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Limitation on Government Liability for Infringing Imports Reversed

In an en banc decision with one dissent, the Court of Appeals for the Federal Circuit vacated an earlier panel decision and reversed a Court of Federal Claims decision because the panel decision incorrectly determined there was no government liability for patent infringement under 28 USC 1498(a) if part of the patented process was performed outside the United States. Alleging carbon fiber products used in the F-22 fighter plane infringed its patent, a third party filed suit against the government in the CFC under §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 government's "authorization or consent." After the Federal Circuit panel found there was no government liability under §1498(a), because not all parts of the patented process had been performed in the U.S. (442 F3d 1345), the CFC granted a motion to amend and transfer the claim to district court ( 53 CCF ¶79,053). Accepting an interlocutory appeal, the Federal Circuit sua sponte revisited the panel's holding that direct infringement of a patent under 35 USC 271(a) was a predicate to government liability under §1498(a).

Reliance on Dicta

The Federal Circuit determined the panel's decision either deprived a patentee of a cause of action against both the government and contractors or "create[d] the possibility that the [government's] procurement of important military matériel could be interrupted via infringement actions against government contractors --the exact result §1498 was meant to avoid." The court found the panel's interpretation of §1498(a) was contrary to its plain language, which made no reference to direct infringement as defined in §271(a). The panel also misapplied its own case law and relied on dicta in equating infringement under §1498 with direct infringement under §271(a). In addition, the panel's interpretation rendered §1498(c), which eliminates government liability "for a claim arising in a foreign country," superfluous. It also vitiated the effect of 19 USC 1337(l), which refers to a remedy under §1498 for the importation of products made by a patented process if the products could have been excluded under §1337.

Scope of Direct Infringement

In delineating the government's liability under §1498(a), the Federal Circuit held §1498(a) created an independent cause of action for direct infringement by the government or its contractors that is not limited to §271(a) but includes acts covered under §271(g) due to unlawful use or manufacture. In addition, if products are imported or used in the U.S., a patentee's claim for relief does not "arise" in a foreign country and §1498(c) does not apply. Thus, "when the product of a patented process is used in, or imported into, the [U.S.] by or for the [government], there is direct infringement for purposes of a §1498 action." ( Zoltek Corp. v. U.S., CA-FC, 56 CCF ¶79,788)




(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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