The Qui Tam Blog

A qui tam case filed in the Texas Northern District Court by a patent watchdog group (The Patent Compliance Group, the PCG) against Activision Video Game Products, the firm that owns the Guitar Hero line of video games and video game products, accuses the company of patent law infringement.

The lawsuit accuses the Activision brand of improperly labeling its products with the patent and patent-pending notation used to protect brand names from copyright infringement. The case involves provision 35 U.S.C. 292(a) which establishes that, “”… whoever marks upon, or affixes to, or uses in advertising in connection with any article the words “patent applied for,” “patent pending,” or any word importing that an application for patent has been made, when no application for patent has been made, or if made, is not pending, for the purpose of deceiving the public - Shall be fined not more than US$500 for every such offense (in this case per item sold).”

Even though Activision does have some patents currently pending, PCG claims that the patents the company has filed do not cover the scope the packaging notation has claimed.

A Qui Tam suit has been brought against J-M Manufacturing Co and Formosa Plastics Corp, the manufacturing company’s previous parent company. Four states, twenty-one water districts and twenty-two cities in California have brought the lawsuit following reports that J-M Manufacturing had been supplying sub-standard PVC pipe.

The suit accuses J-M of taking several “cost-cutting” measures, including producing inferior quality PVC pipe, filling supervisor positions with inexperienced workers and providing independent quality-testers with a higher quality sample of product than what was actually being provided to customers.

For cities using these PVC pipes for water management, inferior quality product means a bad investment in public infrastructure. John Hendrix, who worked as an engineer in the J-M’s product assurance department, blew the whistle on the manufacturing company’s product quality issues and was reportedly fired by the company a week later.

The suit states that Hendrix’s employment was terminated after he wrote a memo to upper management informing them that the tensile strength of the PVC pipe being supplied was below the certification agency standards provided by Underwriters Laboratories, Inc.

Earlier this week AtriCure, Inc. executed a settlement with the Department of Justice in a case brought to court by a relator in 2007. AtriCure, primarily a manufacturer of cardiac surgical ablation systems, settled with the Department of Health and Human services for $3.8 million plus interest covering a five year period.

The case was filed in the United States District Court for the Southern District of Texas and charges AtriCure in violation of the Federal False Claims Act. By using illegal kickbacks and sponsoring non-branded marketing, AtriCure coaxed medical practices into favoring the corporation’s costly in-patient cardiac surgical ablation procedure over a clinically more effective out-patient catheter process.

Compensation for the costs incurred to Medicare because of the more costly treatment being falsely preferred are being sought by the relator and the Department of Justice on behalf of the Department of Health and Human Services.

In a press release earlier this week, the Department of Justice stated that this case is part of a larger movement to fight healthcare fraud. In the last year alone, the legal jurisdiction granted by the False Claims Act has been used by the US Government to recover approximately $2.2 billion in cases of fraud towards United States health care programs.

By: Joel Androphy, Rachel Grier, and Stephanie Gutheinz

For purposes of the FCA’s statute of limitations, an amended complaint filed by the government relates back to the relator’s original qui tam complaint. In United States ex rel. Ven-A-Care v. Actavis Mid Atlantic LLC, a district court in Massachusetts extended this principle to amended complaints filed by the relator as well. Although the defendants argued that the relation back doctrine only applies to the government, the court explained that the FCA contemplates a direct link between the interests of the relator and the interests of the government in every qui tam suit, even when the government declines to intervene. The court also considered the defendants’ argument that allowing relation back under the circumstances of the case would violate their due process rights under the Fifth Amendment due to the delay in unsealing the case. In rejecting this argument, the court noted that the defendants did not allege any prejudice that would implicate due process concerns. The court also noted that the delay was caused by the government exercising its legitimate right to obtain extensions of the seal to investigate the complex allegations of fraud. Therefore, the court held that the relator’s most recent amended complaint was not barred by the statute of limitations because it related back to an earlier complaint that identified the specific drugs at issue.

The court then considered whether relators can invoke the FCA’s tolling provision. Section 3731(b)(2) of the FCA provides that a claim otherwise barred by the statute of limitation may be brought within three years after the date when facts material to the cause of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances. While acknowledging a disagreement among the courts on whether the tolling provision applies in cases in which the government has not intervened, the court sided with the line of cases allowing relators to invoke the tolling provision. According to the court, allowing relators to do so is most consistent with the language of the statute because there is no language prohibiting relators from invoking the provision. The court also emphasized that when the government declines to intervene in a case, the relator has the right to conduct the action; therefore, absent clear language providing otherwise, the relator has the right to invoke the provisions of the FCA—including the tolling provision. United States ex rel. Ven-A-Care v. Actavis Mid Atlantic LLC, 2009 WL 3171798 (D. Mass. Oct. 2, 2009).

By: Joel Androphy, Rachel Grier, and Stephanie Gutheinz

The False Claims Act provides that a relator’s complaint “shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders.” 

In United States ex rel. Ubl v. IIF Data Solutions, a district court in the Eastern District of Virginia considered whether a relator’s failure to comply with these filing requirements when filing a complaint would require a court to dismiss the complaint for lack of subject matter jurisdiction.  Relying on the language and legislative history of the filing requirements, the court determined that the filing requirements are not jurisdictional in nature; therefore, failing to file a complaint in camera and under seal will not divest a court of subject matter jurisdiction over the claim. 

The court noted that, while other provisions of the FCA include limitations on jurisdiction, the provisions establishing the filing requirements do not include any such limitation.  In fact, the FCA does not provide any consequences for failing to file a complaint in camera or under seal.  As such, the court reasoned that automatically divesting courts of subject matter jurisdiction over qui tam complaints based solely on the failure to file the complaint in camera or under seal would defeat congressional intent and would also frustrate the overall purpose of the FCA—to prevent and combat fraud. 

The court also determined that the FCA’s filing requirements do not necessarily apply to the filing of an amended complaint where the defendant already has notice of the original complaint.  The primary purpose of the filing and seal provisions is to permit the government time to investigate the claims and determine whether to intervene in the action, without alerting the alleged wrongdoers that they are under investigation.  If the alleged wrongdoers already have notice that they are under investigation, however, the in camera and under seal provisions do not serve their intended purpose and therefore do not apply.  United States ex rel. Ubl v. IIF Data Solutions, 2009 WL 1254704 (E.D. Va. May 5, 2009).

By: Joel Androphy, Rachel Grier and Stephanie Gutheinz

To establish liability for submitting false claims under the FCA, it must be shown that the defendant acting knowingly.  Knowing conduct can be demonstrated by showing that the defendant either acted (1) with actual knowledge that the information was false, (2) with deliberate ignorance of the truth or falsity of the information, or (3) with reckless disregard of the truth or falsity of the information. 

A finding of knowing action on the part of the defendant may be precluded, however, if it can be shown that the government had ample knowledge of the defendant’s conduct.  The burden of proof required to obviate a defendant’s liability based on government knowledge is considerable and can only be satisfied with evidence that the defendant and the government had an ongoing dialogue about the activities underlying the submission of the false claims. 

It must also be shown that the defendant completely cooperated and shared all information with the government in such a way that it would not have been possible for the defendant to knowingly submit false claims.  Mere allegations that the government had some knowledge of the defendant’s conduct, audited the defendant, or even reviewed thousands of documents related to the claims are not sufficient to negate the defendant’s liability.  Rather, courts will only find as a matter of law that the defendant could not have possessed the requisite state of mind to be liable under the FCA where the government approved of the defendant’s conduct, or where the government had extensive knowledge of the defendant’s conduct.  United States ex rel. Maxwell v. Kerr-McGee Oil & Gas Corp., 2009 WL 3161828 (D. Colo. Sept. 30, 2009).

By: Joel Androphy, Rachel Grier, and Stephanie Gutheinz

The FCA provides that all qui tam complaints must be filed under seal and must remain under seal for 60 days after filing.  During the 60-day period after filing, the government investigates the allegations and determines whether to intervene in the action.  In American Civil Liberties Union v. Holder, three non-profit organizations challenged the FCA’s seal provisions, arguing that the provisions amount to unconstitutional content-based restrictions and unconstitutionally deny access to information regarding important public interests.  The district court dismissed the challenge, holding that the seal provisions do not offend any constitutional protections. 

The court noted that the FCA is not an access statute because its seal provisions do not regulate access to information possessed by law enforcement; rather, the provisions temporarily limit public access to the qui tam relator’s allegations of fraud.  In holding that the seal provisions are narrowly tailored to serve the government’s compelling interest in investigating allegations of fraud, the court acknowledged that public access to qui tam complaints would not enhance the efficient and just resolution of cases, but would actually hamper the government’s investigation by tipping off wrongdoers.  Based on these consequences, the court held that no right of access to a sealed qui tam complaint exists, specifically noting the strong possibility that public access could lead to the destruction of evidence. 

The court further held that the seal provisions do not constitute a prior restraint on speech because the seal merely prevents the disclosure of the existence of the qui tam suit, rather than the facts upon which the suit is based.  Finally, the court rejected the argument that the mandatory seal provisions violate the separation of powers because courts are not permitted to determine the necessity of a seal on a case-by-case basis.  The court reasoned that the mandatory seal is nothing more than a ministerial act and does not require judges to enter an order without considering the merits.  Furthermore, judges eventually have the opportunity to consider the necessity of a seal on a case-by-case basis when the seal is going to expire and the judge must determine whether there is good cause to extend the seal.  American Civil Liberties Union v. Holder, 2009 WL 2596641 (E.D. Va. Aug. 21, 2009).

By: Joel Androphy, Rachel Grier, and Stephanie Gutheinz

In United States ex rel. Eisenstein v. City of New York, New York, the United States Supreme Court considered the applicable time period for filing a notice of appeal in FCA actions where the United States has declined to intervene.  Generally, a notice of appeal must be filed within 30 days; however, the time limit is extended to 60 days when the United States is a party to the action.  The Supreme Court held that, even though the United States is a real party in interest in every action brought under the FCA, it is not a “party” to the action unless it exercises its statutory right to intervene. 

Therefore, when the United States declines to intervene, the 30-day period for filing a notice of appeal applies rather than the extended 60-day period.  The Court reasoned that any other interpretation would render the FCA’s intervention provisions superfluous.  Because the FCA expressly gives the United States discretion to intervene in FCA actions, courts cannot disregard the government’s decision as well as congressional intent by designating the United States a “party” even though it has declined to assume the rights and burdens associated with acquiring the primary responsibility of prosecuting the action. 

United States ex rel. Eisenstein v. City of New York, New York, 129 S. Ct. 2230 (2009).

Last Wednesday, the Justice Department held a conference to announce Pfizer’s off-label criminal and civil settlement for its fraudulent marketing practices.

Pfizer’s subsidiaries will plead guilty to a felony violation of the Food, Drug and Cosmetic Act for misbranding with the intent to defraud or mislead. It will pay a criminal fine of $1.195 billion and forfeit $105 million, bringing the total criminal settlement to $1.3 billion.

The civil settlement of $1 billion will resolve claims under the False Claims Act that Pfizer illegally promoted four of drugs (most notably the anti-inflammatory drug Bextra), caused false claims to be submitted to government healthcare programs for indications other than those approved by the FDA, and provided kickbacks to doctors to induce them to prescribe these drugs.

Pfizer has also entered into a Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services that will subject the company’s marketing practices to additional review procedures and safeguards to help avoid and promptly detect similarly offending conduct. For example, Pfizer’s executives will need to complete annual compliance certifications and the company will be required to make detailed disclosures on its website. 

The settlement is notable enough for its sheer magnitude: it is the largest in the Department of Justice’s history; it also represents the largest criminal fine imposed ever in the United States for any matter.

But the story behind the story is also interesting. The settlement itself was already announced–and largely completed–by the Bush administration. But whereas the Bush administration was less likely to tout its strikes against big pharmaceutical companies, the Obama administration is happy to take the credit. This certainly signals a bleak future for the drug companies. The administration appears poised to go after these cases with more gusto, especially as it faces criticism for the high cost of Obama’s healthcare proposals.

In January, Eli Lilly and Company settled similar claims over its marketing of Zyprexa for $800 million. The success of that case can be traced directly to courageous stands taken by employee whistleblowers. 

The six whistleblowers in the Pfizer case will share some $102 million of the federal portion of the civil recovery. As employee whistleblowers continue to work with the current administration, we can expect to see more of these announcements in the coming months.

Do you know about fraud committed against the Federal or State government? It may be time to call a whistleblower attorney to represent you in court. This article will help you understand the basis for and method of filing a Qui Tam lawsuit or what is better known as a ”Whistleblower” lawsuit against a corporation or medical practice that is defrauding the government.

The False Claims Act (FCA) was originally passed during the Civil War, but was amended in 1986 and gives citizens a potential monetary reward for reporting fraud. Typically, the individual who has reported the fraud is an employee or former employee of the corporation in question. This individual, known as the “relator,” is the whistleblower.

Once the “whistle is blown” as it were, the Department of Justice will review the case and decide whether or not it wants to intervene. Since the 1986 amendments, whistleblower attorneys have been able to recover over $12 Billion.

You will want to contact a whistleblower attorney for healthcare fraud (Medicare, Medicaid, drug corporation) or other government contracting frauds. A good attorney can represent your case and help you learn the details of being a relator in the case.

Turning a corporation in for fraud does not need to be a daunting process with the help of an experienced whistleblower attorney. It can be financially beneficial to you as the relator, and is also of beneficial to your country. If you suspect fraud and are interested in filing a claim, don’t hesitate to contact a whistleblower attorney.