Addressing the American Invents Acts’s (AIA’s) impact on false marking, the U.S. Court of Appeals for the Federal Circuit found that Congress’ retroactive elimination of the qui tam provision in the false marking statute did not violate the due process clause.  Brooks v. Dunlop Mfg. Inc., Case No. 12-1164 (Fed. Cir., Dec. 13, 2012) (Prost, J.).

Under the AIA, the false marking statute, Section 292, was amended to eliminate the qui tam provision, limit suits to only the United States and those who suffered a competitive injury and exempt the marking of products with expired patents. The AIA provided that these amendments would apply to all pending cases.

Kenneth C. Brooks filed suit in district court alleging that Dunlop falsely marked its guitar string winders with an expired and invalidated patent.  After passage of the AIA, Dunlop moved to dismiss the case, arguing that Brooks no longer had standing because he could no longer recover a statutory penalty and failed to allege a competitive injury.  The court agreed and entered final judgment.  Brooks appealed.

On appeal, Brooks argued that Congress violated the due process clause by retroactively eliminating the qui tam provision, because the retroactive elimination was arbitrary and irrational, as it was tantamount to sanctioning Dunlop’s public deception and indemnifying its violation of Section 292.  The Federal Circuit disagreed, stating that the AIA replaced the qui tam action with a compensatory action for any person who suffered a competitive injury and, therefore, the AIA did not sanction public deception.

Brooks also argued that Congress’ retroactive elimination of the qui tam provision was not justified by a rational legislative purpose.  The Federal Circuit found that in making the elimination of the qui tam provision retroactive, Congress was attempting to reduce litigation expenses, rein in abuses and eliminate a potential constitutional issue regarding the qui tam provision.  Accordingly, the Federal Circuit found that the retroactive application of the amended false marking statute to pending actions was a rational means of pursuing a legitimate legislative purpose.

Finally, Brooks argued that by filing the lawsuit against Dunlop, he entered into a binding contract with the United States that was repudiated when Congress retroactively eliminated the qui tam provision.  Brooks claimed that by repudiating its contract, Congress violated the due process clause.  The Federal Circuit disagreed, reasoning that because there was no financial obligation imposed on the United States and there was nothing in Section 292 that created a contract, there was no contract formed between Brooks and the United States.  Moreover, the Federal Circuit reasoned that because qui tam plaintiffs have no vested rights, Brooks had no contractual or vested right with the United States.