By Jason Rantanen
Zoltek Corporation v. United States (Fed. Cir. 2012) (en banc in part) Download 09-5135
Majority: Rader, Newman, Lourie, Bryson, Linn, Prost, Moore, O'Malley, Reyna, and Wallach
We recently discussed the Federal Circuit's en banc opinion in Zoltek v. United States from this past spring in the Contemporary Issues in Patent Law tutorial that I run here at Iowa, and it prompted me to write up a summary.
Zoltek is different from your typical infringement case in that it involves a patent claim brought against the Federal Government for a contractor's actions, and thus liability arises through a separate statutory scheme. Zoltek is the assignee of a patent relating to methods of manufacturing carbon fiber sheets with controlled surface electrical resistivity. Lockheed Martin designed and built F-22 fighter jets for the Federal Government; the F-22 contains carbon fiber sheets that allegedly were produced through the method claimed in Zoltek's patents. However, the process for making the sheets was begun in Japan, the partially completed product was imported into the United States, and the process was completed in the United States, which created a significant problem for Zoltek's infringement claim.
In 1996, Zoltek filed a Complaint against the Federal Government in the Court of Federal Claims under 28 U.S.C. § 1498(a). Section 1498(a) states:
Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner's remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.
This statute does two things: first, it acts as a waiver of the government's immunity, and second, it operates an assumption of liability by the government, thus insulating the government contractor itself from liability. However, during an earlier stage of this case, the government argued that because the process was partially performed abroad, it did not fall under Section 1498(a). In a 2006 opinion (Zoltek III), a panel of the Federal Circuit agreed, and held that the scope of 1498(a) was limited to direct infringement under 35 U.S.C. § 271(a). (That opinion also rejected a Fifth-Amendment takings argument). Because 271(a) does not include manufacturing processes that are begun abroad and completed in the United States, the court concluded that the United States had not assumed liability under 1498(a).
The practical effect of the Federal Circuit's ruling was that on remand, Zoltek sought leave to amend its Complaint to add a claim against Lockheed for infringement of the patent under 271(g) and to transfer the action to federal district court. In granting Zoltek's motion, the trial court rejected the Government's argument that 1498(a) insulates government contractors from suit even when the government could not be liable. The Court of Federal Claims certified for interlocutory review the question "“whether 28 U.S.C. § 1498(c) must be construed to nullify any government contractor immunity provided in § 1498(a) when a patent infringement claim aris[es] in a foreign country.”
The Federal Circuit did not directly answer that question. Instead, the new appeal caused it to "re-examine the premises on which our earlier opinion in Zoltek III was based, and to reconsider the consequences of that opinion." 672 F.3d 1314. In other words, the panel had erred.
Revisiting the issue en banc, the court concluded that the correct interpretation of 1498(a) is that it creates a cause of action for direct infringement that is separate and different from 271(a), and that it could include conduct falling under 271(g). Infringement under 271(a) is thus not a necessary predicate for liablity under § 1498(a) as the earlier panel had held. Instead, the court reasoned, the Government's liability "under 1498(a) is linked to the scope of the patent holder's rights as granted by the patent grant in title 35 U.S.C. section 154(a)(1). As the patent grant has expanded over the years, so too has the coverage of § 1498(a)." 672 F.3d 1323. Applying this reasoning, the court concluded that the government could be liable here: "we hold that for the purposes of section 1498, the use or importation “within the United States [of] a product which is made by a process patented in the United States” constitutes use of the invention without lawful right because the products embody the invention itself." 672 F.3d 1326.
Judge Dyk, writing in dissent, disagreed both that the court had jurisdiction to address the issue of the scope of 1498 sua sponte, as well with as the court's revised interpretation.
The scope of 271(g): In concluding that the Government could be liable for Lockheed's conduct, the court held that "[i]f a private party had used Zoltek's patented process to create the resulting product there would be liability for infringing Zoltek's patent right under § 154(a)(1) and § 271(g)." 672 F.3d 1323. However, 271(g) states that:
Whoever without authority imports into the United States or offers to sell, sells, or uses within the United States a product which is made by a process patented in the United States shall be liable as an infringer, if the importation, offer to sell, sale, or use of the product occurs during the term of such process patent….A product which is made by a patented process will, for purposes of this title, not be considered to be so made after—