An en banc U.S. Court of Appeals for the Federal Circuit reversed a U.S. Court of Federal Claims decision that allowed a patent holder’s patent infringement claim against a government contractor under 35 U.S.C. § 271(g), holding that 28 U.S.C. § 1498(a) protects contractors from infringement suits arising from work they perform for the government. Zoltek Corporation v. United States et al., Case No. 09-5135; -5100, (Fed. Cir., Mar. 14, 2012) (Gajarsa, J.). The Federal Circuit sua sponte voted to take the case en banc for the limited purpose of vacating its earlier Zoltek decision and held that the trial court (Court of Federal Claims) had erred as a matter of law in authorizing the amendment of Zoltek’s claim against Lockheed and transfer of the case to a federal district court.

Zoltek patented a method for manufacturing a carbon sheet product that is used by the United States in making the low-radar-signature F22 fighter plane designed and built by Lockheed Martin. The carbon fibers and carbon fiber mats and sheets were manufactured in Japan and were provided to Lockheed’s subcontractors for use in the F22 fighter plane. Zoltek alleged that the mats and sheets were made for the United States using the claimed processes.

In 2006 the Federal Circuit affirmed a decision of the Federal Claims Court that the United States could not be sued under § 1498 because all method steps in making the carbon-fiber mats and sheets were not performed in the United States, basing government liability under § 271(a). In so doing, the Court relied on § 1498(c), which states “The provisions of this section shall not apply to any claim arising in a foreign country.” In its 2006 decision, the Court also reversed the judgment of the Federal Claims Court that the patent owner could allege patent infringement as Fifth Amendment taking under the Tucker Act, 28 U.S.C. § 1491. (See Zoltek Corporation v. United States, IP Update, Vol. 9, No. 4.) The Federal Circuit denied a petition for rehearing en banc on its holding that the U.S. Court of Federal Claims lacks jurisdiction of a takings claim for just compensation for unauthorized use by the government under the Tucker Act. (See IP Update, Vol. 9, No. 10.)

In Zoltek’s continuing saga of seeking compensation for the alleged infringement of its patent, the Federal Circuit now concluded (en banc) that the issue was whether the Court of Federal Claims properly allowed Zoltek to amend its complaint and transfer its claim for infringement under § 271(g) against Lockheed and remove the case to a United States district court under 28 U.S.C. § 1631. On the facts of this case, the Court held that the amendment and transfer were legal error occasioned in part by the Federal Circuit’s earlier decision.

In its new decision, the Court focused on § 1498(a), which states as follows:

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.

According to the Court, the earlier panel decision, limiting § 1498 to infringement under § 271(a), is inconsistent with the plain meaning of the statute and vitiates a Congressional scheme that spreads across three titles of the United States Code. According to the Court, the panel’s error created the possibility the U.S. government procurement of important military material could be interrupted via infringement actions against contractors, the exact result that the enactment of § 1498 was meant to avoid. The Court held that § 1498(a) “is more than a waiver of immunity and effects an assumption of liability by the government.” Thus, the Court concluded that the earlier per curiam interpretation of § 1498(a) was rooted in a fundamental misreading of the statute. By limiting § 1498(a) to activities within the United States, the earlier court had rendered § 1498(c) superfluous.

Practice Note: Under the Federal Circuit’s ruling, § 1498 provides a comprehensive scheme, independent and apart from § 271, to protect contractors, inventors and the United States. The proper forum for all such cases is the U.S. Court of Federal Claims.