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No ‘Competitive Injury’ in False Marking Suit

A Roanoke U.S. District Court awards defendant summary judgment on plaintiff’s claim under the federal false patent marking statute, 35 U.S.C. § 292, because plaintiffs, as potential competitors,”  have produced insufficient evidence of a “competitive injury,” which is required to show standing under the statute; plaintiffs also have failed to put forth sufficient evidence from which a jury could find they suffered an injury proximately caused by defendant’s violations of California and Washington state statutes.

Plaintiff Ponani Sukumar is a California resident who founded plaintiff Southern California Stroke Rehabilitation Associates Inc. Defendant Nautilus Inc. is a publicly traded American corporation headquartered in Vancouver, Washington, that manufactures and sells fitness and exercise equipment.

This lawsuit is not the first between the parties, nor is it the only one currently pending; there is a 13-year history of litigation by one or both plaintiffs against Nautilus.

The False Marking Statute, 35 U.S.C. § 292, was revised in 2011 to require that where, as here, a private actor instead of the government is suing to enforce a violation of the statute, that actor must have suffered “competitive injury.” The change was intended to eliminate plaintiffs with no connection to the false marking and to limit private plaintiffs permitted to sue under § 292 to a specific group: persons or entities who could show a competitive injury from the false marking. The question before the court is whether plaintiffs here are included in that group.

Plaintiffs contend they have suffered a “competitive injury” within the meaning of the statute because as a potential competitor, they were competitively injured when they were impeded in their efforts to enter the market and incurred “unnecessary costs.”

The court understands that the issue of whether potential competitors may suffer a competitive injury under § 292 is both an issue of first impression and perhaps an interesting legal issue. In the case before it, however, the court need not rule that a potential competitor can never state a claim for competitive injury, or that a plaintiff must already be a competitor or commercial rival to suffer a competitive injury. Instead, the court simply concludes that here, based on the specific facts before it, no reasonable jury could find that these specific plaintiffs have suffered a competitive injury caused by Nautilus’s false marking. The court is firmly convinced that plaintiffs here have not made any such showing and that no reasonable jury could find that plaintiffs’ failure to compete or any of their claimed damages are a “competitive injury” resulting from defendant’s false marking.

Sukumar’s conclusory testimony that defendant’s false marking deterred and delayed plaintiffs from entering the marketplace, is not enough to defeat summary judgment. Plaintiffs have not shown that they were prevented from entering the market of manufacturing and selling exercise equipment by defendant’s false marking.

Plaintiffs also allege they have devoted “unnecessary” expenses to attempting to license Nautilus patents and to purchase Nautilus patents or assets; exploring the purchase of Med-X; analyzing the validity of Nautilus patents and storing nautilus machines plaintiffs owned. However, none of these other alleged damages are competitive injuries. All of the harms alleged here are simply too removed from the false patent labels to be a competitive injury – or any other type of direct injury – caused by the false labels.

It is true that none of plaintiffs’ state law claims require a competitive injury, but they do all require damages caused by the mismarked labels, and the claims likewise fail for lack of proof of causation.

Sukumar v. Nautilus Inc. (Turk) No. 7:11cv218, Dec. 6, 2013; USDC at Roanoke, Va. VLW 013-3-632, 29 pp.

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