Just a few weeks back the Federal Circuit decided an interesting patent infringement case in which the U.S. government waived its sovereign immunity from suit. In this case, the plaintiff, Iris Corporation, had originally brought suit against Japan Airlines Corporation for infringement of its patent on an electronic passport system. What is even more interesting about this case is that it involves 28 USC §1498(a). This is a little-known statute governing patent infringement activities by the United States government and the requirement to adjudicate such suits in the specially-created Court of Federal Claims. See Iris Corp. v. Japan Airlines Corp., 769 F.3d 1359, (Fed. Cir. October 21, 2014).

The patent at the center of this dispute is Iris’s US Patent No. 6,111,506. This patent relates to a method for manufacturing a secure electronic passport, which consists of a computer chip containing biographical and biometric information of the passport holder. In the aftermath of 9/11, the U.S. government made electronic passports mandatory. To comply with this requirement, defendant Japan Airlines used such electronic passports for the processing and boarding of passengers at its check-in facilities throughout the United States. Iris brought suit against Japan Airlines in the U.S. District Court for the Eastern District of New York, seeking treble damages for willful infringement. Japan Airlines motioned for dismissal for failure to state a claim on the ground that §1498(a) requires the suit can only brought in the U.S. Court of Federal Claims. The District Court agreed, dismissing the suit. Iris appealed the decision to the Federal Circuit.

As an aside, Iris did not originally bring suit in the Court of Federal Claims, because it had been thought that 35 USC §271(g) infringement actions –importation of foreign goods – could not be brought against the US government under §1498(a).  The Federal Circuit subsequently clarified this rule in Zoltek Corp. v. United States, 672 F.3d 1309, 1323 (Fed. Cir. 2012) (en banc).

In affirming the District Court’s decision to dismiss the suit, the Federal Circuit made it clear that §1498(a) is the exclusive remedy. The Court quoted from §1498(a) stating “[w]henever an invention described in and covered by a patent . . . is used or manufactured by or for the United States . . . the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims.” The Court explained that “[t]he statute further clarifies that an accused activity is considered as being “for the United States” if two requirements are met: (1) it is conducted ‘for the Government’, and (2) it is conducted ‘with authorization or consent of the Government’.” The Court then went on to explain that the government had provided its authorization or consent because Japan Airlines cannot comply with the passport screening obligations without engaging in the allegedly infringing activities.  Also, it was clear from the facts that the use was done for the benefit of the government, because it improves the detection of fraudulent passports and enhances border security. “When the government requires private parties to perform quasi-government functions, such as this one, there can be no question that those actions are undertaken ‘for the benefit of the government’.” The Court concluded the United States had also affirmatively waived sovereign immunity in this case and that Iris’s exclusive remedy is to bring suit for recovery against the United States in the Court of Federal Claims.

This case raised a few thoughts in my mind. It seemed somewhat odd that the question of whether there was a taking of Iris’s patent rights by the US government was never squarely addressed. Furthermore, the related question of the granting of a compulsory license by the government and other parties did not seem to enter into the mix. Also, the theory of the infringing activity seemed to be under 35 USC §271(g), which relates to the importation of infringing goods, which then almost begs the humorous question of whether the passengers were considered imported goods.

However, what I find most intriguing about this case is that a private company made a decision to screen passports in an allegedly infringing way – even supposedly in the face of noninfringing alternatives – and that this activity created liability for the US government.