Tompkins v. Mag Instrument Inc, et al
Filing
168
MEMORANDUM OPINION and ORDER. Given the dismissal of the plaintiff's false advertising claim, the Court finds there is no remaining justiciable controversy between the parties. With no remaining controversy, the plaintiff's request for de claratory judgment must also be dismissed. Accordingly, Wal-Mart Stores Inc's 156 Motion to Dismiss and Mag Instrument Inc's 157 Motion to Dismiss are GRANTED. Mag Instrument's 144 renewed Motion to Transfer is DENIED AS MOOT. Signed by Judge Michael H. Schneider on 9/9/11. (leh, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
SARAH TOMPKINS
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v.
MAG INSTRUMENT, INC., and
WAL-MART STORES, INC.
Case No. 6:11-cv-80
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Mag Instrument Inc.’s (Mag) Motion to Dismiss
Tompkins’ Third Amended Complaint Under Fed. R. Civ. P. 8, 9(b), 12(b)(1), and 12(b)(6) and
Memorandum in Support (Doc. No. 157),
Defendant Wal-Mart Stores, Inc.’s (Wal-Mart)
Motion to Dismiss Plaintiff’s Third Amended Complaint Pursuant to Rules 12(b)(6) and 9(b)
(Doc. No. 156), and Mag’s Renewed Motion to Transfer Pursuant to 28 U.S.C. § 1404(a) and
Brief in Support (Doc. No. 144). The Court, having fully considered the parties’ arguments, the
undisputed facts, and the applicable law, hereby GRANTS both Mag’s and Wal-Mart’s
respective motions to dismiss (Doc. Nos. 157 & 156) and DENIES AS MOOT Mag’s motion to
transfer (Doc. No. 144).
I.
Background
Relator Sarah Tompkins (Tompkins) brings this qui tam action in her individual capacity
for alleged violations under 35 U.S.C. § 292 for false patent advertising. Section 292 prohibits
advertising an unpatented product as patented for purposes of deceiving the public. 35 U.S.C. §
292(a). Tompkins alleges that Defendants engaged in false patent marking by advertising and
marketing Mag’s Mini-Maglite flashlights as having a “patented candle mode.” Mag is the
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manufacturer of the flashlights, while Wal-Mart advertises and sells the accused products
through its online website. Tompkins specifically alleges that Wal-Mart falsely advertises and
markets Mag’s products on its website as having patented features when no patents exist.
Tompkins further requests a declaration of patent invalidity under the Declaratory
Judgment Act, 28 U.S.C. § 2201, for Mag’s United States Patent No. D530,438. Tompkins
contends that the patent is invalid because it is a design patent with a claimed design that
contains only functional features.
In seeking dismissal, Wal-Mart argues that Tompkins’ pleadings are insufficient under
the heightened pleading standard of Rule 9(b). Mag also attacks the constitutionality of 35
U.S.C. § 292. Finally, Mag challenges Tompkins’ standing to request a declaratory judgment.
II.
Legal Standard
Motions to dismiss for failure to state a claim are “viewed with disfavor, and are rarely
granted.” Lormand v. US Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009) (internal quotation
omitted). The Court utilizes a “two-pronged approach” in considering a motion to dismiss.
Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009). First, the Court identifies and excludes legal
conclusions that “are not entitled to the assumption of truth.” Id. Second, the Court considers the
remaining “well-pleaded factual allegations.” Id. The Court must accept as true all facts alleged
in a plaintiff’s complaint, and the Court views the facts in the light most favorable to a plaintiff.
In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). A plaintiff’s complaint
survives a defendant’s Rule 12(b)(6) motion to dismiss if it includes facts sufficient “to raise a
right to relief above the speculative level.” Id. (quotations and citations omitted). In other words,
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the Court must consider whether a plaintiff has plead “enough facts to state a claim to relief that
is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
III.
Discussion
A. False Marking
The false marking statue provides, in relevant part, that:
Whoever marks upon, or affixes to, or uses in advertising in connection with any
unpatented 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. Accordingly, in order to successfully bring a false patent advertising claim, a
relator must show: (1) the advertising of an unpatented article; and (2) an intent to deceive the
public. See Hollander v. Timex Grp. USA, Inc., Civil Action No. 10-429, 2011 WL 1399806, at
*4 (E.D. Pa. Apr. 13, 2011); Forest Grp., Inc. v. Bon Tool Co., 590 F.3d 1295, 1300 (Fed. Cir.
2009). “Intent to deceive is a state of mind arising when a party acts with sufficient knowledge
that what it is saying is not so and consequently that the recipient of its saying will be misled into
thinking that the statement is true.” Clontech Labs., Inc. v. Invitrogen Corp., 406 F.3d 1347,
1352 (Fed. Cir. 2005). To establish knowledge of falsity, a relator must demonstrate “that the
party accused of false marking did not have a reasonable belief that the articles were properly
marked (i.e., covered by a patent).” Id. at 1352–53. Without such proof, there can be no liability
under the statute. Id. at 1353.
Recently, the Federal Circuit held “that Rule 9(b)’s particularity requirement applies to
false marking claims and that 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.” In re BP Lubricants USA Inc., 637 F.3d 1307, 1309 (Fed.
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Cir. 2011). Specifically, “a pleading that simply avers the substantive elements of a claim
sounding in fraud or mistake, without setting forth the particularized factual bases for the
allegations, does not satisfy Rule 9(b).” Id. at 1311 (citing Exergen Corp. v. Wal-Mart Stores,
Inc., 575 F.3d 1312, 1326–27 (Fed. Cir. 2009)). Knowledge and intent may be pleaded generally
and on information and belief. Id. But to satisfy the requirements of 9(b), a relator must “allege
sufficient underlying facts from which a court may reasonably infer that a party acted with the
requisite state of mind.” Id. (quoting Exergen, 575 F.3d at 1327). The complaint must give
“some objective indication to reasonably infer” that a defendant acted with knowledge of the
misrepresentation. Id.
Tompkins’ complaint fails to allege particularized facts that support a reasonable
inference that Defendants advertised the accused products with the requisite intent. The
complaint contains only generalized allegations that Defendants acted with an intent to deceive
the public. The Federal Circuit specifically rejected such allegations in BP Lubricants. Id. at
1309.
Tompkins’ response highlights her allegations that she believes satisfy Rule 9(b). First,
Tompkins points to the allegation that Mag’s Mini-Maglite was introduced over twenty-five
years ago and has at all times included a “candle mode.” Therefore, according to Tompkins, any
patent claiming to cover this feature is expired. Tompkins also contends that despite a diligent
search, she was unable to locate any unexpired patent which could reasonably be believed to
cover the “candle mode” function. However, Mag presented two unexpired patents which it
believes covers the disputed feature.
Next, Tompkins notes her allegation that Defendants continue to advertise product
features as patented even after being served in this lawsuit. Tompkins argues this placed
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Defendants on notice of their alleged violations. Further, Tompkins points to her allegation that
Wal-Mart had actual knowledge that the “candle mode” function was not covered by valid
patents. Similarly, Tompkins maintains that Wal-Mart advertises the accused products “under a
policy of refusing to confirm the patent status of products advertised as patented and with
knowledge of a high likelihood that at least a significant number of the thousands of products
advertised by them as being patented are not patented.” Compl. at ¶ 13.
In light of these allegations, the Court finds that Tompkins’ complaint fails under Rule
9(b) because it does not provide sufficient underlying facts from which the Court can reasonably
infer that Defendants acted for the purposes of deceiving the public. At most, Tompkins’
allegations amount to nothing more than a recitation that Defendants are sophisticated
companies. Such a conclusory allegation, without a factual foundation, is insufficient under Rule
9(b). In re BP Lubricants, 637 F.3d at 1312 (rejecting as insufficient the bare allegation that a
defendant is a sophisticated company).
Similarly, the Court is unable to infer the requisite intent from Tompkins’ assertion that
Wal-Mart has a policy of refusing to confirm the patent status of its advertised products. At most,
such an allegation suggests that Wal-Mart acted negligently. Under 35 U.S.C. § 292, there is no
action for negligently advertising a product if it was not done for the purpose of deceiving the
public. See Pequignot v. Solo Cup Co., 608 F.3d 1356, 1365 (Fed. Cir. 2010) (“[L]eaving the
expired patent numbers on its products after the patents had expired, even knowingly, does not
show a ‘purpose of deceiving the public.’”); In re BP Lubricants, 637 F.3d at 1311 (“Permitting
a false marking complaint to proceed without meeting the particularity requirement of Rule 9(b)
would sanction discovery and adjudication of claims that do little more than speculate that the
defendant engaged in more than negligent action.”). Ultimately, Tompkins’ assertion that Wal-
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Mart had a policy of refusing to confirm patents does not support an inference that Wal-Mart
engaged in the alleged conduct for the purpose of deceiving the public.
Consequently, Tompkins’ complaint is only based upon generalized allegations—
allegations which were similarly rejected in BP Lubricants. As the Federal Circuit explained,
Rule 9(b) “acts as a safety valve to assure that only viable claims alleging fraud or mistake are
allowed to proceed to discovery. By eliminating insufficient pleadings at the initial stage of
litigation, Rule 9(b) prevents relators using discovery as a fishing expedition.” In re BP
Lubricants, 637 F.3d at 1310. Given the totality of the circumstances and the fact that Tompkins’
complaint presents no objective factual basis for the Court to reasonably infer that Defendants
acted with the requisite intent, Tompkins’ claim for false marking must be dismissed.
As an alternative to dismissal, Tompkins requests the Court to grant her leave to amend
her pleadings. Under Fed. R. Civ. P. 15(a)(2), “[t]he court should freely give leave [to amend]
when justice so requires.” It is within the Court’s sound discretion to determine whether to grant
leave to amend the pleadings. Foman v. Davis, 371 U.S. 178, 182 (1962). The Court can
consider a number of factors, “including the futility of amending, the party’s repeated failure to
cure deficiencies by previous amendments, undue delay, or bad faith.” United States ex rel.
Marcy v. Rowan Cos., Inc., 520 F.3d 384, 392 (5th Cir. 2008).
Furthermore, “outright refusal to grant leave to amend without a justification . . . is
considered an abuse of discretion.” United States ex rel. Adrian v. Regents of the Univ. of Cal.,
363 F.3d 398, 403 (5th Cir. 2004). Nevertheless, a court should deny requests to amend a
complaint if it determines that the proposed change “clearly is frivolous, advancing a claim or
defense that is legally insufficient on its face, or that fails to include allegations to cure defects in
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the original pleading.” 6 Charles A. Wright, et al., Federal Practice and Procedure § 1487 (3d ed.
2011).
Since filing her original complaint, Tompkins has filed three amended complaints. The
most recent was filed nearly two months after the Federal Circuit issued its decision in BP
Lubricants. The Court is unconvinced that allowing Tompkins another opportunity to amend her
pleadings would cure her complaint’s deficiencies. Accordingly, Tompkins’ false marking claim
must be dismissed with prejudice.
B. Declaratory Judgment
In addition to challenging Tompkins’ claim for false patent advertising, Mag argues that
Tompkins lacks standing to seek declaratory judgment of patent invalidity in regards to Mag’s
asserted patent.
The first element of a false advertising claim is that the accused product is unpatented.
See Bon Tool Co., 590 F.3d at 1300. In an effort to establish this element, Tompkins’ complaint
requests a declaration that Mag’s asserted patent is invalid.
Under the Declaratory Judgment Act, a party requesting a declaration of legal rights must
be a party to an “actual controversy.” 28 U.S.C. § 2201(a). Mag alleges that no actual
controversy exists because there are no adverse legal interests between the parties in this case.
Based upon the dismissal of Tompkins’ false patent advertising claim, the Court agrees.
A dispute must be “‘definite and concrete, touching the legal relations of parties having
adverse legal interests’; and that it be ‘real and substantial’ and ‘admi[t] of specific relief through
a decree of a conclusive character, as distinguished from an opinion advising what the law would
be upon a hypothetical state of facts.’” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127
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(2007) (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240–41 (1937)). In determining
whether an actual controversy exists, the Court applies a totality of the circumstances test. Teva
Pharm. USA, Inc. v. Novartis Pharm. Corp., 482 F.3d 1330, 1341–42 (Fed. Cir. 2007).
Given the dismissal of Tompkins’ false advertising claim and based upon the entirety of
the circumstances, the Court finds there is no remaining justiciable controversy between the
parties. Tompkins’ entire basis for requesting declaratory relief is inextricably linked with her
allegation that Defendants engaged in false patent advertising. Outside of this claim, Tompkins’
asserts no other legal interest adverse to either Defendant. With no remaining controversy
between the parties, Tompkins’ request for declaratory judgment must also be dismissed.
.
IV.
Conclusion
For the foregoing reasons, Mag’s motion to dismiss (Doc. No. 157) and Wal-Mart’s
motion to dismiss (Doc. No. 156) are hereby GRANTED. Furthermore, Mag’s renewed motion
to transfer (Doc. No. 144) is DENIED AS MOOT.
It is SO ORDERED.
SIGNED this 9th day of September, 2011.
____________________________________
MICHAEL H. SCHNEIDER
UNITED STATES DISTRICT JUDGE
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