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Blenheim Group, LLC v. Golf Gifts & Gallery

November 4, 2011

BLENHEIM GROUP, LLC, PLAINTIFF,
v.
GOLF GIFTS & GALLERY, INC., ET AL. DEFENDANTS.



The opinion of the court was delivered by: Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

Plaintiff Blenheim Group, LLC filed this qui tam action against Defendants Clark Recreation Ltd., JEF Manufacturing, Golf Gifts & Gallery, Inc., and John Doe, alleging violations of the false marking statute, 35 U.S.C. § 292.*fn1 Defendant Golf Gifts has filed a motion to dismiss the complaint [26] either for failure to state a claim or because § 292 is unconstitutional. Plaintiff has not responded to the motion. For the reasons set forth below, the Court grants Defendant's motion to dismiss [26] and dismisses Plaintiff's complaint without prejudice. Plaintiff may file an amended complaint consistent with this opinion by November 23, 2011.

I. Background*fn2

According to the allegations in the complaint, Golf Gifts manufactures, sells, and advertises various products, including the "Electric Putting Partner." Plaintiff alleges "upon information and belief" that the Electric Putting Partner bears U.S. Patent Nos. 3,030,113 (the "1962 patent") and 200650 (the "1965 patent"). Plaintiff also alleges "upon information and belief" that these two patents are expired.

II. Legal Standard for Rule 12(b)(6) Motions to Dismiss

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the complaint, not the merits of the case. See Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). To survive a Rule 12(b)(6) motion to dismiss, the complaint first must comply with Rule 8(a) by providing "a short and plain statement of the claim showing that the pleader is entitled to relief" (Fed. R. Civ. P. 8(a)(2)), such that the defendant is given "fair notice of what the * * * claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Second, the factual allegations in the complaint must be sufficient to raise the possibility of relief above the "speculative level," assuming that all of the allegations in the complaint are true. E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555, 569 n.14). "[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Twombly, 550 U.S. at 562. The Court accepts as true all of the well-pleaded facts alleged by the plaintiff and all reasonable inferences that can be drawn therefrom. See Barnes v. Briley, 420 F.3d 673, 677 (7th Cir. 2005).

III. Analysis

Plaintiff filed this qui tam action under the false marking statute, which prohibits the use of expired patents in advertising a product. 35 U.S.C. § 292 provides in relevant part:

(a) * * * * 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.

(b) Any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.

35 U.S.C. § 292(a), (b). In order to establish that a defendant intended to "deceiv[e] the public," as required by section 292(a), a plaintiff must show by a preponderance of the evidence that the defendant "did not have a reasonable belief that the articles were properly marked (i.e., covered by a patent)." Clontech Labs., Inc. v. Invitrogen Corp., 406 F.3d 1347, 1352--53 (Fed. Cir. 2005). "[T]he combination of a false statement and knowledge that the statement was false creates a rebuttable presumption of intent to deceive the public." Pequignot v. Solo Cup, 608 F.3d 1356, 1362--63 (Fed. Cir. 2010).

False marking claims under § 292 are subject to Rule 9(b)'s heightened pleading standard. In re BP Lubricants USA, Inc., 637 F.3d 1307, 1310--11 (Fed. Cir. 2011) ("Permitting a false marking complaint to proceed without meeting the particularity requirements 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."). Rule 9(b) requires a plaintiff to "state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b); see also Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir. 2007) (fraud must be pled with particularity by providing the who, what, when, where, and how). Although knowledge and intent may be alleged generally, the complaint must allege "sufficient underlying facts from which a court may reasonably infer that a party acted with the requisite state of mind." Exergen Corp. v. Wal--Mart Stores, Inc., 575 F.3d 1312, 1327 (Fed. Cir. 2009).

As applied in false marking suits, Rule 9(b) requires the relator to allege that the defendant marked an unpatented item as patented with the intent to deceive the public. See Pequignot v. Solo Cup Co., 608 F.3d 1356, 1361--62 (Fed. Cir. 2010); Forest Grp., Inc. v. Bon Tool Co., 590 F.3d 1295, 1300 (Fed. Cir. 2009). Settled law holds that "the combination of a false statement and knowledge that the statement was false creates a rebuttable presumption of intent to deceive the public." Pequignot, 608 F.3d at 1362--63. Accordingly, to properly allege deceptive intent, a complaint must "provide some objective indication to reasonably infer that the defendant was aware that the patent expired" yet continued to mark the patent on its products. BP Lubricants, 637 F.3d at 1311. The Federal Circuit has identified two non-exclusive examples that would satisfy this requirement: "[A] relator can, for example, allege that the defendant sued a third party for infringement of the patent after the patent expired or made multiple revisions of the marking after expiration." Id. at 1312.

In BP Lubricants, the plaintiff filed a ยง 292 action alleging that BP Lubricants USA had marked the bottles for its CASTROL motor oil products with the numbers of expired patents. The complaint alleged "upon information and belief" that "(1) BP knew or should have known that the patent expired; (2) BP is a sophisticated company that has experience applying for, obtaining, and litigating patents; and (3) BP marked the CASTROL products with the patent numbers for the purpose of deceiving the public." 637 F.3d at 1309. The Federal Circuit held that these allegations did not meet the requirements of Rule 9(b), explaining that the plaintiff's "bare assertion [that BP is a sophisticated company] provides no more of a basis to reasonably distinguish a viable complaint than merely asserting the defendant should have known the patent [had] expired. Conclusory allegations such as this are not entitled to an assumption of truth at ...


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