Stauffer v. Brooks Brothers, Inc.

AIA Amendments to False-Marking Statute Eliminating Qui Tam Provision Do Not Constitute an Unconstitutional Pardon


July 10, 2014


Last Month at the Federal Circuit - August 2014

Judges: Lourie, Schall (author), Moore

[Appealed from: S.D.N.Y., Judge Stein]

In Stauffer v. Brooks Bros. Group, No. 13-1180 (Fed. Cir. July 10, 2014), the Federal Circuit affirmed the district court’s dismissal of Raymond E. Stauffer’s false-marking suit against Brooks Brothers, Inc. (“Brooks Brothers”), holding that Stauffer lacked standing due to the elimination of the qui tam provision of the statute by the America Invents Act (“AIA”).

Stauffer, a pro se plaintiff, brought a qui tam action against Brooks Brothers under the then-extant version of the false-marking statute, 35 U.S.C. § 292 (2006), claiming that Brooks Brothers marked its bow ties with long-expired patent numbers. While the case was pending, the President signed into law the AIA, which eliminated the false-marking statute’s qui tam provision, changing the law so that only a “person who has suffered a competitive injury” may bring a claim. Slip op. at 3 (quoting AIA § 16(b)(2)). Additionally, the AIA expressly stated that marking a product with an expired patent is not a false-marking violation and that the amendments applied to all pending cases.

Acknowledging that he no longer had standing to pursue his lawsuit, Stauffer presented two constitutional challenges to the retroactive application of the AIA amendments. First, Stauffer argued that, because marking a product with an unexpired patent was a criminal violation before enactment of the AIA, the amendments amounted to an unconstitutional pardon by Congress that usurped the President’s pardon power and violated the doctrine of separation of powers. Second, Stauffer argued that the AIA amendments violated the common-law principle that prohibits the use of a pardon to vitiate a qui tam action once the action has commenced. The district court rejected both arguments and dismissed the case for lack of standing. Stauffer appealed.

On appeal, the Federal Circuit affirmed. Before addressing the merits of Stauffer’s appeal, the Court first resolved a jurisdictional question raised by the government as intervenor regarding whether Stauffer had standing to make his pardon-power argument. Disagreeing with the government that a favorable decision could not redress Stauffer’s injury, the Court held that Stauffer had standing to raise his constitutional arguments. According to the Court, Stauffer sought to establish that Congress (1) carried out an unconstitutional pardon when it amended the false-marking statute to permit marking with expired patent numbers, and (2) could not have constitutionally eliminated the ability of a qui tam plaintiff to enforce false-marking violations. The Court concluded that were Stauffer to win on both issues, “it is likely rather than speculative that a favorable decision would redress his alleged injury.” Id. at 10-11.

Turning to the merits of Stauffer’s appeal, the Federal Circuit first held that the AIA amendments eliminating liability for marking products with expired patents did not constitute an impermissible pardon. According to the Court, “[r]ather than granting a pardon, the amendments to the false-marking statute are better characterized as repealing a law, an action undoubtedly within Congress’s power.” Id. at 11. The Court also noted as significant that this was not a case where Congress attempted to set aside an already adjudicated punishment. Instead, the Court explained, “Congress repealed the provisions of the false-marking statute that it did not wish to remain in force,” which did “not constitute a pardon.” Id. at 12.

The Court next held that the AIA amendments did not violate the common-law principle prohibiting the use of a pardon to vitiate a qui tam action once commenced. First, according to the Court, Stauffer had “no vested rights in his lawsuit” because Stauffer’s case had not reached final judgment, and, second, the AIA amendments “do not constitute a pardon.” Id. Further, the Court noted, it had already rejected the argument that a litigant like Stauffer enters into a contract with the government upon filing a qui tam false-marking claim. The Court explained that even if the law had not changed, Stauffer might still have lost the lawsuit, and therefore “could not have acquired a private-property interest in his share of the statutory penalty simply by filing suit.” Id. at 13. Accordingly, the Federal Circuit concluded that the common-law principle did not apply here and did not save Stauffer’s suit from dismissal.

Finally, the Court held that Stauffer could not raise a host of additional arguments on appeal because he did not properly raise them before the district court. Because the record showed that Stauffer did not raise these arguments in his initial response, but rather waited until his reply brief before the district court, the Court held these issues were waived on appeal. The Court thus affirmed the district court’s dismissal of Stauffer’s suit for lack of standing based on the AIA’s elimination of the qui tam provision in the false-marking statute.

Summary authored by David C. Seastrunk, Summer Associate at Finnegan.