The Central District of California ruled that the heightened pleading standard of Federal Rule of Civil Procedure 9(b) applies to all three prongs of a false patent marking claim, including the third prong, competitive injury. In doing so, took a clear stand on an issue with a nationwide split among district courts.
After being sued for infringing two patents directed to magnetic building tiles, defendant filed counterclaims alleging false patent marking under 35 U.S.C. § 292(a). Defendant alleged that plaintiff had marked its products with the now-abandoned U.S. patent application, No. 17/140,367 (“the ’367 application”) and that the statement “patent pending” on its website was false because the ’367 application was no longer alive.
Plaintiff filed a motion to dismiss the counterclaim. To survive a motion to dismiss under the Iqbal/Twombly standard, a counterclaim “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” The allegations cannot be merely conclusory or based on unreasonable inferences. Under Rule 9(b), when alleging fraud, a party “must state with particularity the circumstances constituting fraud.”
In the case of a false patent marking claim, defendant must plead sufficient facts to show that plaintiff (1) marked an unpatented article and (2) intended to deceive the public by doing so. This requires an intent to deceive the public and sounds in fraud, in accordance with the Rule 9(b) pleading requirements. To show an intent to deceive, there must be an objective indication to reasonably infer that the party was aware that the patent expired, such that a general allegation that they knew or should have known is insufficient.
For a false patent marking claim, defendant must also show that the defendant (3) suffered a competitive injury as a result of a violation of the marking statute. The court recognized that there was a split among district courts as to whether the heightened Rule 9(b) requirements applied to the competitive injury requirement, with some courts only applying the standard to the first two elements.
The court concluded that defendant had stated with particularity that plaintiff used patents and patent applications to advertise its products to consumers, meeting the first element, but did not find that defendant alleged facts from which the court could make a reasonable inference that there was an intent to deceive.
As to the third element, the court recognized the split in authority, but found that 9thCircuit jurisprudence was clear that the Rule 9(b) pleading requirement applied to false patent marking claims in their entirety. Similarly, although the Federal Circuit had not spoken on the issue, precedent from that tribunal further supported this conclusion. Therefore, the court also applied Rule 9(b)’s heightened pleading standard to the third element, competitive injury. However, regardless of whether the heightened pleading standard applied, the court concluded that defendant did not allege sufficient facts to show competitive injury.
The court granted plaintiff’s motion to dismiss on the ground that defendant failed to sufficiently plead two of the three prongs required for false patent marking: intent to deceive and competitive injury.
Practice Tip: In at least the Central District of California, a party alleging a false patent marking claim should recognize that the entire claim is subject to the heightened pleading standard of Rule 9(b), and should plead accordingly. Aside from well-pleaded factual allegations showing that plaintiff marked an unpatented and article and intended to deceive, this also includes alleging particular instances (avoiding conclusory or speculative allegations without factual support) sufficient to show competitive injury caused by the other party.
Squaregles LLC v. Laltitude LLC, No. 2:23-cv-09751-CBM-(BFMx) (C.D. Cal. July 2, 2024).
