The Qui Tam Blog

Laidlaw Transit, Inc., a company that provides busing services to California school districts, is being challenged by the First District Court of appeals on the basis of a Qui Tam case brought by plaintiffs claiming that the company falsified safety records and failed to meet state safety and environmental standards.

Because Laidlaw accepted payment while allegedly breaching the contract held with the city, they are liable under the False Claims Act. The case had previously been dismissed but has been revived by the Court of Appeals.

The case was brought to court by a private individual with knowledge about Laidlaw’s supposed misconduct. If Laidlaw is charged with damages in this case, the whistle blower will be awarded some of the money under the False Claims Act.

The past few months have seen a dramatic increase in Qui Tam cases based on the false-marking section of the Patent Act. This section of the Act allows for whistleblowers to bring a company to court for falsely marking products as being patented or patent ending. If the company is found guilty of falsely claiming patent, the whistleblower and government receive compensation, as outlined in the Patent Act.

A recent case, Forest Group, Inc. v. Bon Tool Co. interprets the false-marking section as incurring a fine of $500 for every printed instance of false patent claim. Previous cases had interpreted the section to mean that a $500 fine should be incurred for every intention of falsely marking a product. The older interpretation was less harsh on manufacturers, whereas the newer interpretation in the Forest case offers hefty incentives for whistleblowers to turn in companies they have found to be fraudulently marking products.

The $500 fee is not automatic nor required. District courts are allowed to strike a balance in cases where mass-produced smaller items have been marked. For low-cost items, an $500 fine per item might be too steep and disproportionate to the benefits garnered by the company that fraudulently marked the product. Still, the potential of up to $500 in fines per item is enough to discourage companies from fraudulently marking future product and is more than enough to cause a substantial and steady increase in Qui Tam cases by whistle blowers who are ready to hold companies accountable for their patent law violations under the new interpretation of the Patent Act.

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.

By: Joel Androphy, Rachel Grier, and Stephanie Gutheinz 

In Rodriguez v. Our Lady of Lourdes Medical Center, the Third Circuit noted that it has declined to adopt either an express or implied false certification theory.  The court further held that even if it did adopt such a theory, FCA liability will not attach unless the relator shows that a defendant’s certification of compliance with applicable regulations is a condition of payment of federal funds.  Under the express false certification theory, a defendant is liable for falsely certifying its compliance with statutory or regulatory requirements in connection with the receipt of federal funds.  Under an implied certification theory, FCA liability can attach even when the defendant has not expressly certified that it complied with the regulations that it violated.  While declining to adopt either false certification theory, the Third Circuit noted that, under either false certification theory, it is still the relator’s burden to demonstrate that the defendant failed to comply with applicable regulations, and that the payment of federal funds was conditioned on compliance with those regulations.  In affirming the dismissal of the case, the court held that the relator did not satisfy this burden because the relator did not even suggest a connection between certification and condition of payment.