In the last two months, pharmaceutical companies have been hit with a wave of whistleblower suits claiming they intentionally included expired patents on their product labeling to deter competition.

The complaints arose after the U.S. Court of Appeals for the Federal Circuit issued a ruling in December making it more profitable for individuals to pursue such claims.

The Patent Act specifies that anyone who marks an unpatented article with the word "patent" for the purpose of deceiving the public shall be fined "not more than $500 for every such offense." Historically, district courts have capped the penalty at $500 for each event of false marking. But in Forest Group v. Bon Tool Company, the Federal Circuit ruled that the statute provides for a fine of up to $500 per article marked.

"It seems unlikely that any qui tam plaintiffs would incur the enormous expense of patent litigation in order to split a $500 fine with the government," the court said.

However, the Federal Circuit said this does not mean that a court must fine those guilty of false marking $500 per article. "In the case of inexpensive mass-produced articles, a court has the discretion to determine that a fraction of a penny per article is a proper penalty," the Federal Circuit stated.

The court noted that commentators have expressed concern of "the possible rise of 'marking trolls' who bring litigation purely for personal gain." But the Federal Circuit said that the false marking statute explicitly permits qui tam actions to allow individuals to help control false marking.

Whistleblowers Sue Amgen, Merck, Ranbaxy

Seeing the opportunity to cash in, individuals have pored over product labeling in search of expired patents. Eleven pharma companies have been sued for false patent marking since the Forest decision (see chart: " ¹ Old Products, Fresh Court Cases: Pharma Sued For Marking Products With Expired Patents ").

The suits target both over-the-counter and prescription drugs, including Amgen's Neupogen (filgrastim) for treatment of chemotherapy-induced neutropenia; Ortho-McNeil-Janssen's Alzheimer's disease drug Razadyne (galantamine); and Merck's allergy medicine Claritin-D (pseudoephedrine/loratadine).

"We believe this is a frivolous lawsuit," Merck said in a statement. "Merck maintains that its patent label information is proper and trusts that the court will so determine."

Most of the pharma suits were brought by Thomas Simonian, who is listed as an individual residing in Geneva, Illinois. Bentley Hollander, a resident of Philadelphia, Penn., also filed suit against several companies, including Ranbaxy.

They allege that the companies marked their products with expired patents with the intent to deceive the public and gain a competitive advantage in the market. The suit against Amgen cites two Neupogen patents, alleging that one has been expired since March 2006 and the other since March 2009. Amgen said it believes the suit is without merit.

Hollender's attorney, Jacob Cohn of Cozen O'Connor, said "no one in good faith can believe an expired patent is valid." Nor, he said, is it credible for a company to say it forgot its patent had expired.

Foley & Lardner attorneys Justin Gray and Harold Wegner compiled a list of 139 false patent marking cases that have been filed over the past decade. Of these, 101 were filed since January 1, 2010. In a companion article they say that even if the penalty is a fraction of a penny per article falsely marked, the cost could be exorbitant.

They note that in Pequignot v. Solo Cup Co. a false marking penalty is alleged based upon 21 billion cup lids that were marked with patent numbers that were expired at the time the lids were sold. In this case, they said, damages could range from $21 million at a tenth of a penny an article to a maximum of ten trillion dollars. The Federal Circuit is scheduled to hear arguments in the case April 6.

Patent Reform Bill Would Curtail Marking Claims

Some companies are trying to nip the potential problem in the bud. At their urging, the Senate patent reform bill now includes a provision that would effectively eliminate false patent marking litigation by requiring anyone filing suit to have been injured by the practice (² Also see "Patent Reform Bill In Senate Could Reduce "Inequitable Conduct" Litigation" - Pink Sheet, 1 March, 2010.).

Cohn said the provision is unconstitutional as it violates the Fifth Amendment prohibition against taking of property without due process or just compensation. He said the false marking statute gives the qui tam litigant a property right in the fine that can be recovered.

"My client doesn't need to be injured" to file suit, he stated. "My client is responding to Congress' call for help."

- Brenda Sandburg ( ³ b.sandburg@elsevier.com )

New Qui Tam Worry: Lawsuits Over False Patent Markings

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