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Infringement Claim Sent to District Court with New Defendant

The Court of Federal Claims granted a motion to transfer a patent infringement claim to federal district court because the CFC lacked jurisdiction over the claim, the district court would have had jurisdiction at the time the claim was originally filed, and the transfer served the interests of justice. The dispute involved a third-party claim against the government alleging components of the F-22 fighter plane infringed the claimant's patent. The suit was brought under 28 USC 1498(a), which provides a remedy against the government in the CFC for patentees whose patents are "used or manufactured" by government contractors acting with the "authorization or consent" of the government. After the Court of Appeals for the Federal Circuit issued a decision finding there was no government liability under 1498(a) because part of the patented process was performed outside the United States, and the CFC lacked jurisdiction over the claim (442 F3d 1345), the claimant moved to transfer the claim to district court under 28 USC 1631 and to substitute the contractor that manufactured the aircraft as defendant. Opposing the motion, the government argued, under the Federal Circuit's decision, that no court had jurisdiction over the claim.

Three Elements Present

Under 28 USC 1631, a civil action may be transferred to another forum when the transferor court lacks jurisdiction, the transferee court would have had jurisdiction at the time the original case was filed, and transfer would serve the interests of justice. Here, all three prongs were met. First, the Federal Circuit already found the CFC lacked jurisdiction over the claim. Second, although the original complaint alleged a cause of action against the government under 28 USC 1498(a), and the district court would not have had jurisdiction over the government, the district court could have asserted jurisdiction if the complaint properly alleged a claim against the contractor under the Patent Act (35 USC 271). The claimant was granted leave to amend the complaint to change the statutory basis of the claim, and to add the contractor as a defendant, because the factual basis for the claim remained the same and the contractor would not be unduly prejudiced. Third, the claim could be time-barred if transfer were denied. Moreover, the contractor was involved in discovery in the earlier phases of the litigation, and the claimant encountered several issues of first impression, so the interests of justice favored a transfer.

No Contractor Immunity

The government had argued "1498 takes away the patentee's right to bring an infringement action against a [contractor] and substitutes an action for compensation against the [g]overnment," citing a 1928 Supreme Court case stating Congress enacted 1498 "to relieve the contractor entirely from liability of every kind for the infringement of patents in manufacturing anything for the government" (275 US 331). However, 1498(a) only insulates contractors from suit when the government can be found liable, and 1498(c) provides that the provisions of 1498 do not apply to claims arising in a foreign country. Therefore, "1498(c) must be construed to nullify the contractor immunity provision of 1498(a)." There was no evidence in the legislative history that the "authorization or consent" language was intended to establish patent infringement immunity for contractors in cases where the government cannot be held liable. Further, "[c]onstruing 1498(a) ... to incorporate all forms of liability defined in [the Patent Act] ... would be contrary to legislative intent and would be inconsistent with the language of 1498 as a whole." Finally, even if 1498(a) insulated contractors from suit when 1498(c) was triggered, 1498(a) would still not prevent the exercise of jurisdiction by the district court, because 1498(a) is an affirmative defense, not a jurisdictional bar. (Zoltek Corp. v. U.S., FedCl, 53 CCF 79,053)

(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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