Monday, May 07, 2012

Another false marking defeat post AIA

McCabe v. Floyd Rose Guitars, 2012 WL 1409627 (S.D. Cal.)
McCabe brought false patent marking and other claims against defendants, alleging that they marked unpatented articles with expired patent numbers that never covered the products in the first place.  The false marking provision, as amended by the AIA, says that marking a product with an expired patent number isn’t a violation of the law, but, by alleging that the patents never covered the products, McCabe pled around that. 
Defendants argued that McCabe failed to allege damages from the false marking.  False marking now requires “competitive injury.”  In the Lanham Act context, the 9th Circuit has defined competitive injury as “harmful to the plaintiff's ability to compete with the defendant.”  McCabe alleged that he was unable to reach agreements with potential licensees for his patents based on defendants’ false marking, precluding him from commercializing his inventions.  But he didn’t allege facts supporting these conclusory allegations.  He alleged that other entities were defrauded when they entered into license agreements with defendants, but he didn’t allege that, but for those agreements, those licensees would have contracted with him instead.  Indeed, he didn’t even allege that the false marking was the problem—rather, he alleged that the licensees were defrauded by the invalidity of the patents.  A letter from a manufacturer said it wouldn’t go ahead with McCabe in light of the “patent issues,” but again that wasn’t about false marking but about alleged patent infringement (by defendants).  Thus, the motion to dismiss the false marking claims was granted.  McCabe also alleged a Lanham Act false advertising claim, but it failed for the same problem of insufficiently alleged competitive injury.
McCabe’s California UCL claim was based in part on the false marking allegations, so that part failed too.  His unfairness allegations were also too conclusory, failing to explain how defendants’ conduct restrained trade or inhibited competition.  Nor did McCabe allege that he suffered any injury because defendants allegedly defrauded licensees.  Though he alleged that he was a licensor, he couldn’t connect defendants’ licensing with his own failure to license; if defendants’ patents were in fact invalid, licensees would more likely seek licenses from the prior art patentees, not from McCabe.  (I'm not sure that logically or business-wise follows, but I doubt that the ease of getting a license from patentees of the prior art was discussed in the complaint.)

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