UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT, DECISION OF 14 MARCH 2012, ZOLTEK CORP. V. UNITED STATES NO. 2009-5135 (EN BANC)
The United States Court of Appeals for the Federal Circuit ruled, en banc, to reverse its own precedent and close the remedy gap for patentees seeking to pursue infringement claims against the United States where the infringing product has been made outside the U.S., either in whole or in part.
Under 28 U.S.C. §1498(a), government contractors can claim immunity from suit for patent infringement occurring within the U.S. on behalf of the United States. Prior to this decision, suit could proceed against the government for infringement but not, in the case of a process claim, if any part of the infringing process was performed outside the U.S. In that case, the patentee was left without a remedy because neither the United States nor the contractor could be held liable.
In 1996, Zoltek, the assignee of a patent for a method of production of carbon fibers, brought an infringement suit against the United States under §1498(a) due to the alleged infringing actions of Lockheed Martin, a government contractor. Zoltek alleged that Lockheed created the fiber materials in Japan, and then completed the patented process by forming the fibers into the infringing sheets in the U.S. The sheets were used to build F-22 fighter jets pursuant to a government contract. The trial court, relying on the Federal Circuit’s earlier precedent, held that, because part of the infringing production took place outside the U.S., Zoltek had no claim against the government under 28 U.S.C. § 1498(a). Instead, Zoltek’s remedy was in a suit against the government contractor alone under 35 U.S.C. § 271.
On appeal, the Federal Circuit found it was not proper to add Lockheed Martin as a defendant because the statutory language and congressional intent indicated, while there should be no gap in remedy for a patent holder, the liability for infringement properly lay with the United States, not the contractor. In reaching its decision, the court undertook an extensive analysis of the statutory language of §1498 and of related patent statutes. The court noted that, although 19 U.S.C. §1337(a)(1)(B)(ii) permits process patent holders to petition the International Trade Commission to preclude importation of infringing goods, that subsection does not apply to goods imported by or for the United States. According to §1337(l), parties enduring infringement by products that would have been excludable but for the United States’ receipt of the goods, should find remedy in suit under §1498(a). The court also found that the statutory language unambiguously reflects Congress’ intent that patentees should have a remedy in suit against the government, even though there would not be a valid suit under §271(a).
The Federal Circuit determined that the act of importation and use of products, by or on behalf of the United States, that are made by a patented process outside of the U.S., is an improper use of a patented product. Reversing the trial court’s decision, the court held that: "when the product of a patented process is used in, or imported into, the United States by or for the United States, there is direct infringement for the purposes of a §1498(a) action."
Thus, the Federal Circuit held that Zoltek’s complaint against the United States is proper under 28 U.S.C. §1498(a), the United States’ sovereign immunity is waived, the government is subject to suit and the government contractor is immune from suit.
This decision closes the statutory gap that deprived patentees of a remedy for infringement by, or on behalf of, the United States where the infringing activities take place at least partially abroad.