Frank's Electrical Service v. Philips Electronics North America Corporation
Filing
44
ORDER GRANTING in part 19 SEALED MOTION To Dismiss Plaintiff's Complaint Pursuant To Fed. R. CIV. P. 12(B)(1) And 12(B)(6) filed by Philips Electronics North America Corporation, 20 MOTION to Dismiss Plaintiff's Complaint Pursuant To Fed. R. CIV. P 12(B)(1) And 12(B)(6) filed by Philips Electronics North America Corporation. Complaint dismissed without prejudice, plaintiff given 21 days to amend. Signed by Chief Judge David R. Herndon on 7/18/11. (kls2)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
FRANK’S ELECTRICAL SERVICE,
Plaintiff,
v.
No. 11-cv-145-DRH
PHILIPS ELECTRONICS NORTH
AMERICA CORPORATION, d/b/a
Lightolier and Lightolier Controls,
Defendant.
ORDER
HERNDON, Chief Judge:
Before
the
Court
is
defendant
Philips
Electronics
North
America
Corporation’s motion to dismiss (Docs. 19 [sealed] & 20). Defendant argues (1)
plaintiff’s claims are barred by prior litigation; (2) plaintiff has failed to plead its
claim with sufficient particularity as required by Federal Rule of Civil Procedure
9(b); and (3) the false patent marking statute, 35 U.S.C. § 292, is
unconstitutional. For the following reasons, the motion to dismiss is GRANTED
in part.
Plaintiff Frank’s Electrical Service’s complaint (Doc. 2) is dismissed
without prejudice for failure to comply with the pleading requirements of Federal
Rule of Civil Procedure 9(b). Plaintiff shall have twenty-one days from the date
this Order is entered to file an amended complaint that comports with the
pleading requirements in Rule 9(b). Defendant shall have fourteen days from the
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date the amended complaint is filed to file a responsive pleading. Defendant’s
motion to dismiss with regard to the constitutional argument and res judicata
argument is denied without prejudice since the Court is granting leave to amend.
Background
On February 23, 2011, plaintiff filed its twenty-seven count qui tam
complaint (Doc. 2) alleging defendant violated the false patent marking statute by
falsely marking articles with expired patents for the purposes of deceiving its
competitors and the public into believing that such articles are covered by the
falsely marked patents. On May 16, 2011, defendant filed its motion to dismiss
(Docs. 19 [sealed] & 20). Plaintiff responded on June 20, 2011 (Docs. 31 & 38
[sealed]), and defendant replied on June 30, 2011 (Docs. 34 [sealed] & 35). The
United States intervened in the lawsuit because of the constitutional dispute, and
filed its response to the motion’s constitutional arguments on July 11, 2011 (Doc.
40).
Defendant’s motion to dismiss argues in part the complaint does not state
its claim with sufficient particularity as required by Federal Rule of Civil
Procedure 9(b). Specifically, defendant asserts (1) plaintiff has failed to plead
defendant acted with intent to deceive the public, as the complaint does not
contain specific facts indicating the defendant has engaged in more than negligent
action, and (2) plaintiff has failed to plead defendant has “marked” its products
within the meaning of the false marking statute, as the complaint does not claim
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specific facts showing the patent markings were on the products themselves or the
packaging for those products.
Plaintiff argues the complaint is properly pled because it contains specific
instances of marking of expired patents and knowledge of that expiration.
Plaintiff notes defendant does not contest the false markings.
Plaintiff asserts
defendant’s knowledge of the false markings and intent to deceive is evidenced by
a prior lawsuit; a provision in defendant’s annual report indicating the annual
tracking and evaluation of its patents; and the “threat” of litigation on expired
patents found on some of defendant’s brochures, websites, and product
specifications.
Law & Analysis
Federal Rule of Civil Procedure 9(b) provides “a party must state with
particularity the circumstances constituting fraud or mistake.
Malice, intent,
knowledge, and other conditions of a person’s mind may be alleged generally.”
Rule 9(b) applies to false marking claims under 35 U.S.C. § 292.
In re BP
Lubricants USA Inc., 637 F.3d 1307, 1309 (Fed. Cir. 2011). The Federal Circuit
in BP Lubricants held that, under Rule 9(b), “a complaint alleging false marking
is insufficient when it only asserts conclusory allegations that a defendant is a
‘sophisticated company’ and ‘knew or should have known’ that the patent
expired.” Id. To satisfy Rule 9(b), although knowledge and intent may be averred
generally and a plaintiff may plead upon information and belief, the complaint
must contain sufficient underlying facts from which a court may reasonably infer
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that the defendant acted with the requisite state of mind.
Id. at 1311 (citing
Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1327 (Fed. Cir. 2009)).
To allege the requisite intent to deceive in the § 292 context, the complaint must
“provide some objective indication to reasonably infer that the defendant was
aware that the patent expired.”
BP Lubricants, 637 F.3d at 1311.
As to the
rebuttable presumption of intent to deceive the public recognized by the Federal
Circuit in Pequignot v. Solo Cup Co., 608 F.3d 1365 (Fed. Cir. 2010), the Court
in BP Lubricants found:
This court agrees that the Pequignot presumption informs the
determination of whether a false marking plaintiff has met Rule 9(b).
However, as we noted in Pequignot, ‘[t]he bar for proving deceptive
intent [in false marking cases] is particularly high,’ requiring that the
relator show ‘a purpose of deceit, rather than simply knowledge that
a statement is false.’ That relator pled the facts necessary to activate
the Pequignot presumption is simply a factor in determining whether
Rule 9(b) is satisfied; it does not, standing alone, satisfy Rule 9(b)’s
particularity requirement.
BP Lubricants, 637 F.3d at 1313 (quoting Pequignot, 608 F.3d at 1362-63
(internal citations omitted)).
The Federal Circuit determined that because the
relator’s complaint “provided only generalized allegations rather than specific
underlying facts from which [the Court could] reasonably infer the requisite
intent, the complaint failed to meet the requirements of Rule 9(b).”
BP
Lubricants, 637 F.3d at 1312. “Permitting a false marking complaint to proceed
without meeting the particularity requirement of Rule 9(b) would sanction
discovery and adjudication for claims that do little more than speculate that the
defendant engage in more than negligent action.” Id. at 1311.
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The false marking statute says that “Whoever marks upon, or affixes to, or
uses in advertising in connection with any article the word ‘patent’ or any word or
number importing that the same is patented for the purpose of deceiving the
public . . . [s]hall be fined not more than $500 for every such offense.” 35 U.S.C.
§ 292(a). Plaintiff’s current complaint alleges only false marking, not affixing or
advertising.
The plain language of that statute indicates the phrase “mark[ed]
upon” requires the patent markings be either on the product itself or the
packaging for that product. See Pequignot, 608 F.3d at 1365 (finding markings
on the packaging of an item to be subject to the false marking statute); Oakley,
Inc. v. Bugaboos Eyewear Corp., 757 F. Supp. 2d 1050, 1055-56 (S.D. Cal.
2010) (agreeing with the plain language interpretation of “mark[ed] upon”).
Here, plaintiff’s complaint provided examples of allegedly false markings on
current specifications of the products, or on the product brochures, which may be
found online.
Because of the markings on the specifications, brochures or
internet, plaintiff alleges defendant marks its products. However, plaintiff offers
no examples of this alleged marking.
Because the phrase “mark[ed] upon”
requires marking on the product or packaging itself, plaintiff’s allegations are
insufficient under Rule 9(b).
Furthermore, plaintiff has similarly failed to plead intent to deceive with
requisite specificity.
Plaintiff’s claims that defendant’s knowledge of the false
markings and intent to deceive are evidenced by a prior lawsuit; a provision in
defendant’s annual report indicating the annual tracking and evaluation of its
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patents; and the “threat” of litigation on expired patents found on some of
defendant’s brochures, websites, and product specifications, are not sufficient to
show intent to deceive. They may suggest negligence or that defendant should
have known the patents expired, but the allegations are not indicative of proof of
knowledge of falsity as required by Rule 9(b) and BP Lubricants.
Conclusion
Therefore defendant’s motion to dismiss is GRANTED in part. Plaintiff’s
complaint is dismissed without prejudice for failure to comply with the pleading
requirements of Federal Rule of Civil Procedure 9(b). Plaintiff shall have twentyone days from the date this Order is entered to file an amended complaint that
comports with the pleading requirements in Rule 9(b), as explained by BP
Lubricants.
Defendant shall have fourteen days from the date the amended
complaint is filed to file a responsive pleading. Defendant’s motion to dismiss
with regard to the constitutional argument and res judicata argument is denied
without prejudice since the Court is granting leave to amend.
IT IS SO ORDERED.
Signed this 18th day of July, 2011.
Digitally signed by David R.
Herndon
Date: 2011.07.18 15:53:07
-05'00'
Chief Judge
United States District Court
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