by Dennis Crouch
The US Federal Government does not get a free-pass on patent infringement. Rather, the Government’s unlicensed use of a privately held patent constitutes infringement and is actionable. However, Congress created a special court to hear the cases (the Court of Federal Claims), and implemented a number of restrictions on both the adjudication process and the substantive rights that all tend to favor the government as defendant. See 28 U.S.C. § 1498. Generally, patentees would prefer to litigate in Federal District court.
Further, Congress created a special indemnity that bars lawsuits against government contractors and others doing the work of the Government. Under the statutory indemnity, when a patented invention “is used or manufactured . . . for the United States [Government] . . . the owner’s [only] remedy shall be by action against the United States in the [US] Court of Federal Claims.” 28 U.S.C. § 1498(a).
In Iris Corp. v. Japan Airlines Corp. (Fed. Cir. 2014), the patent at issue basically covers the method of manufacturing an identification document (such as a national Passport) with an in-laminated RFID chip. US Patent No. 6,111,506. As required by US Law, Japan Airlines examines passports before allowing its passengers to board international flights leaving the US The patent holder here is the Malaysian company Iris Corp. who competes in the market for this type of ID technology.
Iris sued in Federal District Court under 271(g) for using the electronic passports that had been made abroad (namely Japan) but in a manner within the scope of the patented claims. In response, Japan Air and the US Government (as amicus) argue that the indemnity provision of Section 1498 eliminates both (a) the jurisdiction of the District Court and also (b) the liability of Japan Airlines.
Infringement Done for the United States: The legal question on appeal is whether’s Japan Airline’s alleged use of the patented invention was done “for the United States.” The statute spells out a partial definition of “for the United States” as being done “for the Government and with the authorization or consent of the Government.” In its 2009 decision, the Federal Circuit further explained that the infringement must be “for the benefit” of the US and that benefit may not be merely “incidental.” Advance Software. The court here finds that, under this framework, Japan Airline’s activities were done for the Government and thus the case falls under Section 1498.
Is Infringement Required?: A critically element of the court’s decision (in my view) was the court’s factual conclusion that “JAL cannot comply with its legal obligations without engaging in the allegedly infringing activities.”
At first this statements appears at odds with the reality that, although the law requires Japan Air to inspect passports, it does not require that the e-chip be used. Rather, it appears that manual inspection without reliance on the e-chip is also fully acceptable under the law. The US Government writes: “While there may be some ability for the airline to determine the best way to make the needed comparison, it may not decline to examine the passport.”
One way to reach the court’s conclusion that infringement is required is to recognize that the case is a 271(g) infringement action that would create liability for any use of a product made by the patented process even if the particular-use does not take advantage of the product benefits. Under that theory, every US-inspection of an e-chipped-passport, regardless of how it is conducted and even if manual, constitutes infringement.
In addition to the fact that infringement was required by federal law in order to participate in the marketplace element, the court here also found it relevant that border security is a core role of the federal government and that Japan Air’s actions here are quasi-governmental. That finding led to the conclusion that the alleged infringement was done for the non-incidental benefit of the US.
Although in this case the US Government agreed that it should be the defendant, and important take-away from this decision is that the company infringing need not have any contractual relationship with the US Government or that the US Government be given any notice of the ongoing infringement. Rather, under the law, a private company (her Japan Air) is able to decide to conduct its business in a way that infringes a patent but that only creates liability for the Government.
Next stop Court of Federal Claims?: One reason why the patentee sued in district court was that – at the time of the filing – it appeared that 271(g) actions could not be brought against the US under 1498. The Federal Circuit changed that rule in Zoltek Corp. v. United States, 672 F.3d 1309, 1323 (Fed. Cir. 2012) (en banc). One question is whether the long delay in filing in the CFC has tripped some statute of limitations for filing suit.
This case would be much more interesting (from my academic perspective) if Japan Air could carry out its required function without infringing, but had made the business decision to inspect the passports in a way that infringed.
It strikes me as tremendously inefficient to try the same case twice, once in court and a second time in the court of claims. This probably happens a lot when a defendant is making and selling something both to the government and to the public.
Does anyone know if there is a procedure whereby both cases could be consolidated in court? If not, this truly is something congress needs to take look at.
Ned, in most of the numerous cases in which a patent owner have attempted to sue a defense contractor or other govenment supplier in a District Court [cases in which gorvernmen “authorization and consent” is usually clearer than it was here] the D.C. suit simply gets promptly thrown out jusidictionally. [I have wondered why sanctions are not awarded more often.]
That argument is not in any way supported by the fact patterns at hand.
They can’t be consolidated because the CFC only has jurisdiction over claims against the government. Suing a private defendant in the CFC would be unconstitutional, and the Tucker Act clearly limits claims against the government above a certain amount to the CFC.
Mr. Guest, My dear Sir, while I may personally agree with your sentiment that bringing a patent infringement case in an Article I court is unconstitutional for number of reasons, I don’t think you have heard that the Federal Circuit has ruled in the Patlex case that a patent is a public right as a patent can only be created by statute. And of course, you know, if a patent is a public right, Congress has plenary power to locate adjudications regarding that right anywhere it so pleases and totally keep the courts out of it – with no right of appeal even – unless Congress authorizes an appeal.
Now one might think that Patlex might be wrongly decided, but we shall see what the Federal Circuit says about that.
Patent infringement cases are jury matters when between private parties. The Supreme Court has been clear that infringement is, as in Markman. Patent validity, perhaps, is a different concern. I’ve always felt that patent validity is much more like a collateral attack on a contract. Professor Kerr, who isn’t a patent expert, wrote a very good article about the contractual nature of the patent granting system in the administrative state. A patent is essentially a contract with the government which gives you a private right of action. If you satisfy the terms of the offer (compliance with sections 101, 102, 103, 112) then you get the right. If you aren’t given it, you can sue for specific performance in the District Court (or appeal to the Fed. Cir.). It’s a pretty classic unilateral contract situation.
Because a patent is similar to a contract with the government, that there would be no right to a jury trial on validity only is not surprising. But the Patlex case draws a line between infringement and validity. Validity is a public right because patents are a contract with the government. Infringement is a private right because it is a dispute about property trespass, essentially a private dispute.
I don’t know that Patlex is necessarily wrong, I just think that you are citing it for a far too expansive proposition. Judge Nies’s dissent in In re Lockwood is quite strong, and I imagine that if the case had not been mooted by the parties, the Supreme Court would have agreed with Judge Nies.
All of which is to say: If there is a right to a jury trial on patent infringement, as the Supreme Court’s precedent suggests, then you cannot sue both the government and a private entity in the same court for infringement (unless the claim falls under the Little Tucker Act’s jurisdiction for district court). I’m fairly sure that the CFC jurisdictional provision has been interpreted to exclude claims against private defendants, but I’m not an expert.
You know, Guest, what is clear to anyone who really pays attention, the Federal Circuit really doesn’t get it — at least not historically. They may be changing their stripes due to the repeated 9-0 reversals its has had, and further considering the nasty asides the court has included in its opinion about the Federal Circuit not understanding basic patent law, or for that matter the difference between equitable and legal title, or laches vs. legal cause of action having a statute of limitation, or the holding of the Supreme Court that patents are joint property that can only be enforce/licensed jointly — and the beat goes on. The court makes fundamental errors time and again because it simply chooses to ignore control precedent.
The Patlex case stands by itself without case law support. No other case has ever gone so far as Patlex — especially in view of the weight of Supreme Court authority it essentially overruled. Patlex cannot be right and be consistent with the constitution.
Patents are property. Their enforcement and their repeal are matters only for the courts and congress had no power to alter this under our constitution.
“At issue is a right that only be conferred by government.” Patlex at 604.
The court held a patent to be a “public right” as it could only be conferred by government. Validity, in contrast, was a “public concern.”
Now contrast to what you said,
“But the Patlex case draws a line between infringement and validity. Validity is a public right because patents are a contract with the government. ”
Your premise is faulty as you do not seem to understand the holding of Patlex. Validity is not a right, it is the state of a patent.
Now if a patent is a public right, there is no right to a jury trial at all.
Now think about this, in patent infringement cases since the 1600’s, patent validity, just as much as infringement, has enjoyed a right to a trial by jury. The cases affirming this are legion. And yet that cannot be if a patent is a public right.
Also, actions to repeal a patent for invalidity were commonplace in England prior to 1792. The enjoyed a right to trial by jury. Why? Perhaps patents were even then viewed a property?
And yet a patent is a public right — to be conferred and cancelled by the Executive at its whim? Have you read Marbury v. Madison?Public rights are rights of the government, between itself and those that it regulates. In contrast, the Supreme Court held that right conferred by statute cannot be revoked by the Executive — only by the courts. That was the whole point of that case.
There are no Supreme Court cases anywhere that support the absurd theory propounded in Patlex. Nowhere. The Supreme Court has ruled that if a right enjoys a right to a trial by jury, it cannot be a public right. Such is a patent. It is a private right, and actions to both enforce it and to repeal it enjoy a right to a trial by jury.
Patlex is absurd.
Guest, even Kerr recognizes that a patent is property:
From page 130 of his article:
“If an application satisfies the Patent Act, then the offer has been accepted; a binding contract exists, and the PTO must issue the property right of a patent as consideration.”
Dennis and Ned discuss below whether the government, having intervened here, will just cut a check to IRIS or really contest the claim.
I certainly hope the government does resist here. The patent in question, 6111506, is a land grab by people who haven’t invented anything.
Patentees claim combining RFID technology (patented in 1973) with ordinary passport making techniques that were known long before filing. The two technologies are described in vague terms that contribute nothing to the art and claim vast broad uses. The combination of radio tracking technology and documents were known and discussed long before the priority date. A dozen hours of library research will produce an easy §102 IPR rejection or at least a §103. Or can Federal Claims just invalidate a patent itself?
The mystery, of course, is why we have a system that presumes the validity of patents when they aren’t examined seriously. The presumption of validity needs to go (or examination needs to change drastically).
Owen, given how badly some examiners do their jobs on a seemingly routine basis, I am coming to the view that the compensation/quota system is part of the problem, if not the entire problem. A notice of allowance, causally given, is a problem to the public, and the casually part has to be discouraged, rather than encouraged.
Serious question here: How much time do patent attorneys generally spend responding to Office actions? I know it will vary by case and by technology, just as an examiner’s time spent on any given case will vary with the field, the cases’s complexity, no. of claims, etc. But for an examiner, the time spent needs to average out to their quota. For instance, a primary examiner in organic chemistry (class 564) is expected to conduct prosecution in 17 hours (that’s all-inclusive – reviewing the application, prior art searches, inventor/assignee search, reviewing IDSs, writing up a first Office action, responses, after-finals, allowances/examiner’s answer, etc.). In the polymer fields (520 series) it’s 16.5 hours. What’s a ball park estimate for how much time attorneys might bill for their side of prosecution in a particular art?
Both the compensation and the quota system are problems – but so is a lack of adequate supervisory review. The SPEs don’t have enough time to train new examiners properly, and they and the quality assurance people don’t have enough time to properly review enough allowances. I also think having just one person examine the case is an issue – I think cases ought to be handled by a panel of examiners, similarly to the board.
Responding? Depends of course. But typically it doesn’t take much time at all if the attorney is familiar with the case. He can read the action, the identified prior art and figure out a response in about an hour. Drafting it, another hour.
RH, doesn’t it seem odd that we pay a lot for extra claims but actually get nothing for it if the examiner is not allotted extra time to examine these claims.
Back to allowances. Rejections are reviewed ultimately by the Board. But allowances can be a problem for the public. The Office should review them at effectively the same level as the Board before they are approved.
It seems to me that the fees for extra claims are just a disincentive the Office imposes to (they hope) decrease the number of claims submitted to the examiner. It does seem strange that the number of claims does not affect how much time an examiner is given. I sometimes see bio cases with hundreds of claims and wonder what’s the point of filing those – an examiner obviously can’t thoroughly consider that many. It’s just asking for a species election requirement or a less than thorough examination.
On the other hand, with that in mind, an attorney could counsel their client that because some examiners cherry-pick the cases with a smaller number of claims, they stand a chance at faster consideration by submitting fewer claims.
I think that allowances should be reviewed more often than they currently are, but there are simply too many to have all of them reviewed. The Board only considers the small percentage of applications cases that go to appeal – far fewer than get allowed.
RH, doesn’t it seem odd that we pay a lot for extra claims but actually get nothing for it if the examiner is not allotted extra time to examine these claims.
Management tells us that it all averages out in the end.
As for adjusting the number of claims that you file in an effort to get faster consideration: a case with a hundred claims will pretty much always either be restrictable or it’ll be a dog (a giant pain in the posterior). But a case with 20 claims can sometimes be easier than a case with 10, depending on what’s being claimed. Trivial dependent claims or claiming “deep” (i.e., not just making everything dependent from claim 1) tend to make a case easier.
Dennis, do you know why Congress moved the existing Art. I judges of the former court of claims to the Federal Circuit in ’82 and then replaced the old court of claims with a new court that was an Art. I court? Was it because they wanted to give claimants fewer rights as you imply, such as no jury trials?
Just to clarify the history —
Prior to 1982, the U.S. Court of Claims judges were Article III judges. There was a separate group of trial commissioners who were part of the Court of Claims, but who were Article I judges. The trial commissioners conducted the evidentiary hearings, and their decisions were reviewed by the Art. III judges on the Court of Claims.
The FCIA in 1982 combined the Art. III Court of Claims judges and the Art. III judges on the C.C.P.A. to create the Federal Circuit. The Art. I Court of Claims trial commissioners became the U.S. Claims Court (as the CFC was previously known).
So the procedures are essentially the same for Claims Court proceedings before and after the 1982 FCIA — Article I judges heard the evidence, and Article III judges heard the appeals. The rearrangement of the Art. III judges to create the CAFC didn’t result in giving claimants fewer rights. The evidentiary hearing was always conducted before Art. I judges. Also, there has never been a right to a jury trial in the Court of Claims. Court of Claims actions were only permissible as a result of waiver of sovereign immunity, so Court of Claims cases have never been a “suit at common law” for which the Seventh Amendment would guarantee a trial by jury.
Pilgrim, thanks. This was really helpful and informative.
And Pilgrim, regarding your comment about “suits at common law,” the Federal Circuit has already ruled in PatLex that a patent is a public right. As such, Congress has plenary powers with regard to patents and can wholly withdraw from Article III courts all patent litigation – meaning there really is no constitutional right to a trial by jury for infringement of patents.
What I’m saying here is that patent litigation could be assigned to the Federal Court of Claims.
But you would say that this is ridiculous because patents were litigated in the courts of England prior to 1792. A casual observer would say that is obviously correct, especially in view of Markman where the Supreme Court essentially held that there was no dispute that patent infringement actions enjoy a right to a trial by jury because they had that right in the courts of England prior to 1792.
But you must know, that the Federal Circuit has ruled that patents are public rights and therefore the Supreme Court must be wrong.
Some sort of statute of limitations?
You mean,
35 U.S.C. 286 Time limitation on damages.
Except as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.
In the case of claims against the United States Government for use of a patented invention, the period before bringing suit, up to six years, between the date of receipt of a written claim for compensation by the department or agency of the Government having authority to settle such claim, and the date of mailing by the Government of a notice to the claimant that his claim has been denied shall not be counted as a part of the period referred to in the preceding paragraph.
I suspect, having gone to bat for JAL, that the government will simply fork over the case without forcing a suit.
I believe that there are real non-infringement and invalidity issues in the case as well.
One other interesting note: It’s unclear whether the plaintiff could obtain remedy under 271(g), since it exempts “noncommercial use” of the product when remedy is otherwise available against someone who infringes by importing the product… and in this case, each individual passenger infringed by importing the passport to the US.
So, if Iris decides to file that CFC suit, the US could then argue that inspection of the passport is noncommercial because it is a government-mandated activity expressly for the furtherance of US security goals, and so no remedy can be had against the US since the passengers infringed for importing the passports under 271(g) and could be sued individually.
Noting as mentioned infringement is alleged (for these method-of-making the article claims) via 271(g), “Whoever … or uses within the United States a product which is made by a process”, what counts as “use”?
Is inspecting the security document by the airline a “use” of that document? What is a “use” of the security document (passport)?
Isn’t “use” of the document that which the passport holder does in obtaining permission to travel?
What if I decide to “use” my passport as a coaster so I don’t get condensation rings on my table from my beer mug tonight?
The Airline wasusing the security document as a security document to clear (or not) a potential passenger, and apparently using the rfid chip to pull up identity information and probably log the traveler with the U.S. Gov’t as someone about to board a plane.
The question of whether using the passport as a coaster qualifies as a use seems to be pretty far from relevant here.
In my state, officials can also use my passport to verify my identity prior to permitting me to vote.
Are poll workers committing an infringing use of my passport?
Its use is as a document by which I identify myself, correct?
Seems like “specific, substantial, and credible” should be informative here, but I don’t know of any case law on the subject.
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