Stauffer v. Brooks Bros. Inc.

• Court: U.S. Court of Appeals — Federal Circuit
• Citation: Stauffer v. Brooks Bros. Inc., 619 F.3d 1321 (Fed. Cir. 2010)
• Decision Date: 31 August 2010
• Docket Number: Nos. 2009-1428, 2009-1430, 2009-1453.,s. 2009-1428, 2009-1430, 2009-1453.
• Parties: Raymond E. STAUFFER, Plaintiff-Appellant, v. BROOKS BROTHERS, INC. and Retail Brand Alliance, Inc., Defendants-Appellees, United States, Movant-Cross Appellant.

619 F.3d 1321

Raymond E. STAUFFER, Plaintiff-Appellant,

v. BROOKS BROTHERS, INC. and Retail Brand Alliance, Inc., Defendants-Appellees,United States, Movant-Cross Appellant.

Nos. 2009-1428, 2009-1430, 2009-1453.

United States Court of Appeals,Federal Circuit.

Decided Aug. 31, 2010.

Raymond E. Stauffer, of Chatham, New Jersey, pro se.

Stephen L. Baker, Baker & Rannells, PA, of Raritan, New Jersey, argued for defendants-appellees. With him on the brief were Neil B. Friedman And Ryan A. McGonigle.

Douglas N. Letter, Appellate Litigation Counsel, Civil Division, United States Department of Justice, of Washington, DC, argued for movants-cross appellants. With him on the brief was Tony West, Assistant Attorney General.

Thomas P. Steindler, McDermott Will & Emery LLP, of Washington, DC, for amicus curiae CIBA Vision Corporation. With him on the brief were M. Miller Baker and Jeffrey W. Mikoni.

Bryan P. Collins, Pillsbury Winthrop Shaw Pittman LLP, of McLean, Virginia, for amicus curiae Stanley Black & Decker, Inc., et al. With him on the brief was Jack S. Barufka.

Before RADER, Chief Judge, and LOURIE and MOORE, Circuit Judges.

LOURIE, Circuit Judge.

Raymond E. Stauffer and the government appeal from the decision of the United States District Court for the Southern District of New York dismissing Stauffer's false marking qui tam action for lack of standing. Stauffer v. Brooks Bros., Inc., 615 F.Supp.2d 248 (S.D.N.Y.2009) (“ Standing Op.”). The government also appeals from the court's denial of its motion to intervene. Stauffer v. Brooks Bros., Inc., No. 08-cv-10369, 2009 WL 1675397, 2009 U.S. Dist. Lexis 51166 (S.D.N.Y. June 15, 2009) (“ Intervention Op.”). Because Stauffer had standing to bring his claim, and because the government had a right to intervene, we reverse on both grounds.

Background

Brooks Brothers, Inc. and its parent Retail Brand Alliance, Inc. ¹ (collectively, “Brooks Brothers”) manufacture and sell men's bow ties. Some of the Brooks Brothers bow ties contain an “Adjustolox” mechanism that is manufactured by a third party, J.M.C. Bow Company, Inc. (“J.M.C.Bow”), and are marked with, inter alia, U.S. Patent Nos. 2,083,106 and 2,123,620, which expired in 1954 and 1955, respectively. Standing Op., 615 F.Supp.2d at 251, 255.

Stauffer is a patent attorney who has purchased some of the marked bow ties. Id. at 251. In December 2008, Stauffer brought a qui tam action under 35 U.S.C. § 292 alleging that Brooks Brothers had falsely marked its bow ties. Section 292, the “false marking” statute, provides that:

(a) ...

Whoever marks upon, or affixes to ... any unpatented article, the word “patent” or any word or number importing that the same is patented, for the purpose of deceiving the public

...

Shall 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.

Id. (emphasis added).

Brooks Brothers moved to dismiss Stauffer's complaint pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of standing and pursuant to Rule 12(b)(6) for failure to allege an intent to deceive the public with sufficient specificity to meet the heightened pleading requirements for claims of fraud. The district court granted Brooks Brothers' motion pursuant to Rule 12(b)(1), concluding that Stauffer lacked standing. According to the court, all plaintiffs, including qui tam plaintiffs (or “relators”), must establish (1) that they have suffered an injury in fact (2) that is causally connected to the defendant, and (3) that is likely to be redressed by the court. Standing Op., 615 F.Supp.2d at 253. The court further noted that the qui tam provision of section 292(b) operates as a statutory “assignment” of the rights of the United States, so Stauffer must prove that the government, rather than he, satisfies the requirements for standing, including that it has suffered an injury in fact. Id.

The district court held that Stauffer had not sufficiently alleged that the United States had suffered an injury in fact from Brooks Brothers' false marking. According to the court, Stauffer's allegations of Brooks Brothers' conduct wrongfully quelling competition were too conjectural or hypothetical to constitute an injury in fact. Id. at 254-55. The court added that even the hypothetical harm to competitors was lessened by the fact that J.M.C. Bow provides the marked Adjustolox mechanism to many of Brooks Brothers' competitors, in addition to providing it to Brooks Brothers. Id. at 255.

The district court further held that Stauffer's assertions that he himself was injured were not contained in the complaint and were thus not properly alleged. Id. at 255 n. 7. Moreover, according to the court, those assertions would only support an injury to Stauffer, not to the public, and thus would not be a basis for finding standing. Id. Because the court found a lack of standing, it did not reach the merits of Brooks Brothers' Rule 12(b)(6) motion to dismiss for failure to allege an intent to deceive the public with sufficient specificity. Id. at 251 n. 1.

After the district court's decision on standing, Standing Op., 615 F.Supp.2d 248, the government moved to intervene, arguing that the court's opinion called into question the constitutionality of section 292 and that the government was therefore entitled to defend the statute pursuant to Rule 24(a)(1) and 28 U.S.C. § 2403. The government also argued that its interest in seeing the patent laws enforced gave it a right to intervene pursuant to Rule 24(a)(2) and that it should be permitted to intervene pursuant to Rule 24(b)(1)(B). The court denied the motion, finding no basis for the government to intervene as of right and finding the showing for permissive intervention insufficient. Intervention Op., 2009 WL 1675397, 2009 U.S. Dist. Lexis 51166.

The district court reasoned that it had not decided any constitutional issue that would give the government the right to intervene pursuant to Rule 24(a)(1), as it had only decided the case on its facts. Id., 2009 WL 1675397, *2-3, 2009 U.S. Dist. Lexis 51166 at *8-9. The court added that, contrary to the government's argument, it was entitled to rule on Brooks Brothers' motion before the government's deadline to decide whether it would seek to intervene had expired, as the court had not held the statute unconstitutional. Id., 2009 WL 1675397, *3 n. 4, 2009 U.S. Dist. Lexis 51166 at *9-10 n. 4. The court further found that the government did not have a sufficient interest in the action to have a right to intervene pursuant to Rule 24(a)(2) because the court had denied standing only to Stauffer, not to the United States itself. Id., 2009 WL 1675397, *3-4, 2009 U.S. Dist. Lexis 51166 at * 12.

Finally, the district court denied permissive intervention pursuant to Rule 24(b)(1)(B), finding that the government's interest in the outcome of the case was premised on issues and legal questions not actually presented to or decided by the court. Id., 2009 WL 1675397, *4, 2009 U.S. Dist. Lexis 51166 at *13-14. The court further reasoned that Brooks Brothers would be prejudiced by a post-judgment intervention that would impose needless costs and delay. Id., 2009 WL 1675397, *4-5, 2009 U.S. Dist. Lexis 51166 at *14-15.

Stauffer timely appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

Discussion

A. Stauffer's Standing

The government argues that the district court erred in dismissing Stauffer's suit for lack of standing based on a lack of injury in fact. ² The government asserts that Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000), controls the outcome in this case, and that decision held that a qui tam relator has standing without an injury to the relator himself, a proposition that, according to the government, the court stated but did not follow. Furthermore, the government argues that the United States' interest in seeing its laws enforced itself leads to an injury in fact when those laws are not obeyed. In other words, according to the government, in enacting the false marking statute, Congress determined that such conduct is harmful and should be prohibited, which is a sufficient injury in fact to confer standing on the government and therefore on Stauffer as the government's implicit assignee of the action to recover for injury. Finally, the government asserts that even if a proprietary injury involving the federal treasury's being directly diminished were required under Vermont Agency, as opposed to solely a sovereign injury based on the United States' interest in seeing its laws enforced, the United States has a proprietary interest in receiving half of the recovery in a suit under section 292.

Stauffer separately argues that, according to this court's decision in Clontech Labs., Inc. v. Invitrogen Corp., 406 F.3d 1347 (Fed.Cir.2005), the public is injured by false marking, which misleads and wrongly imposes the costs of evaluating patents on the public. Thus, he argues, the public has suffered an injury in fact sufficient to confer standing. Stauffer adds that his complaint alleged that Brooks Brothers had “wrongfully quelled competition with respect to ... bow tie products thereby causing harm to the economy of the United States.” J.A. 66, para. 129. That, he argues, further demonstrates an injury to the public. Stauffer also asserts that he has individually been injured as a member of the public, thereby demonstrating another injury to the public.

Brooks Brothers responds that standing is not automatically conferred on qui tam relators, but that they must demonstrate standing. Brooks Brothers adds that Stauffer's conclusory allegations that he was personally injured are insufficient to establish an injury, and the court properly looked outside the pleadings to assure itself that it lacked subject matter...