce class actions or multiple separate
suits based on identical facts and circumstances.”
S.Rep. No. 99-345, at 25 (1986).

7
Id. at 1.
8
The court held that “[a]s in the False Claims Act, the false
9
marking statute contains no provision allowing for multiple private
10
plaintiffs to share in a recovery.”

Id. at 2.

The qui tam

11
provision of false marking statute “contemplates only a single
12
action brought by a private individual on behalf of the United
13
States” and “[j]ust as the United States could not bring multiple
14
identical actions against a defendant under the false marking
15
statute,

multiple

private

plaintiffs

cannot

do

so

on

the

filed

an

16
government's behalf.”

Id.

17
Here,

Champion

does

not

dispute

that

Tex-Pat

18
identical false marking action against Parker in the Eastern
19
District of Texas several weeks before Champion filed this action
20
in the Eastern District of California. Tex Pat’s lawsuit was filed
21
nearly three weeks prior to December 20, 2010, when Champion filed
22
this qui tam action. It is without disputed that Tex Pat’s amended
23
complaint, filed several hours before this lawsuit, alleged that
24
the Parker 2016 replacement filter was falsely marked with the '537
25
and '993 patent numbers. Instead, Champion argues that the current
26
state of the law is unsettled and that a “competitor” is the proper
27
party to advance a qui tam false marking case.
28
11

1

Champion’s contention the case law is unsettled is erroneous.

2

Simonian v. Hunter Fan Co., No. 10-C-1212, 2010 WL 2720749 (N.D.

3

Ill. July 8, 2010), on which Champion’s opposition centers, never

4

reached the issue whether the reasoning behind the first-to-file

5

limitation of 31 U.S.C. § 3730(b)(5) applies with equal force to

6

false patent marking qui tam actions.

7

consider these arguments because they were first raised in the

8

defendant’s reply brief:

9

Hunter Fan refused to

[I]n its reply, Defendant argues that “[35 U.S.C. § 292]
only provides for a single lawsuit and a single
recovery”
and
that
“even
assuming
that
the
‘first-to-file’ rule for qui tam actions is not directly
applicable to false marking suits, the reasoning behind
the ‘first-to-file’ rule applies equally to [a] qui tam
action under 35 U.S.C. § 292 and further supports the
plain language of § 292 as only authorizing a single qui
tam action for false marking.” . 24, Def.'s Reply at
2-4.) Defendant, however, has waived these arguments by
raising them for the first time in its reply brief.
London v. RBS Citizens, N.A., 600 F.3d 742, 747 (7th
Cir. 2010).

10
11
12
13
14
15
16

Id. at 3.
17
The only other district court to reach the issue, Simonian v.
18
Quigley

Corp.,

2010

WL

2837180,

found

the

reasons

for

the

19
first-to-file limitation of 31 U.S.C. § 3730(b)(5) apply with equal
20
force to false patent marking qui tam actions.

Champion's false

21
marking claims are barred under the "first-to-file” rule.
22
Assuming, arguendo, that Champion’s lawsuit is not barred
23
under the “first-to-file rule,” Parker alternatively contends that
24
the

dismissal

with

prejudice

in

the

Texas

action

has

claim

25
preclusive effect. Champion disagrees, relying on In re Schimmels,
26
127 F.3d 875 (9th Cir. 1997) for the proposition that a prior
27
judgment needs to satisfy due process considerations to have
28
12

1

preclusive effect.

2

875 (9th Cir. 1997), asserting that a prior judgment needs to

3

satisfy due process considerations to have preclusive effect.

4

Specifically, the Tex Pat judgment is not binding against it until

5

the

6

satisfied.

five

“due

Champion relies on In re Schimmels, 127 F.3d

process”

factors

prescribed

by

Schimmels

are

7

Champion’s argument is a non-starter. It fails to address the

8

formal prerequisites for claim preclusion and erroneously assumes

9

that it has standing against Parker to challenge the Tex Pat

10

judgment validity.9

11

interest in a qui tam suit and its interest was represented in the

12

Tex Pat litigation.

13

1321, 1329 (Fed. Cir. 2010)(holding that claim preclusion precludes

14

the government from bringing duplicative false marking claims

15

against the same defendant from the same markings); see also

16

Simonian v. Irwin. Indus. Tool Co., No. 10-1260, 2010 WL 3488129

17

(N.D. Ill. Jan. 18, 2011)(denying motion to amend complaint because

18

of preclusive effect of prior settlement).

19

provides for a single claim for false marking, not multiple claims

20

for multiple penalties. See, e.g., Simonian v. Quigley Corp., 2010

21

WL 2837180 at 2. The government has exercised and relinquished its

22

right to seek damages from Parker for alleged false markings at

23

issue in this case.

24

However, the government is the real party in

See Stauffer v. Brooks Bros., Inc., 619 F.3d

The qui tam statute

Champion’s argument contains an additional flaw by incorrectly

25
9

26
27
28

Claim preclusion applies whenever there is (1) an identity
of claims, (2) a final judgment on the merits, and (3) privity
between parties.” Tahoe–Sierra Pres. Council, Inc. v. Tahoe Reg'l
Planning Agency, 322 F.3d 1064, 1077 (9th Cir. 2003) (footnote and
internal quotation marks omitted).
13

1

analyzing the Schimmels’ factors from its own perspective, not that

2

of the government.10 Although Champion is a “competitor” of Parker,

3

Champion cites no legal authority that competitor status controls

4

the analysis.11

5

factors

6

subsequent relator.

7

aware of its right under the False Claims Act to intervene in the

8

relators' adversary proceeding [...] [i]n addition, the government

9

participated in the relators' suit through the presence of its

10

to

the

In Schimmels, the Ninth Circuit applied the five
government’s

position,

not

from

that

of

the

See id. at 885 (“the government was fully

counsel [...]”)(emphasis added).

The only case citing Schimmels

11
12
13
14
15

10

At oral argument, Champion argued the settlement changed,
which does not alter that the government received notice.
11

Similar “competitor only” arguments were unsuccessfully
advanced to challenge Article III standing of a non-competitor
relator in Pequignot v. Solo Cup Co., 640 F. Supp. 2d 714 (E.D. Va.
2009):

16
17
18
19
20
21
22

Solo urges the Court to avoid the constitutional
question by construing § 292(b) narrowly. Under this
narrow construction, a suit by a plaintiff like
Pequignot, who is not a competitor of the company
alleged to have engaged in false patent marking, would
be barred. Solo supports this argument by citing to
several decisions that have restricted false advertising
suits under section 43(a) of the Lanham Act, 15 U.S.C.
§ 1125(a), to actions by competitors.
[...]

23
24
25
26
27
28

Together with the overwhelming authority explicitly
describing § 292(b) as a qui tam statute, these factors
are more than sufficient to conclude that § 292(b) is
indeed a qui tam statute, and therefore, that Pequignot
has Article III standing, as a partial assignee of the
government's claims, to sue Solo for violations of §
292.
Id. at 717.
14

1

for

its

due

process

holding,

U.S.

ex

rel.

Williams

v.

Bell

2

Helicopter Textron Inc., 417 F.3d 450 (5th Cir. 2005), a qui tam

3

case, did not apply the five due process factors and is factually

4

distinguishable from this case.

5

“dismissal with prejudice as to the United States was unwarranted

6

where, as here, the relator's claims were dismissed on a Rule

7

12(b)(6) motion based on a lack of specificity in the complaint as

8

required by Rule 9(b).”).

9

judicata from the government’s perspective.

See id. at 455 (holding that

Bell Helicopter also analyzed res
Id. at 456 (“our

10

ruling would in fact give the government further opportunity to

11

look into the allegations of the relator.”)(emphasis added). There

12

is similarly no requirement that a business notify its competitors

13

of pending litigation and/or settlements involving its allegedly

14

falsely-marked products. Champion’s attempts to expand the qui tam

15

jurisprudence to include a “competitor” exception are unavailing.

16

In Schimmels, the Ninth Circuit held that a summary judgment

17

order

18

government from bringing its own successive False Claims Act case

19

against the defendants for the same claims.

20

balanced

21

circumstances of that case:

22
23

against

to

a

relator

determine

in

that

a

qui

tam

preclusion

action

precluded

Five factors were

was

fair

under

[1] participation by the precluded party in the prior
proceeding through intervention, combined discovery,
amicus submissions, presence of counsel at hearings,
testifying as a witness, advising previous parties;

24
25

[2] the extent of congruence between the legal interests
and positions of the party to the earlier suit and those
of the precluded party;

26
27

[3] the quality of
party's interests;

28

[4]

the

burdens

representation

relitigation
15

poses

of
on

the

the
the

precluded
judicial

the

1

system; and

2

[5] the cost and harassment that relitigation poses to
the parties.

3
4

Id. at 885 (citing Southwest Airlines Co. v. Texas International

5

Airlines, Inc., 546 F.2d 84, 101 (5th Cir.), cert. denied, 434 U.S.

6

832, 98 S.Ct. 117, 54 L.Ed.2d 93 (1977).)

7

Parker has submitted substantial and undisputed evidence to

8

satisfy the Schimmels’ factors in this case.

9

factors are met because the government was provided with a copy of

10

the false marking claims advanced by Tex Pat, as well as the

11

proposed settlement and the terms of dismissal.

12

acknowledged

13

accepted settlement remuneration.

14

letter

15

Corporation, et al, Civil No. 5:10-cv-00202 (E.D. Texas), reads:

16

This letter confirms that we have received your check
numbered 5138504 in the amount [redacted] payable to John
Fargo in the settlement of the above captioned case. The
check was received on Thursday, December 23, 2010, by
Federal Express.

17
18

to

the

settlement

Parker,

headed

between

Tex

Tex

The first and second

Pat

The government
and

Parker,

and

The government’s confirmation
Pat,

LLC

v.

Parker-Hannifin

19
Decl. of R. Clark, Exh. D., Pg. 1.12
20
The endorsed settlement check, made out to “John Fargo, Comm
21
Litig[.] Branch, Civil Div[.] United States Dept[.] of Justice,”
22
reveals that the funds were deposited in a government account after
23
24
25
12

26
27
28

Mr. Robert Clark’s declaration was filed under seal on
February 4, 2011.
The sealed documents were the subject of a
status conference on February 23, 2011, when the Court ruled that
documents would remain under seal for purposes of Parker’s Rule
12(b) motion. Doc. 27.
16

1

December 22, 2010.13 The acceptance of this check by the government

2

represents satisfaction and participation in the settlement to

3

raise estoppel against the government’s knowledgeable and binding

4

role in the settlement.

5

The United States’ legal interests and positions are identical

6

as both Tex Pat and Champion seek damages based on the false

7

marking of Parker’s filter elements.

8

the Schimmels’ factors based on its competitor status.

9

misapplication is fatal to the arguments supporting the second

10
11

Champion incorrectly invokes
This

Schimmels’ factor.
The

third

factor

is

met

based

on

Tex

Pat’s

specific

12

allegations of false marking - which are identical to Champion’s -

13

and the government’s acceptance of the settlement’s terms and

14

amount.

15

merits of the false marking claims is significant given that the

16

case was dismissed with prejudice and no inequitable facts exist.

17

Patent litigations are among the most complex, intricate and

18

expensive civil actions, settlements have a “particular value.”

19

See Aro Corp. v. Allied Witan Co., 531 F.2d 1368, 1372 (6th Cir.),

20

cert. denied, 429 U.S. 862 (1976) ("Settlement is of particular

21

value

22

inordinately complex and time consuming. Settlement agreements

23

should

24

considerations so permit.").

As to the fourth factor, the burden of re-litigating the

in

patent

therefore

litigation,

be

upheld

the

nature

whenever

of

which

equitable

is

and

often

policy

25
26
27
28

13

A copy of the government's endorsed settlement check was
attached to Mr. Robert Clark's declaration (Exh. "E"), filed on
February 4, 2011. Mr. Robert Clark purportedly serves as Associate
General Counsel for Parker Hannafin Corporation.
17

1

The fifth Schimmels’ factor applies for similar reasons,

2

namely the false marking claims were resolved to the satisfaction

3

of the “first filer” (Tex Pat), the government, and the District

4

Court for the Eastern District of Texas.

5

deposited the settlement funds from the Tex Pat case, raising a

6

number of practical and procedural concerns not discussed in

7

Champion’s briefing.

The government also

8

Courts have recognized that in some circumstances a dismissal

9

with prejudice of a later filed action may not bar an earlier-filed

10

action. See, e.g., Marin v. HEW, Health Care Fin. Agency, 769 F.2d

11

590, 593 (9th Cir. 1985) (“Even without a determination which is

12

literally on the merits, a denial with prejudice may be a final

13

judgment with a res judicata effect as long as the result is not

14

unfair.”).

15

claim preclusive effect to the dismissal with prejudice would be

16

error in this case because Champion has not raised a single fact

17

demonstrating unfairness or inequity.

18

a full and fair opportunity to litigate the initial qui tam claim

19

against Parker.

20

District of Texas has claim preclusive effect in this case.

21

However, those are different cases.14

Not according

The government was afforded

The “with prejudice dismissal” from the Eastern

Champion suggests that the circumstances surrounding the Tex

22
23
24
25
26
27
28

14

See Kremer v. Chem. Constr. Corp., 456 U.S. 461, 480-81, 102
S.Ct. 1883, 72 L.Ed.2d 262 (1982) ("the judicially created doctrine
of collateral estoppel does not apply when the party against whom
the earlier decision is asserted did not have a ‘full and fair
opportunity' to litigate the claim or issue"); Clements v. Airport
Auth., 69 F.3d 321, 328 (9th Cir. 1995) ("[W]e do not give
preclusive effect to judgments rendered in proceedings that fail to
comply with the minimum standards of due process. In other words,
the party against whom preclusion is urged must have had a ‘full
and fair opportunity' to litigate his claim.").
18

1

Pat settlement be reopened and dissected.

2

settlement was “staged” and lacks transparency, submitting the

3

publicly-available settlement terms of a recent qui tam false

4

marking case in the District of Arizona.

5

public disclosure is required to finalize a qui tam settlement and

6

voluntary dismissal with prejudice, many of Champion’s general

7

concerns are recognized in Unique Product Solutions, Ltd. v.

8

Hy-Grade Valve, Inc.

9

292(b) was found to violate the Appointments and Take Care Clauses

10

of Article II of the United States Constitution by failing to give

11

the Executive Branch sufficient control over the litigation:

12

Applying the Morrison “sufficient control” analysis to
the False Marking statute, it is clear the government
lacks sufficient control to enable the President to
“take Care that the Laws be faithfully executed.” As
discussed, supra, unlike the FCA, the False Marking
statute lacks any of the statutory controls necessary to
pass Article II Take Care Clause muster. The False
Marking statute essentially represents a wholesale
delegation of criminal law enforcement power to private
entities with no control exercised by the Department of
Justice [...]

13
14
15
16
17
18
19
20
21
22
23
24

It argues that the

While it is unclear if

There, the qui tam provision of 35 U.S.C. §

Any private entity that believes someone is using an
expired or invalid patent can file a criminal lawsuit in
the name of the United States, without getting approval
from or even notifying the Department of Justice. The
case can be litigated without any control or oversight
by the Department of Justice. The government has no
statutory right to intervene nor does it have a right to
limit the participation of the relator. The government
does not have the right to stay discovery which may
interfere with the government's criminal or civil
investigations. The government may not dismiss the
action. Finally, the relator may settle the case and
bind the government without any involvement or approval
by the Department of Justice.

25
26
27
28

It is therefore essential that the government have
control over when such cases are brought, and most
importantly, how they are settled.
Such decisions
should be made by government attorneys who have no
19

1

financial stake in the outcome of the litigation or
settlement, not by private parties motivated solely by
the prospect of financial gain.

2
3
Id.
4

Champion’s arguments incorporating Unique Product Solutions’
5
reasoning are not persuasive.

District courts in the Southern

6
District of

New

York

and

Northern

District of

Illinois have

7
determined that the government maintains a sufficient level of
8
control over qui tam actions brought under Section 292(b). Public
9
Patent Found., Inc. v. GlaxoSmithKline Consumer Healthcare, L.P.,
10
2011

WL

1142917

(S.D.N.Y.

Mar.

22,

2011)

found

Section

292

11
constitutional because, “the Executive Branch is not without the
12
ability to assert its interests in a [Section 292] qui tam action.”
13
Id. at 4 (citation omitted). Simonian v. Allergan, Inc., No. 10-C14
02414, 2011 WL 1599292 (N.D. Ill. April 28 ,2011) specifically
15
profiled the government’s involvement in § 292(b) qui tam actions:15
16
17
18
19
20
21

[T]he law obliges the district court clerk to apprise the
Director of the PTO — a member of the Executive Branch —
“of an action under” Title 35 of the U.S.Code. 35 U.S.C.
§ 290.
Such notice must include, as far as known, the
names and addresses of the parties, the name of the
inventor, and the designating number of the patent upon
which the relator has brought the action. Id. A qui tam
action for false marking arises under Title 35, and so the
Court determines that, contrary to Allergan's argument, the
Executive Branch receives notice of qui tam false-marking
claims.

22
23

In addition, the government may request intervention in
false-marking cases.
See Fed. R. Civ. P. 24(b)(2).

24
15

25
26
27
28

Because the constitutionality of § 292(b) need not be
determined to resolve Parker's motion, it is unnecessary to resolve
the conflict between Unique Product Solutions and Public Patent and
Allergan. The holdings are discussed because Champion advanced the
lack of government involvement as grounds to deny the motion. This
is consonant with the district court’s duty to avoid reaching a
constitutional issue if possible.
20

1
2

Moreover, in the event that the government intervenes, the
relator may not voluntarily dismiss the case without the
government's agreeing to stipulate to the same. See Fed.
R. Civ. P. 41(a)(1)(A)(ii).

3
4
5

Id. at 5.
While

discussed

in

the

context

of

§

292(b)’s

6

constitutionality, the Public Patent and Allergan holdings belie

7

Champion’s assertions that the Tex Pat proceeding was a “sham” or

8

lacked legally acceptable levels of government engagement.16 The

9
16

10
11
12
13
14
15
16
17
18

Champion’s “government participation” arguments are
nonsensical. Champion argues that § 292(b)’s qui tam provision is
constitutional while also insisting that the Tex Pat action is
invalid because “the government’s interests were [not] adequately
represented by Tex Pat.” Champion, however, fails to distinguish
this case from the false marking claims in Public Patent and
Allergan, two cases finding that the government maintains adequate
control over § 292(b) qui tam actions. Champion further suggests
that the Court invalidate the Tex Pat settlement because Parker did
not disclose to the government how each false marking claim was
settled. Champion, however, does not cite any authority for this
position and the Court has found none.
Champion refuses to
acknowledge that the government received the settlement documents,
which included the amended complaint alleging false marking of the
‘537 and ‘993 patent numbers, reviewed them, and then approved the
Tex Pat litigation/settlement.

19
20
21
22
23
24
25
26
27

Pequignot v. Solo Cup Co., 640 F. Supp. 2d 714, a qui tam
case, stated that any arguments against § 292(b) based on policy
concerns are “addressed to the wrong forum.” The Fourth Circuit
similarly stated concerning the FCA:
[P]erhaps Congress should have taken note of the
possibility that [defendants] would be harassed by
vexatious qui tam suits in federal courts. Perhaps it
did, but decided that the benefits of the qui tam scheme
outweighed its defects. In any event, we have no
inclination or power to delve into the wisdom of the
balance Congress struck ... Congress has let loose a
posse of ad hoc deputies ... [Defendants] may prefer the
dignity of being chased only by the regular troops; if
so, they must seek relief from Congress.

28
21

1

government received a part of the settlement consideration.

2
3

The dismissal with prejudice from the Eastern District of
Texas precludes this case.17

4
5

28 U.S.C. § 1738.

Parker’s motion to dismiss is GRANTED WITH PREJUDICE as to
Champion’s false marking claims.

6
7

B.

Unfair Competition and False Advertising (Claims 3 and 4)

8

Champion alleges claims for federal law unfair competition and

9

false advertising under the Lanham Act § 43(a) and state law unfair

10

competition

11

Professions Code § 17200.

12
13

and

unfair

business

practices

under

Business

&

Champion’s third claim for violations of the Lanham Act, 15
U.S.C. § 1125(a) alleges:

14

86. Parker has attempted to suppress competition from
Champion by making false and misleading statements regarding
the Parker 2016 Filter, including that it is protected by the
'537 Patent and the '993 Patent.

15
16

87. Parker has asserted, both on the product itself and, on
information and belief, in promotional materials, that the
'537 Patent and the '993 Patent apply to the Parker 2016
Filter.

17
18
19

88. Neither the '537 Patent nor the '993 Patent apply to the
Parker 2016 Filter.

20
89. Parker’s misrepresentations regarding the applicability
of the '537 Patent and the '993 Patent to the Parker 2016
Filter are material. These misrepresentations have caused,
or are likely to cause confusion and mistake by consumers of
these products.

21
22
23
24
25
26
27
28

U.S. ex rel. Milam v. Univ. of Tex. M.D. Anderson Cancer Ctr., 961
F.2d 46, 49 (4th Cir. 1992).
17

Parker also argues that the doctrine of accord and
satisfaction bars Champion's false marking claims. Since there is
sufficient reason to grant Parker's motion to dismiss on other
grounds, these arguments need not be resolved.
22

1
2

90. Parker’s misrepresentations regarding the applicability
of the '537 Patent and the '993 Patent to the Parker 2016
Filter are material in that they influence or are likely to
influence a consumer’s purchasing decisions.

3
4
5
6
7

91. Parker’s misrepresentations regarding the applicability
of the '537 Patent and the '993 Patent to the Parker 2016
Filter is made on the filter itself, which is sold in
interstate commerce.
92. Parker has publicized such false and misleading
descriptions and representations of fact in violation of the
Lanham Act § 43(a), 15 U.S.C. § 1125(a). On information and
belief, Parker’s aforesaid acts are deliberate and willful.

8
9
10

93. Champion has suffered and, absent judicial relief, is
likely to continue to suffer injury as a result of Parker’s
false and misleading designations and representations
concerning the applicability of the '537 Patent and the '993
Patent to the Parker 2016 Filter.

11
12
13
14
15
16

94. Parker’s conduct alleged herein is irreparably damaging
to Champion and will continue to so damage Champion until
restrained by this Court, and, therefore, Champion is without
an adequate remedy at law.
95. Champion is entitled, pursuant to 15 U.S.C §§ 1117 and
1125(a), to recover its reasonable attorney’s fees and
litigation expenses incurred in connection with remedying
Parker’s
false
and
misleading
designations
and
representations concerning the applicability of the '537
Patent and the '993 Patent to the Parker 2016 Filter.

17
18
19
20
21
22

Compl. ¶¶ 86-95.
Champion’s

fourth

claim

for

violations

of

Business

&

Professions Code § 17200:
97. Parker has attempted to suppress competition by making
false and misleading statements regarding the Parker 2016
Filter, including that it has the characteristic of being
protected by the '537 Patent and the '993 Patent.

23
24

98. Parker has asserted that the '537 Patent and the '993
Patent apply to the Parker 2016 Filter.

25

99. Neither the '537 Patent nor the '993 Patent apply to the
Parker 2016 Filter.

26
27
28

100. Parker’s misrepresentations regarding the applicability
of the '537 Patent and the '993 Patent to the Parker 2016
Filter are unlawful under 35 U.S.C. § 292 and/or the Lanham
Act § 43(a), 15 U.S.C. § 1125(a).
23

1
2
3
4

101. Parker’s misrepresentations regarding the applicability
of the '537 Patent and the '993 Patent to the Parker 2016
Filter are material in that such representations cause or are
likely to cause confusion and mistake in the market in which
Parker and Champion compete, cause or are likely to cause
deception amongst consumers and other market participants,
and influence or are likely to influence the deceived
consumer’s purchasing decisions.

5
6
7
8
9

102. Parker’s misrepresentations regarding the applicability
of the '537 Patent and the '993 Patent to the Parker 2016
Filter are shown on the filter itself, which is sold in
interstate commerce.
103. Parker has further attempted to suppress competition by
changing the filtration system to prevent use of competitors’
non-infringing
replacement
filter
elements,
including
Champion’s long core adapter version.

10
11
12
13
14
15

104. Parker’s persistent and continuous acts and conduct in
incorporating features that serve no functional or aesthetic
purpose are unfair in that the economic harm flowing to
consumers and competition clearly outweighs its benefits,
constituting unfair competition pursuant to Cal. Bus. Prof.
Code § 17200.
105. Parker’s conduct as alleged above has damaged, and will
continue to damage, Champion and has resulted in losses to
Champion and an elicit gain of profit to Parker in an amount
to be proven at trial in excess of $75,000.

16
17
18

106. The harm caused by Parker’s unfair
continuing and irreparable at law. Champion
remedy at law that will compensate it
continuing and irreparable harm it will
wrongful conduct of Parker is not enjoined.

competition is
has no adequate
fully for the
suffer if the

19
20
21

Id. ¶¶ 97-106.
“Section

43(a)

of

the

Lanham

Act,

15 U.S.C.

§

1125(a),

22

prohibits, inter alia, the use of any symbol or device which is

23

likely to deceive consumers as to the association, sponsorship, or

24

approval of goods or services by another person.”

25

Int'l, 125 F.3d 806, 812 (9th Cir. 1997).

26

the Lanham Act is to protect commercial parties against unfair

27

competition.”

28

F.2d at 1108).

Wendt v. Host

“An express purpose of

Abdul-Jabbar, 85 F.3d at 410 (quoting Waits, 978

24

1

California's unfair competition law prohibits "any unlawful,

2

unfair

3

Communic'ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th

4

163, 180 (1999). "By proscribing ‘any unlawful' business practice,

5

section 17200 ‘borrows' violations of other laws and treats them as

6

unlawful

7

independently actionable."

Id. (citation omitted);

Farmers Ins.

8

Exch. v. Superior Court, 2 Cal. 4th 377, 383 (1992).

A "defendant

9

cannot be liable under § 17200 for committing unlawful business

10

practices without having violated another law." Ingles v. Westwood

11

One Broadcasting Servs., Inc., 129 Cal. App. 4th 1050, 1060 (2005)

12

(internal quotations omitted).

13

The

or

fraudulent

practices

legal

business

that

framework

the

act

or

unfair

used

to

practice."

competition

analyze

state

Cel-Tech

law

law

makes

unfair

14

competition claims is substantially the same as the framework used

15

to evaluate Lanham Act claims under federal law.

16

U.S.A., Inc. v. Toys R Us, Inc., 84 F.3d 1143, 1152 (9th Cir. 1996)

17

(“[S]tate common law claims of unfair competition and actions

18

pursuant to California Business and Professions Code § 17200 are

19

substantially congruent to claims made under the Lanham Act.”)

20

(internal citations and quotations omitted).

See Denbicare

21

Parker argues that Champion’s Lanham Act and UCL claims are

22

precluded because they are predicated on false marking claims that

23

are barred under the “first-to-file” rule.

24

Parker argues that Plaintiff cannot plead or prove the prerequisite

25

conduct that is required to state a claim.

26

Parker's

arguments

are

well-taken.

In the alternative,

To

the

extent

that

27

Champion’s claims are premised only on the false marking of the PF-

28

L2016 filter with the ‘993 and/or ‘537 patent numbers, they are
25

1

preempted. Compare Semiconductor Energy Lab. Co. v. Samsung Elecs.

2

Co.,

3

constituting inequitable conduct, without more, could be considered

4

predicate acts under federal or state RICO law, then every accused

5

infringer asserting an inequitable conduct defense would also bring

6

such a RICO counterclaim [...] [a]n additional state cause of

7

action predicated so squarely on the acts of inequitable conduct

8

would be ‘contrary to Congress' preemptive regulation in the area

9

of patent law.’”) with Rodime PLC v. Seagate Technology, Inc., 174

10

F.3d 1294, 1303-04 (Fed. Cir. 1999)(“the patent laws do not preempt

11

Rodime's

12

Seagate's alleged efforts to dissuade other disk drive companies

13

from taking a license from Rodime [...] [t]he patent laws will not

14

preempt such claims if they include additional elements not found

15

in the federal patent law cause of action and if they are not an

16

impermissible attempt to offer patent-like protection to subject

17

matter addressed by federal law.”)(citation omitted);’ accord Veto

18

Pro

19

3:08-cv-302-VLB, 2009 WL 276369, 2 (D.Conn. Feb. 5, 2009) (federal

20

patent law preempts state law claims that merely incorporate by

21

reference two counts of patent infringement and assert that the

22

infringement

23

competition under Connecticut law). Parker correctly observes that

24

Champion’s unfair competition claims are preempted if they are

25

based entirely on the allegation of false marking and unexpired

26

patent numbers.

204

Pac,

F.3d

state

LLC

1368,

law

v.

also

1382

claims

Custom

(Fed.

[...]

Cir.

Rodime

Leathercraft

constitutes

2000)(“If

unjust

based

Mfg.

the

its

Co.,

enrichment

conduct

claims

Inc.,

and

on

No.

unfair

27

Champion does not dispute this general rule, rather it asserts

28

that “courts have found that patent laws do not preempt other laws
26

1

directed to policing ‘bad faith misconduct in the marketplace.’”

2

Relying on King Tuna, Inc. v. Anova Food, Inc., No. CV-07-07451-

3

ODW-AJWx, 2011 WL 839378 (C.D. Cal. Feb. 24, 2011) and DP Wagner

4

Mfg., Inc. v. Pro Sys., Inc., 434 F. Supp. 2d 445, 461 (S.D. Tex.

5

2006), Champion argues that its unfair competition claims survive

6

because it adequately pleaded that Parker acted in “bad faith.”

7

Champion points to paragraphs 58, 59, 63, 73 and 74 of its

8

complaint

9

marketplace”:

10
11
12
13

to

support

an

allegation

of

“bad

faith

in

58. Upon information and belief, Parker knows, or
should know (by itself or by its representatives), that
the '537 Patent marked on the Parker 2016 Filter does
not apply to the Filter.
The individually packaged
Parker 2016 Filter does not include “a separate annular
end piece [that is] located in sealing relation with
the first end cap,” an element as required by the '537
Patent.

14
15
16
17

59. Upon information and belief, Parker, with knowledge
that patents have a specific scope and that a patent
confers no rights outside the scope of the patent
claims, intentionally included the '537 Patent in the
patent markings of the Parker 2016 Filter in an attempt
to deter competitors from attempting to design,
produce, market, or sell a competing filter.

18
19
20
21

63. Upon information and belief, Parker knows, or
reasonably should know, that marking the Parker 2016
Patent with false patent statements was and is illegal
under Title 35 of the United States Code.
At a
minimum, Parker had and has no reasonable basis to
believe that its marking was or is proper or otherwise
permitted under federal law.

22
23
24
25
26
27
28

73. Upon information and belief, Parker knows, or
should know (by itself or by its representatives), that
the '993 Patent marked on the Parker 2016 Filter does
not apply to the Parker 2016 Filter. The individually
packaged Parker 2016 Filter sold by Parker does not
include one or more of the following elements required
by the '993 Patent: a filter housing, a central support
core, a locking assembly, and a main spring.
74. Upon information and belief, Parker, with knowledge
that patents have a specific scope and that a patent
confers no rights outside the scope of the patent
27

the

1

claims, intentionally included the '993 Patent in the
patent markings of the Parker 2016 Filter in an attempt
to deter competitors from attempting to design,
produce, market, or sell a competing filter.

2
3
4
5

Compl. ¶¶ 58, 59, 63, 73-74.
It is unclear how paragraphs 58, 59, 63, 73 and 74 adequately

6

allege

marketplace

bad

faith

to

support

Champion’s

unfair

7

competition claims.

8

decided pre-Iqbal and paragraphs 58, 59, 63, 73 and 74 fail to

9

satisfy the applicable pleading standard.

DP Wagner Mfg., Inc. v. Pro Sys., Inc. was

See, e.g., CardioNet,

10

Inc. v. LifeWatch Corp., No. 07-C-6625, 2008 WL 567031, at 2 (N.D.

11

Ill. Feb. 27, 2008) (“Claims that allege [] false advertising under

12

the Lanham Act are subject to the heightened pleading requirements

13

of Fed. R. Civ. P. 9(b).”).18

14

alleges

15

knowledge that the patent was inapplicable to the product,” the

16

unfair competition claim survives a pleading challenge.

17

not the law, especially considering that the complaint’s only

18

factual assertions refer to Parker’s false marking of its filter

19

element with the ‘537 and ‘993 patent numbers.

20

false

Champion

marking

rejoins

was

that

According to Champion, if a party

performed

it

has

“intentionally”

adequately

or

pleaded

“with

That is

unfair

21

competition because it alleged that Parker incorporated a non-

22

essential plastic structure into its filter design to “thwart

23

competition from Champion's competing replacement filter.”

Compl.

24
25
26
27
28

18

The parties have not addressed Rule 9(b) in the context of
alleging unfair competition claims involving “bad faith” or
“fraud.”
Noteworthy is that the Federal Circuit in In re BP
Lubricants USA Inc., No. 960, 2011 WL 873147, at 2 (Fed. Cir. Mar.
15, 2011), recently held that Rule 9(b)'s particularity requirement
applied to false marking claims.
28

1

¶¶ 45-46.19 However, the “plastic structure” design allegations are

2

similarly

3

allegations fall short of the “marketplace bad faith” discussion in

4

Rodime

5

principal authority relied upon by Champion.

6

Circuit

7

plaintiff’s unfair competition claim because “[plaintiff] based is

8

claims on [defendant's] alleged efforts to dissuade other disk

9

drive companies from taking a license from Rodime.”

PLC

nonspecific

v.

held

Seagate

that

under

Iqbal;

Technology,

federal

patent

more

Inc.,

laws

critically,

174

did

F.3d

1294,

the

the

There, the Federal
not

preempt

the

Id. at 1306.

10

Based on this alleged affirmative marketplace place manipulation,

11

the Court held the unfair competition claim survived a preemption

12

challenge: “The patent laws will not preempt such claims if they

13

include additional elements not found in the federal patent law

14

cause of action and if they are not an impermissible attempt to

15

offer patent-like protection to subject matter addressed by federal

16

law.”

17

Circuit decisions similarly hold that “marketplace bad faith”

18

requires more than conclusory allegations of false marking/patent

19

infringement and alleged (and unexplained) anti-competitive design

Id. (citation omitted)(emphasis added).

Subsequent Federal

20
21
22
23
24
25
26
27
28

19

Paragraphs 45 & 46 of Champion’s complaint provide:

45. On information and belief, this plastic structure
added to the Core serves no design or engineering purpose
other than to thwart the competitive use of the long core
adapter, an otherwise non-infringing and lawfully
competing product.
46. On information and belief, Parker engineers knew that
incorporating this plastic structure served no design or
engineering
purpose,
but
instead
designed
and
incorporated this change solely to thwart competition
from Champion's competing replacement filter.
29

1

features.

See Serio-US Industries, Inc. v. Plastic Recovery

2

Technologies Corp. 459 F.3d 1311 (Fed. Cir. 2006)(holding that

3

courts “will impose [unfair competition] liability on a patentee

4

for marketplace statements only if the statements [were] made in

5

bad faith.”)(emphasis added).

6

PLC and Serio-US Industries materially differ from Champion’s

7

allegations.

The allegations/arguments in Rodime

8

At oral argument, Champion asserted that its false advertising

9

claim (Lanham Act only) survived because it alleged that Parker

10

“wrongfully and illegally” marketed its patent rights “[t]hrough

11

its product packaging and other promotions.”20

12

contention

13

allegations are conclusory, abridged and, as a result, unclear:

14

Champion fails to clearly allege that the alleged “advertisement”

15

is found inside the filter package.21 Champion also fails to allege

fails

for

three

reasons.

One,

Champion’s latest
the

advertising

16
17
18
19
20
21
22
23

20

"The elements of a Lanham Act § 43(a) false advertising
claim are: (1) a false statement of fact by the defendant in a
commercial advertisement about its own ... product; (2) the
statement actually deceived or has the tendency to deceive a
substantial segment of its audience; (3) the deception is material,
in that it is likely to influence the purchasing decision; (4) the
defendant caused its false statement to enter interstate commerce;
and (5) the plaintiff has been or is likely to be injured as a
result of the false statement, either by direct diversion of sales
from itself to defendant or by a lessening of the goodwill
associated with its products." Southland Sod Farms v. Stover Seed
Co., 108 F.3d 1134, 1139 (9th Cir. 1997) (citations omitted).

24
21

25
26
27
28

This lack of explanation concerning the “advertisement”
resulted in substantial confusion and a nearly sixty-minute oral
argument; the parties even introduced demonstrative evidence - the
actual filter box - during the Rule 12 motion hearing. Further
complicating matters, the parties’ briefing spanned several hundred
pages, many documents filed under seal, and focused on the firstto-file jurisdictional bar and In re Schimmels, 127 F.3d 875, not
30

1

how the consumer views the “advertisement” or how it directly

2

impacts consumer choice.

3

Parker’s alleged false marking of its filter element with the ‘537

4

and ‘993 patent numbers, nothing more.22

5

not meet the Iqbal pleading threshold; facts, not labels or black

6

letter restatements, plead actionable claims in federal court. See

7

Twombly, 550 U.S. at 570 (2007) (holding that a “plaintiff's

8

obligation to provide the ‘grounds' of his ‘entitlement to relief’

9

requires

more

than

labels

Two, the allegations rely solely on

and

Three, the allegations do

conclusions,

and

a

formulaic

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

the unfair competition claims. Neither party requested enlarged
page limits or extended oral argument. See E.D. Local Rule 78230(g)(“Any party that believes that extended oral argument, more
than 10 minutes per side or 20 minutes in the aggregate, will be
required shall notify the courtroom deputy clerk so that the
hearing may be rescheduled if deemed appropriate by the Court.”).
22

In a patent infringement case decided in the Northern
District of California, Hull v. Rothhammer Intern., Inc., No. C
05-03538-WHA, 2006 WL 988818 (N.D. Cal. Apr. 13, 2006), the
plaintiff's state law claims were dismissed because "the
unfair-competition claim is based on the same set of transactional
facts as the first patent infringement claim":
As a basis for the Section 17200 claim, plaintiffs
"reallege[d]
and
incorporate[d]
by
reference
the
allegations" underlying the new patent-infringement claim."
Beyond this, plaintiffs merely have alleged that "RII's
deliberate copying and imitation of Plaintiffs' training
fin devices is an act of unfair competition." Essentially,
plaintiffs have re-clothed their patent-infringement claim
under a different legal theory. "It will remain as clear
as ever that a mere change in legal theory does not create
a new cause of action."
Id. at 5 (citations omitted); see also Delano Farms Co. v. Cal.
Table Grape Comm'n, 2010 WL 2952358, at 26 (E.D. Cal. 2010)
(finding that “where a state law cause of action hinges on a
finding that implicates federal patent law (such as the scope of a
patent), the state law must yield.”)(citation omitted).

28
31

1

recitation of the elements of a cause of action will not do.”).

2

There are additional concerns as to the plausibility of Champion’s

3

arguments that need not be addressed at this time.23

4

As currently pled, Champion’s unfair competition allegations

5

are conclusory, incomplete and primarily refer to the scope of

6

Parker's false marking of its filter element with the ‘537 and ‘993

7

patent numbers.

Supreme Court authority requires that Champion

8

plead

appropriately

9

conduct undertaken by Parker that violates unfair competition laws.

10
11

facts

to

Champion has not done so.
Champion’s

identify

with

particularity

the

Parker’s motion is GRANTED.

complaint

inadequately

alleges

Lanham

Act

12

violations and unfair competition under Section 17200.

13

motion to dismiss Champions's unfair competition claims is granted

14

with leave to amend. Champion is afforded the opportunity to amend

15

its complaint to explain the basis for its Lanham Act and Section

16

17200 claims, with greater particularity and focus on Parker’s

17

alleged

unfair

18

alleged

bad

19

pleading shall conform with Rules 8 and 11 of the Federal Rules of

20

Civil Procedure.

competitive

faith

and/or

business
improper

practices,
advertising.

Parker's

including
Any

any

amended

21
22
23
24
25
26
27
28

23

It is uncertain if the "inside of the filter box" is the
same class/type of advertisement prohibited by the Lanham Act. See
Sanderson v. Spectrum Labs, Inc., 227 F.Supp.2d 1001, 1008 (N.D.
Ind. 2000)("If a written publication is not advertising material,
or distributed to the general public for the purpose of promoting
a product, it does not constitute commercial advertising under the
Lanham Act."); see also Gillette Co. v. Norelco Consumer Products
Co., 946 F.Supp. 115, 134 (D. Mass. 1996)("Statements made inside
the product's packaging, available to consumers only after the
purchase has been made, do not affect the choice to purchase, that
choice having been made at an earlier point.").
32

1

V. CONCLUSION.

2

For the reasons stated:

3

1.

4

Champion’s

false

marking

claims

against

Parker

are

DISMISSED WITH PREJUDICE;

5

2.

6

Champion’s Lanham Act claim against Parker is DISMISSED
WITHOUT PREJUDICE; and

7

3.

8

Champion’s

Section

17200

claim

against

Parker

is

DISMISSED WITHOUT PREJUDICE.

9
10

Defendant Parker shall submit a form of order consistent with,

11

and within five (5) days following electronic service of, this

12

memorandum decision.

13

Any amended complaint shall be filed within twenty (“20”) days

14

following date of electric service of this decision.

15

shall have twenty (20) days to respond.

16

IT IS SO ORDERED.

17

Dated:
hkh80h

May 16, 2011

/s/ Oliver W. Wanger
UNITED STATES DISTRICT JUDGE

18
19
20
21
22
23
24
25
26
27
28
33

Defendant