Tag: Federal Circuit

U.S. Can’t Use Supreme Court’s Property Rights Ruling to Rewrite Takings Law

The Supreme Court ruled in December that a taking occurs when a government action gives rise to “a direct and immediate interference with the enjoyment and use of land,” thus allowing the Arkansas Game & Fish Commission to proceed with claims relating to the damage caused by government-induced flooding of a state wildlife management area. (The lower court had bizarrely held that while temporary physical invasions and permanent floods were subject to takings analysis, temporary flooding, even if repeated, was not.  For more background and links to Cato’s amicus briefs before the Supreme Court, see Roger Pilon’s commentary.)

On remand to the U.S. Court of Appeals for the Federal Circuit, however, the United States, relying on a single passage from the opinion, contends that the Supreme Court created a new multi-factor test applicable to all regulatory and temporary physical takings claims. Cato has now joined the Pacific Legal Foundation, National Federation of Independent Business, and National Association of Home Builders on a brief supporting the Commission and arguing that the passage upon which the government relies is both non-binding (“dicta” in legal terms) and in any event cannot be read to upset the distinction between regulatory and physical takings that the Court has consistently asserted.

It is well established in the Supreme Court’s takings jurisprudence that government intrusions on private property that permanently deprive the owner of a valuable property interest are to be subjected to the same test, regardless of whether the invasions are permanent or temporary. Under that test, courts are to consider the duration of the government intrusion, along with other information, to determine (1) whether the invasion is the direct cause of injury to the property and (2) whether the injury is substantial enough to subtract from the owner’s full enjoyment of the property and limit his exploitation thereof. If the injury to the property is substantial, it doesn’t matter whether the it was caused by an invasion of limited duration; once it is shown that the government invasion directly and substantially interfered with an owner’s property right, the government has a categorical duty to pay compensation.

In this case, the government’s intrusion permanently damaged significant property — valuable timber, from the destruction of trees — and is thus a compensable taking. The Supreme Court’s decision in Arkansas Game & Fish Commission didn’t modify or overturn the well-settled test for adjudicating physical takings claims, which remains distinct from the test that controls regulatory takings claims.

The Federal Circuit will hear argument in the case later this spring.

Cato’s First Brief in a Patent Case — On Constitutional Grounds

Recognizing an opportunity to make quick and easy money, private attorneys have been suing companies under the False Marking Statute, 35 U.S.C. § 292.  This law allows any person to sue to enforce a federal criminal statute that prohibits anyone from labeling an unpatented product with a patent number or to advertise a product with a patent number that is not actually patented. 

The penalty for violating this law is $500 per offense, which has been interpreted to mean each and every product falsely marked.  For instance, if a business is charged with falsely marking 100,000 products, it could be liable for $50 million.  Private attorneys suing under this statute seek massive amounts in damages and then try to settle with the defendant for a fraction of that cost (still a large amount of money).  Companies often settle even if the case against them has little merit because they do not want to risk such a massive amount in damages.

The longtime toy manufacturer Wham-O, however, successfully defended such a lawsuit in court, provoking the plaintiffs’ lawyers to appeal to the Federal Circuit (the only appellate court below the Supreme Court that can hear patent cases).  Cato, along with my colleague, Walter Olson — who has studied these patent marking cases — filed an amicus brief supporting Wham-O on constitutional grounds.  We argue that the False Marking Statute fails to give the executive branch, through the attorney general, control over the enforcement actions brought at its behest.  By allowing any person to sue and then receive half of the damages, the law abrogates the executive power to enforce the law and places it in the exclusive hands of the private attorney. 

There is clear precedent for this argument:  In the 1988 case of Morrison v. Olson, the Supreme Court upheld the independent counsel statute because it gave the attorney general “sufficient control” over the counsel’s hiring, firing, and investigative scope.  Other courts have held that for a private person to prosecute what is called a “qui tam” action under the False Claims Act — essentially stepping into the shoes of the government — the government must maintain “sufficient control” over the litigation.  The False Marking Statute does not provide sufficient control, or any control, and therefore violates Article II’s “Take Care Clause,” the font of the executive branch’s enforcement duties.

Ultimately, the separation of powers, the foundation for the governmental structure created by the Framers, ensures that laws are enforced by someone accountable to the people, the Executive. The False Marking Statute divests the president of this authority, so the Federal Circuit should strike it down as violating the Constitution’s separation-of-powers structure.

The Federal Circuit will hear FLFMC, LCC v. Wham-O, Inc. this spring.