Case Information
*2 Before N EWMAN , P ROST , and M OORE , Circuit Judges . P ROST , Circuit Judge .
Kenneth Brooks appeals from the decision of the United States District Court for the Northern District of California dismissing his false marking claim and reject- ing his argument that the application of amendments to 35 U.S.C. § 292 effectuated by the Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011) (“AIA”) to pending actions is unconstitutional. Because we conclude that Congress’s retroactive elimination of the provision from § 292 does not violate the Due Process Clause or the Intellectual Property Clause of the Constitution, we affirm.
I. B ACKGROUND A
Section 292(a) makes it unlawful for any person to engage in specified acts of false patent marking, such as affixing to a product a mark that falsely asserts that the item is patented, with the intent to deceive the public. Any person who engages in false patent marking prohib- ited by § 292(a) “[s]hall be fined not more than $500 for every such offense.”
Prior to 2011, 35 U.S.C. § 292(b) provided that “[a]ny
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.” More particularly, § 292(b) authorized
private parties (relators) to bring a
qui tam
or informer’s
suit for violations of § 292(a). Section 292(b) did not,
however, specify the procedures to be used in adjudicating
the relator’s suit, nor did it expressly authorize the gov-
ernment to file its own suit to collect the penalty. The
qui
tam
provision of § 292 had been the subject of ongoing
litigation, both before district courts and this court.
See,
e.g.
,
Forest Group, Inc. v. Bon Tool Co.
, 590 F.3d 1295
(Fed. Cir. 2009) (holding that § 292 required the court to
impose a penalty for false marking on a per article basis);
Pequignot v. Solo Cup Co.
,
On September 16, 2011, the President signed into law the AIA, which amends § 292 in several respects. Specifi- cally, Section 16 of the AIA eliminates the provi- sion of § 292(b) and amends § 292(a) to provide that “[o]nly the United States may sue for the penalty author- ized by this subsection.” AIA § 16(b)(1). In lieu of the qui tam provision, the AIA amends § 292(b) to authorize actions for damages by any person “who has suffered a competitive injury as a result of a violation” of § 292(a). § 16(b)(2). Moreover, the AIA narrows the scope of liability by providing that marking products with expired patents is not a violation. Id. § 16(b)(3). And of particu- lar relevance here, the AIA expressly provides that “[t]hese amendments . . . shall apply to all cases, without exception, that are pending on, or commenced on or after, the date of the enactment of this Act.” § 16(b)(4).
B
In September 2010, Mr. Brooks sued Dunlop Manu- facturing Inc. (“Dunlop”) under the then-prevailing ver- sion of § 292, alleging that Dunlop marked a guitar string winder with the number of a patent that was both expired and invalidated. Dunlop moved to dismiss the case, arguing both that Mr. Brooks had not pled the required intent to deceive and that the qui tam provision violated the Take Care Clause, U.S. Const. art. II, § 3. The United States intervened to defend the constitutionality of § 292, and the district court stayed the case pending our resolu- tion of the same constitutional question in FLFMC, LLC v. Wham-O, Inc. , No. 2011-1067, 2011 WL 4952991 (Fed. Cir. Oct. 19, 2011).
While the Wham-O case was pending, Congress en- acted the AIA, amending § 292 and eliminating qui tam actions under that section. The Wham-O parties agreed that the passage of the AIA, by eliminating the provision on which the case was predicated, rendered their case moot. at *1. [1] Shortly thereafter, Dunlop moved to lift the stay and to dismiss this case, arguing that Mr. Brooks no longer has standing because he can no longer recover a statutory penalty and has not alleged any right to damages for competitive injury. Mr. Brooks opposed the motion, arguing that Congress’s elimination of qui tam actions constitutes a taking of Mr. Brooks’s property without just compensation.
The district court held a hearing on Dunlop’s motion to dismiss. At that hearing, Mr. Brooks also introduced, for the first time, the argument that the AIA violates the Due Process Clause. Specifically, Mr. Brooks argued that he has “rights [that] are contractual in nature” under the former version of § 292 and that “repudiat[ing] the Gov- ernment’s contractual obligations may violate the Consti- tution.”
After supplemental briefing on this new contractual issue, the district court dismissed Mr. Brooks’s case. Brooks v. Dunlop Mfg. Inc. , No. 3:10-cv-04341, 2011 WL 6140912 (N.D. Cal. Dec. 9, 2011). The district court first held that the application of the false marking amend- ments to pending actions under § 292 does not violate the Due Process Clause. at *4-5. After observ- ing that Congress is free to give retroactive effect to economic legislation as long as doing so is a rational means of pursuing a legitimate legislative purpose, the district court found “that Congress, by eliminating the qui tam provision in § 292, rationally furthered a legitimate legislative purpose by comprehensively reducing the costs and inefficiencies associated with the ‘cottage industry’ of false marking litigation that developed after the Federal Circuit’s decision in Forest Group, Inc. , 590 F.3d 1295.” at *5. The district court further determined that it “need not address whether a binding contract was actu- ally formed,” because even were there such a contract, the due process inquiry would still require only that Congress had a rational basis for changing the law. at *4. Indeed, Mr. Brooks “submit[ted] no legal authority . . . that would require a higher standard of scrutiny.” Id.
The district court also rejected Mr. Brooks’s claim
that AIA’s amendments to pending actions under
§ 292 violated the Takings Clause. Specifically, the
district court reasoned that even if a government act
constitutes a taking, it cannot be declared “void so long as
the government ‘provide[s] an adequate process for ob-
taining compensation.’”
Id.
at *5 (quoting
Williamson
Cnty. Reg’l Planning Comm’n v. Hamilton Bank of John-
son City
,
On December 9, 2011, the district court issued a final judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c). Mr. Brooks filed a timely notice of appeal. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
II. D ISCUSSION
In reviewing a judgment on the pleadings, we follow
the procedural law of the regional circuit.
Imation Corp.
v. Koninklijke Philips Elecs. N.V.
,
A
Mr. Brooks is no longer contesting the district court’s rejection of his takings claim. Nor does he challenge the application of amended § 292 to future actions that have not yet been filed. Mr. Brooks, however, renews his claim that the Due Process Clause prevents Congress from applying the AIA’s amendments to § 292 to pending qui tam actions. As Mr. Brooks admitted before the district court, if applied as intended by Congress, the AIA’s amendments to § 292 have taken away whatever right Mr. Brooks may have had to bring a false marking claim against Dunlop because Mr. Brooks is not a competitor of Dunlop.
“No person has a vested interest in any rule of law,
entitling him to insist that it shall remain unchanged for
his benefit.”
N.Y. Cent. R.R. Co. v. White
, 243 U.S. 188,
198 (1917);
see also Plaut v. Spendthrift Farm
, 514 U.S.
211, 226 (1995) (“When a new law makes clear that it is
retroactive, an appellate court must apply that law in
reviewing judgments still on appeal that were rendered
before the law was enacted, and must alter the outcome
accordingly.”). Nevertheless, retroactive legislation, like
the false marking provisions of the AIA at issue here,
“must meet the test of due process.”
Pension Benefit
Guar. Corp. v. R.A. Gray & Co.
,
According to Mr. Brooks, Congress’s retroactive elimi- nation of the qui tam provision of § 292(b) is arbitrary and irrational because it is tantamount to sanctioning Dunlop’s public deception and indemnifying its violation of § 292. Mr. Brooks, however, overlooks that the AIA replaced actions under § 292(b) with a compensa- tory cause of action for any person who has suffered a competitive injury as a result of a false marking violation. Moreover, the United States may sue for the penalty authorized by § 292(a). Accordingly, we reject the argu- ment that the AIA’s amendments to § 292 somehow sanction public deception. We therefore turn to Mr. Brooks’s more general argument that the retroactive elimination of the qui tam provision of § 292 is not justi- fied by a rational legislative purpose.
As an initial matter, we cannot say that it was irra- tional for Congress to conclude that the costs associated with actions under § 292(b) exceeded their bene- fits, and to respond by replacing such actions with a compensatory cause of action for private parties suffering competitive injury. Indeed, the legislative history of the AIA suggests that this is what many members of Con- gress had in mind. See 157 Cong. Rec. S5320 (daily ed. Sept. 6, 2011) (statement of Sen. Jon Kyl) (“The America Invents Act reins in abuses that are reflected in a recent surge in false marking litigation. It allows such suits to be brought only by those parties who have actually suf- fered a competitive injury as a result of false marking.”). Commentators expressed similar concern that the action, combined with the statutory penalty, had created a surge of vexatious litigation and posed a risk of grossly disproportionate penalties for false marking. See, e.g. , Michael R. O’Neill, False Marking Claims: The New Threat To Business , 22 No. 8 Intell. Prop. & Tech. L.J. 22, 22-23 (2010) (noting that “false patent marking claims are now the new and very real threat to any business that marks any of its products or promotional materials with patent numbers”).
It follows that, by making the elimination of the
qui
tam
provision of § 292(b) retroactive, Congress “was in
significant part attempting to reduce the litigation expen-
ditures in the large number of complaints filed, but not
yet subject to a final judgment.”
Rogers v. Tristar Prods.,
Inc.
, No. 2011-1194, 2012 WL 1660604, at *3 (Fed. Cir.
May 2, 2012) (nonprecedential) (per curiam order denying
motion for reconsideration). In fact, the legislative his-
tory suggests that Congress was particularly concerned
with the perceived abuses and inefficiencies stemming
from false marking claims that were initiated before the
AIA was signed into law.
See
157 Cong. Rec. S1372 (daily
ed. Mar. 8, 2011) (statement of Sen. Jon Kyl) (“[B]ecause
the Federal Circuit’s recent decision in
Forest Group, Inc.
v. Bon Tool Co.
,
But there is more. At the time that Congress acted, there was a live question about the constitutionality of the then-existing provision. See, e.g. , Rogers , 2012 WL 1660604; Wham-O, Inc. , 2011 WL 4952991. This too appears to have been a concern when Congress eliminated the qui tam provision from § 292(b). See, e.g. , 157 Cong. Rec. S1368 (daily ed. Mar. 8, 2011) (statement of Sen. Chuck Grassley). Indeed, it was rational for Congress to pass legislation eliminating a potential constitutional issue and sparing the courts, private par- ties, and the United States the litigation burdens and risks associated with such issues. At bottom, Congress made a considered choice to modify the private cause of action in § 292(b) and apply that modification to pending as well as future cases. Given Congress’s legitimate concerns with respect to the cost and constitutionality of pending actions, we conclude that the retroactive application of amended § 292 to pending actions was a rational means of pursuing a legitimate legislative pur- pose.
B
Mr. Brooks primarily contends that by filing a lawsuit
against Dunlop, he entered into a binding contract with
the United States. Although he does not articulate what
exactly this contract was for or what was promised to
him, Mr. Brooks asserts that the
qui tam
provision of
former § 292(b) was essentially an offer to enter into a
unilateral contract—an offer which Mr. Brooks accepted
when he filed suit. Then, according to Mr. Brooks, Con-
gress violated the Due Process Clause when it retroac-
tively eliminated the provision from § 292(b) and
repudiated its contract with Mr. Brooks.
[2]
In particular,
Mr. Brooks relies on
Perry v. United States
for the propo-
sition that every time Congress “repudiate[s] the sub-
stance of its own engagements,” it violates the Due
Process Clause.
Mr. Brooks’s reading of Perry goes too far. Notably, the plaintiff in Perry had a written contract with the United States, in the form of a government bond. at 346-48. That bond expressly imposed financial obliga- tions on the United States, including the obligation to repay the borrowed funds in gold. The federal legisla- tion at issue in Perry relieved the government from the obligation to repay the debt in gold. at 349. In con- trast, nothing in the AIA relieves Congress from a finan- cial obligation owed to Mr. Brooks. Rather, it simply eliminated his standing to bring a action under § 292.
Even more to the point, the pre-AIA version of § 292 was not an offer to enter into a unilateral contract with Congress. The Supreme Court “has maintained that absent some clear indication that the legislature intends to bind itself contractually, the presumption is that ‘a law is not intended to create private contractual or vested rights, but merely declares a policy to be pursued until the legislature shall ordain otherwise.’” Nat’l R.R. Pas- senger Corp. v. Atchison , 470 U.S. 451, 465-66 (1985) (quoting Dodge v. Bd. of Educ. , 302 U.S. 74, 79 (1937)). “This well-established presumption is grounded in the elementary proposition that the principal function of the legislature is not to make contracts, but to make laws that establish the policy of the state.” Id. at 466. Accord- ingly, “the party asserting the creation of a contract must overcome this well-founded presumption and [courts should] proceed cautiously both in identifying a contract within the language of a regulatory statute and in defin- ing the contours of any contractual obligation.”
In determining whether a statute creates a contract, the Court has instructed us to first look to the language of the statute. Before passage of the AIA, § 292(b) provided that “[a]ny person may sue for the penalty, in which one-half shall go to the person suing and the other to the use of the United States.” Nothing in this language “create[s] or speak[s] of a contract” between the United States and a qui tam relator. at 467. Although not necessarily determinative, no words typically associated with contract formation, such as “offer” or “acceptance,” were used. The far more natural interpretation of this text, which is not framed in contractual language, is that it simply authorized a action and specified how any penalty would be divided.
We next look to whether the circumstances surround- ing the statute’s passage manifested any intent by Con- gress to bind itself contractually. at 468-70. Mr. Brooks has not pointed to any legislative history, or any other evidence, which suggests that during the passage of the pre-AIA version of § 292, Congress had the intent to enter into a contract with qui tam relators. The pre-AIA language of § 292(b) at issue here was added in 1952, when Congress recodified the patent laws. Act of July 19, 1952, Pub. L. No. 82-593, 66 Stat. 792, 814. The Senate Report stated that two paragraphs in the predecessor version were being “consolidated,” a new form of false marking was being added, and the fine was being in- creased. S. Rep. 82-1979, at 31 (1952). The only mention of the qui tam action was that “[t]he informer action is included as additional to an ordinary criminal action.” There is no indication that Congress intended to create a special provision that forms a contract or otherwise vests rights upon the filing of suit.
Instead of legislative history, Mr. Brooks relies on the
Ninth’s Circuit’s holding in
United States ex rel. Kelly v.
Boeing Co.
,
Treating the former
qui tam
provision of § 292 as a
unilateral contract offer would also be inconsistent with
the history of
qui tam
provisions. It is true that
qui tam
provisions “have been in existence for hundreds of years
in England, and in this country ever since the foundation
of our government.”
United States ex rel. Marcus v. Hess
,
317 U.S. 537, 541 n.4 (1943) (quoting
Marvin v. Trout
,
Because Mr. Brooks cannot point to “some clear indi-
cation that the legislature intend[ed] to bind itself con-
tractually,” Mr. Brooks cannot overcome the presumption
that the pre-AIA version of § 292 was “not intended to
create private contractual or vested rights.”
Nat’l R.R.
Passenger Corp.
,
C
In addition to his due process arguments, Mr. Brooks contends that the retroactive elimination of the provision of § 292(b) violates the Intellectual Property Clause, U.S. Const. art. I, § 8, cl. 8. More precisely, Mr. Brooks argues that Congress’s authority under the Intel- lectual Property Clause is subject to “a more searching analysis” than Congress’s other enumerated powers. Appellant’s Reply Br. 15. In support of his argument, Mr. Brooks relies on the Supreme Court’s decision in Graham v. John Deere Co. , 383 U.S. 1 (1966). There, the Court explained that the Intellectual Property Clause is a “qualified authority” and that:
Congress in the exercise of the patent power may
not overreach the restraints imposed by the stated
constitutional purpose. Nor may it enlarge the
patent monopoly without regard to the innovation,
advancement, or social benefit gained thereby.
Moreover, Congress may not authorize the issu-
ance of patents whose effects are to remove exis-
tent knowledge from the public domain, or to
restrict free access to materials already available.
at 5-6.
Mr. Brooks’s reliance on
Graham
is unavailing. To be
sure, Congress’s patent power is limited. However,
“[w]ithin the limits of the constitutional grant, the Con-
gress may, of course, implement the stated purpose of the
Framers by selecting the policy which in its judgment
best effectuates the constitutional aim.” at 6. Here,
the AIA’s retroactive amendments to § 292 do not impli-
cate the scope of the patent power, but rather, Congress’s
judgment in effectuating and maintaining a patent sys-
tem.
[3]
Accordingly, our judicial review is limited to deter-
mining whether Congress’s actions were “a rational
exercise of the legislative authority conferred by the
[Patent] Clause. On that point, we defer substantially to
Congress.”
Eldred v. Ashcroft
, 537 U.S. 186, 204-05
(2003);
see also Figueroa v. United States
,
III. C ONCLUSION
We have considered Mr. Brooks’s remaining argu- ments and find them unpersuasive. Accordingly, we affirm the final judgment of the district court.
AFFIRMED
Notes
[1] In Wham-O , we also noted that “[t]he parties do not challenge, and this court does not address, the consti- tutionality of the retroactive application of the amend- ments to § 292.”
[2] To be clear, Mr. Brooks did not bring an actual breach of contract claim against the United States under the Tucker Act, 28 U.S.C. § 1491, or the Little Tucker Act, 28 U.S.C. § 1346. Rather, he only alleges that Congress’s repudiation of the alleged contract violates the Due Process Clause.
[3] Mr. Brooks’s argument that Congress’s retroactive elimination of the qui tam provision of § 292(b) impermis- sibly extends patent monopolies lacks merit. False mark- ers remain subject to penalties under § 292. Congress has merely traded one enforcement mechanism for another. As already noted, amended § 292 now authorizes both the United States and any person who has suffered a com- petitive injury as a result of a false marking violation to bring suit.