A patent is a contract between the patent owner and the government that gives the patent owner the legal right to exclude others from making, using, selling and importing an invention for a limited period of years, in exchange for publishing an enabling public disclosure of the invention. But what happens when the infringer is the government itself?
The Eleventh Amendment of the U.S. Constitution provides immunity to the State Government of U.S. against any patent infringement lawsuit. The Eleventh Amendment reads:
“The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”
The import of the Eleventh Amendment is that state governments have sovereign immunity, which prevents individuals and private parties from suing them in court for money damages. However, it is still possible to sue state entities in Federal Court for an injunction. If a court finds that infringement occurred, an injunction is issued which requires that the infringing activities be ceased.
While it is impossible to sue a state government for patent infringement due to the protections of the Eleventh Amendment, it is possible to sue the Federal government of U.S. for infringement in the U.S. Court of Federal Claims. This is due to 28 U.S. Code § 1498, which waives the United States’ right to sovereign immunity and grants individuals and private entities the right to sue for infringement damages.
The statute 28 U.S.C. § 1498(a) states:
“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. Reasonable and entire compensation shall include the owner’s reasonable costs, including reasonable fees for expert witnesses and attorneys, in pursuing the action if the owner is an independent inventor, a non-profit organization, or an entity that had no more than 500 employees at any time during the 5-year period preceding the use or manufacture of the patented invention by or for the United States. Notwithstanding the preceding sentences, unless the action has been pending for more than 10 years from the time of filing to the time that the owner applies for such costs and fees, reasonable and entire compensation shall not include such costs and fees if the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.
For the purposes of this section, the use or manufacture of an invention described in and covered by a patent of the United States by a contractor, a subcontractor, or any person, firm, or corporation for the Government and with the authorization or consent of the Government, shall be construed as use or manufacture for the United States.
The court shall not award compensation under this section if the claim is based on the use or manufacture by or for the United States of any article owned, leased, used by, or in the possession of the United States prior to July 1, 1918.”
The statute explains that an owner whose patent has been infringed by the United States Government can sue the Government for recovery of his entire compensation or at least reasonable compensation. The compensation will cover owner’s damages and lost profits. The compensation may even include reasonable fees for expert witnesses and attorneys if the owner is an independent inventor or a non-profit organization or an entity with employee base up to 500 at any time during the 5-year period preceding the use or manufacture by or for the U.S. Government.
Authorization and Consent
The Government can also authorize its contractors to infringe another company’s patents when performing under a Government contract. Thus, an infringing contractor can use Government’s direction as a defense against patent infringement lawsuit. Therefore, a patent owner who sues the private party infringer in such cases is wasting its time and efforts. Instead, the owner needs to properly exercise its rights against the Government.
In practice, many Government contracts contain a standard Federal Acquisition Regulation (“FAR”) clause – “52.227-1 Authorization and Consent”- that states:
The Government authorizes and consents to all use and manufacture, in performing this contract or any subcontract at any tier, of any invention described in and covered by a United States patent-
(1) Embodied in the structure or composition of any article the delivery of which is accepted by the Government under this contract; or
(2) Used in machinery, tools, or methods whose use necessarily results from compliance by the Contractor or a subcontractor with (i) specifications or written provisions forming a part of this contract or (ii) specific written instructions given by the Contracting Officer directing the manner of performance. the entire liability to the Government for infringement of a United States patent shall be determined solely by the provisions of the indemnity clause, if any, included in this contract or any subcontract hereunder (including any lower-tier subcontract), and the Government assumes liability for all other infringement to the extent of the authorization and consent hereinabove granted.
However, if a contract or grant fails to contain this clause and the Government does not otherwise give its consent in some other form, a contractor or grantee may be liable for patent infringement.
The Government’s right to take patents can sometimes have extreme consequences. One such example is “Gerard T. O'BRIEN, Plaintiff, v. UNITED STATES, Defendant” case. The Government had developed a worldwide radio navigation system that was found to infringe a patent held by the plaintiff. Plaintiff alleged a series of continuing violations through which his intellectual property has been “taken” by the Government. The alleged taking occurred through both the Government's prevention of plaintiff's use of his patented process as well as by the Government's aid and inducement of others' infringement of plaintiff's property through their unlicensed use of his process. The Court of Claims noted that the Government’s action prevented the patentee from exploiting its patent. Since the Government’s system was already in use worldwide, it was incredibly far-fetched that anyone else would license the patent; there simply was no need for a second navigation system. The owner was restricted to obtain a reasonable royalty from the Government. Also, it did not receive any other damages for the fact that it was essentially put out of business.
While it may sound impossible to win a patent infringement case against the Government, it does happen. In 2016, SecurityPoint Holdings sued the Transportation Security Administration, alleging that the TSA infringed on its patent for a cart used to transport security screening trays. The TSA didn’t dispute that it had duplicated SecurityPoint’s design. Instead, it took the position that the cart system could be implemented by any skilled artisan, thus rendering the patent obvious and void. However, the judge ultimately found that while the invention was simple and was composed of a combination of simple items, that it was only a simple design in hindsight, and thus wasn’t obvious. The argument for the non-obviousness of the patent was bolstered by the fact that using the cart system resulted in an 80% increase in efficiency, which quickly led the TSA to implement the system nationwide.
While the prospect of filing a patent or copyright infringement suit against the Government is a daunting task, once the case makes it to court, you can be assured that the case will be judged on its merits, just like any other patent case. Like in any other infringement case, patent owner may file an administrative claim with the allegedly infringing agency for settlement.
If the agency denies the patent holder’s claims, the patent owner can file complaint in the U.S. Court of Federal Claims. But you must file complaint within six years after the infringement occurs. This also means that you will be able to collect only six years’ worth of damages.
Under the section 1498, a patent holder may obtain reasonable and entire compensation. The preferred basis for calculating damages in a section 1498 suit is a reasonable royalty which is the established rate that the patent owner actually asks in the commercial marketplace. The compensation may also cover reasonable fees for expert witnesses and attorneys, provided the owner is an independent inventor or a non-profit organization or an entity with employee base up to 500. The action could be taken during the 5-year period preceding the use or manufacture by or for the U.S. Government.
You may even collect damages for lost profits. To do so, a patent owner must show the strictest proof that the plaintiff would in fact have earned and retained those sums on its sales to the Government but for the infringement.