It's Not Always Good to Be the KingZoltek Corp. v. United States, No. 2009–5135 (Fed. Cir. Mar. 14, 2012)  (Chief Judge Rader and Judges Plager and Gajarsa; court sat en banc with respect to Part I-B)

When can you sue the U.S. government for patent infringement? In general, the federal government has sovereign immunity (that is, immunity by right of being the government) to lawsuits under the Eleventh Amendment to the Constitution, but Congress waived that immunity for at least some types of patent infringement. 28 U.S.C. § 1498(a) allows suits against the federal government “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…”

That section goes on to state that the U.S. will immunize government contractors accused of patent infringement and accept liability. The main issue here is whether the waiver of sovereign immunity extends beyond direct patent infringement.

Shooting Down a Patent Suit

Lockheed Martin designed and built the F–22 fighter jet for the U.S. military. Some of the components are partially manufactured in Japan and then finished in the U.S. Zoltek has a patent that allegedly covers the method that was used to make those components.

It used to be that Zoltek would have had no patent infringement claim, because its patented method wasn’t performed completely in the U.S. But in 1988, Congress amended the law to add 35 U.S.C. § 271(g). This section makes it infringement to import a product made by a process that’s covered by a U.S. patent.

Zoltek sued the U.S. in the Court of Federal Claims (CFC) for patent infringement. But the court held that section 1498(a) doesn’t apply to the new type of infringement created by section 271(g). In an earlier appeal, Zoltek Corp. v United States, 442 F.3d 1345 (Fed. Cir. 2006) (Zoltek I), the Federal Circuit went further, holding that section 1498(a) only applies to direct patent infringement under section 271(a).

So Zoltek tried to add Lockheed Martin to its complaint. Without the U.S. as a party, the CFC found that it didn’t have jurisdiction. But before transferring the case, the trial judge certified a question to the Federal Circuit, asking whether Lockheed still had immunity because infringement occurred abroad. (Section 1498(c) says that the waiver of sovereign immunity doesn’t apply to “any claim arising in a foreign country.”) The Federal Circuit accepted the appeal.

And For My Next Trick

As the Federal Circuit recognized, its hands were tied by the earlier panel decision in Zoltek I. If section 1498(a) only applies to direct infringement under section 271(a), there’s no immunity for Lockheed, no matter where it occurred. But that seems inconsistent with the whole point of the statute, which is to immunize contractors from patent infringement lawsuits.

The court chose to sit en banc for the limited purpose of vacating the original Zoltek I decision. Only Judge Dyk (who was on the first panel) dissented. (The other two members of that panel, Judges Gajarsa and Plager, have since assumed senior status and did not vote.) This isn’t unheard of, although it is unusual.

The en banc section, which is on pages 15–25 of the opinion, can be summarized pretty simply. The court looked to the original purpose of the statute and decided that limiting the government’s waiver of immunity to only direct infringement under section 271(a) is inconsistent with Congress’s intent. It vacated the original Zoltek decision.

The panel then went on to hold that direct patent infringement under section 271(g), which is infringement by importing a product made by a patented process, is “use” under section 1498(a), which waives the government’s immunity for using or manufacturing a patented invention. The court analyzed the language of various sections of the Patent Act and concluded that this was the result that Congress intended.

That’s What You Think

Judge Dyk dissented. He first argued that the court had no business even addressing the earlier panel decision, let alone vacating it, because the question addressed there wasn’t being appealed; the claims against the U.S. had already been dismissed from the case. The en banc court’s decision brought those claims back to life.

While I take Judge Dyk’s point, I don’t think this is his best argument. The reality is that if the court simply reinterpreted the statute (granting Lockheed immunity) but left intact the dismissal of the claims against the U.S., the case would go back to the CFC and the court would enter final judgment in favor of the defendants. Zoltek would then appeal the dismissal of the claims against the U.S. on the grounds that the law was now clear that the U.S. had waived sovereign immunity against claims for patent infringement under section 271(g). And Zoltek would win. We end up with the same result, but at much less cost for everyone.

I think the stronger part of Judge Dyk’s dissent is his argument that the majority’s interpretation of section 1498(a) is wrong. There is a strong presumption against interpreting statutes to have any effect outside the United States. And in fact, section 1498(c) specifically says that the waiver doesn’t apply to “any claim arising in a foreign country.”

Judge Dyk also argued that there’s no reason to believe that Congress intended to modify section 1498(a). Section 1498(a) was last amended in 1949, before the 1952 Patent Act was enacted and decades before Congress added section 271(g) in 1988. Judge Dyk also noted that when Congress added section 271(g), it amended the statute dealing with actions at the International Trade Commission to add this new type of infringement claim, but it didn’t amend section 1498(a). He argued that Congress clearly knew how to alter other statutes to deal with the change to the patent infringement section, so if it wanted to change the government’s waiver of immunity, it could have done that.

From a statutory interpretation perspective, I think Judge Dyk has to be right. As Judge Dyk pointed out, 271(g) isn’t the first time Congress added a section to deal with patent infringement activities abroad. Section 271(f) essentially says that it’s infringement to ship the components of a patented invention abroad, even if the components themselves don’t infringe. Congress enacted that section in order to overturn Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972), which expressly limited patent infringement to activities in the U.S.

And Back We Go

But the court didn’t agree. So, the case goes back to the Court of Federal Claims, where Zoltek can now pursue its patent infringement claim against the U.S. government. Lockheed is immune from suit.

The holding here isn’t likely to have a broad effect. The interesting thing about the opinion is the court’s willingness to stretch its interpretation of the statute in order to extend the reach of U.S. patent laws.

Did the court overreach? What do you think?

Photo credit: Rennett Stowe