Article III of the United States Constitution includes a “case or controversy” clause which limits the types of cases federal courts can and cannot consider. The clause limits jurisdiction of federal courts to only those cases the court is competent to hear. Under Article III, a plaintiff in federal court must establish he or she has standing in order to proceed with a case. It was this issue – whether a whistleblower had standing to bring a qui tam action – that was before the United of States Court of Appeals for the Federal Circuit in Stauffer v. Brooks Brothers, Inc., 619 F.3d 1321 (Fed. Cir. 2010).

The Stauffer decision involved the sale of Brooks Brothers’ bowties. As alleged in the lawsuit, the ties contained an adjustment mechanism reflecting patents which expired in 1954 and 1955. Under 35 U.S.C. § 292, known as the “false marking” statute, an entity that affixes the word “patent” to an article in order to deceive the public is liable up to $500 for each offense. The statute also provides 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.” Id. at 1322.

Brooks Brothers moved to dismiss the qui tam action, claiming the whistleblower lacked standing. The district court agreed, dismissing the suit because it found that the United States, on whose behalf the lawsuit was brought, did not suffer any injury from Brooks Brothers’ false markings of patents. On appeal, the circuit court reversed, finding that the whistleblower had satisfied the criteria to show standing to bring a lawsuit. Id. at 1325.

As the circuit court explained, every plaintiff must demonstrate standing in order to satisfy Article III’s case or controversy provision. More specifically, a plaintiff must show: (1) that he has suffered an injury in fact, being an invasion of a legally protected right; (2) there must be a causal connection between the injury and the wrongful conduct; and (3) the injury can be resolved by a favorable decision of the court. Id. at 1325.

The Stauffer court, applying the Supreme Court’s decision in Vermont Agency of Natural Resources v. U.S. ex rel., Stevens, 529 U.S. 765 (2000), recognized that a plaintiff, or relator, in a whistleblower action can establish standing based on the “implicit partial assignment” of the government’s damages claim. Id. at 1325. Under Vermont Agency, even though a whistleblower may not suffer a direct injury, a qui tam provision operates as a statutory assignment of the United States’ rights and the whistleblower, as the assignee, has standing to allege an injury in fact suffered by the assignor, which is the government. Id.

By creating 35 U.S.C. § 292, Congress established an injury in fact against the United States. Said another way, a violation of section 292’s prohibition against false markings is, by statute, harmful to the United States. The qui tam provision in section 292 allows whistleblowers to stand in the shoes of the United States government, acting as assignee of the government’s rights. By allowing the whistleblower in Stauffer to sue, Congress granted the whistleblower a legally recognized right to half of the penalty under section 292(a). Applying the test for standing to the facts of the case, the Stauffer court found that the plaintiff sufficiently alleged (1) an injury in fact to the United States (2) that was caused by the false markings of bowties, and (3) is likely to be “redressed” by a favorable decision through the imposition of a statutorily imposed fine. Id. at 1328.

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Jason Cornell is an attorney who represents whistleblowers with the law firm Clark Fountain LaVista Prather Keen & Littky-Rubin. Clark Fountain represents plaintiffs in various matters throughout the United States. If you have questions regarding the issues addressed in this or other posts, you can reach Jason at 561 899-2111, or jcornell@clarkfountain.com.