Addressing the issue of just compensation under the Invention Secrecy Act, the U.S. Court of Appeals for the Federal Circuit reversed the Court of Federal Claims and held that Honeywell’s patent at issue was valid and that Honeywell had standing to seek just compensation for pre-issuance use and post-issuance infringement of the patent by the United States. Honeywell Int’l, Inc., et al. v. United States, et al., Case No. 02-CV-1909 (Fed. Cir. Feb. 19, 2010) (Moore, J.) (Mayer, J. dissenting in part).

The patent-in-suit relates to passive night vision goggles (NVGs) that are compatible with a full-color display when both are used in an aircraft cockpit. Generally, NVGs function by amplifying available light, specifically light having relatively long wavelengths. A problem arises with the use of NVGs in aircraft cockpits because the cockpit displays often use red warning lights, a type of light that can overwhelm the NVG sensor and lead to disruption of vision through the NVGs. Prior art solutions involved eliminating or dimming red lights from cockpit displays. The government addressed the red-light problem by issuing an order that prohibited the use of red lights in NVG-compatible cockpits.

In 1985 Allied Corporation filed the application that matured into the patent in suit, the described invention was directed to a way of making NVGs compatible with red lights in aircraft cockpits. The invention employed a combination of filters, one of which allowed a narrow band of red light to pass, while another blocked all other ambient red light from reaching the NVG sensors. Together, these filters allowed the use of red lights in a cockpit display without disrupting the NVG sensors. Pursuant to the Invention Secrecy Act, a Naval Air Systems Command engineer reviewed the application and concluded that a secrecy order should be imposed. The secrecy order prevented the patent from issuing every year until 2000. By 2000, Allied Corporation merged with Honeywell to become Honeywell International . Consequently, Honeywell acquired ownership rights in the application. Honeywell later amended the claims of the application, which ultimately issued as the patent in suit.

After the patent issued, Honeywell filed a complaint in the Court of Federal Claims against the United States seeking just compensation under the Invention Secrecy Act for pre-issuance use of the invention and under 28 U.S.C. §1498 (a) for post-issuance infringement of certain claims that had been added to the application after the secrecy order had been lifted. The claims court held that the United States did infringe a claim of the patent, but that the patent was ultimately invalid. The claims court further held that Honeywell lacked standing under the Invention Secrecy Act to bring suit finding that, because of claim amendments and newly added claims, the patent in suit did not issue upon an application that was subject to a secrecy order pursuant to §181. Lastly, the claims court concluded that the “first sale doctrine” precluded Honeywell from recovering damages from the government for infringing on the patent because Honeywell manufactured and sold the NVGs at issue to the government. Honeywell appealed.

The Federal Circuit reversed, finding that the United States failed to meet its burden of proving that the patent was invalid. The Federal Circuit also reversed the claims court finding that Honeywell failed to establish a causal link between its injury and the United States’ conduct. According to the Invention Secrecy Act, “[t]he owner of any patent issued upon an application that was subject to a secrecy order … shall have the right, after the date of issuance of such patent to bring suit … for just compensation for the damages caused by reason of the order of secrecy and/or use by the Government of the invention resulting from his disclosure.” The claims court found that Honeywell’s amendments to the application were so dramatic that there was no “contiguous relationship or dependence between” the application on which a secrecy order had been imposed and the issued patent. As such, the claims court determined that the patent did not issue “upon” the application and that there was no causal link between Honeywell’s claimed harm and the secrecy order. The Federal Circuit rejected this “continuous relationship” test and noted that the Invention Secrecy Act explicitly allows for amendments made to an application. Therefore, because the patent in suit matured from the application that was subject to the secrecy order, Honeywell had standing to assert a claim for just compensation.

The Federal Circuit further rejected the claims court application of the first sale doctrine. Under the first sale doctrine, an inventor is precluded from seeking damages from the United States if an authorized first sale under the U.S. patent occurs prior to bringing the action. The claims court found that an authorized first sale occurred during Allied Corporation’s ownership of the application, when Allied manufactured and sold the invention disclosed and claim in the application to the government. The Federal Circuit rejected this application of the first sale doctrine and stated that “the fact that Honeywell now owns the patent does not retroactively authorize the earlier sale.” Accordingly, the first sale doctrine did not preclude Honeywell from recovering damages against the government for its infringing use of the patent.

In dissent, Judge Mayer asserted that when Allied Corporation and Honeywell merged to form Honeywell International, Allied Corporation’s rights merged with Honeywell’s rights. Therefore, in Judge Mayer’s opinion the majority’s ruling on the first sale doctrine unfairly allowed Honeywell to recoup the profits of the sale of products by its predecessor while simultaneously allowing Honeywell to sue the United States for infringing use of those sold product. Also, applying a forceful §112 written description argument, Judge Meyer would find that nothing in the original application supports the contention that Honeywell (or its predecessor) were in possession of the invention as ultimately claimed and that the trial court commented no error in finding that Honeywell was not harmed by the original secrecy order.