Appeals Court Denies Competitive Injury Claim in Sukumar v. Nautilus, Inc.

Date: June 23, 2015

The U. S. Court of Appeals for the Federal Circuit recently held that a potential competitor has suffered a “competitive injury” within the meaning of the revised False Marking Statute, 35 U. S.C. § 292, only if it has attempted to enter the relevant market by displaying an intent to enter the market with a reasonable possibility of success and taken action to enter the market.

In 2004, Ponani Sukumar founded Southern California Stroke Rehabilitation Associates, Inc. (“SCSRA”) to open and run senior rehabilitation facilities with customized equipment ordered from Nautilus, Inc. Sukumar twice attempted to negotiate a patent license for the altered equipment, including in a proposal to settle litigation between the parties.  In 2010, Sukumar sued Nautilus, claiming that its false marking of patents on fitness equipment caused SCSRA to suffer a competitive injury under 35 U.S.C.  § 292(b).

In 2012, the district court entered partial summary judgment in favor of Sukumar, finding that some - but not all – of the patents marked on certain Nautilus fitness machines did not cover the machines. On the ongoing litigation, Sukumar alleged that the false marking of the fitness machines caused him and SCSRA to suffer a competitive injury. The district court, however, subsequently entered summary judgment against Sukumar, holding that Sukumar had not suffered a competitive injury within the meaning of the statute.

On appeal to the U.S. Court of Appeals for the Federal Circuit, the court explained that a potential competitor (such as SCSRA here) lacks standing to pursue a claim if it had only a subjective intent to compete, but never actually attempted to put the idea into practice. The court reasoned that a potential competitor cannot have suffered a “competitive injury” unless it has engaged in competition, which is demonstrated with evidence that it has (1) actually attempted to enter the market, which includes intent to enter the market and (2) has taken action to enter the market. The Court of Appeals affirmed the district court’s dismissal of Sukumar’s claim because he failed to establish that SCSRA intended to compete with Nautilus or that SCSRA actually attempted to enter the market for fitness machines.

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