Addressing for the first time the meaning of “manufactured” for the purposes of 28 USC § 1498, the US Court of Appeals for the Federal Circuit affirmed the US Court of Federal Claims’ interpretation of “manufactured” as being in a state “suitable for use.” FastShip, LLC v. United States, Case Nos. 17-2248; -2249 (Fed. Cir., June 5, 2018) (Wallach, J).

FastShip owns two patents related to a ship whose hull design in combination with a waterjet propulsion system permits transit speeds of up to 40–50 knots in high or adverse sea states. FastShip brought suit against the US government under § 1498, which allows a patent owner to bring an action for infringement against the government where the invention described is “used or manufactured by or for the United States without license of the owner.” 

The dispute centered around two contractor-built lines of Littoral Combat Ships (LCS) used by the US Navy: the LCS-1, which began construction in February 2005 and was launched in September 2006, and the LCS-3, which began construction in July 2009 and was launched in December 2010. Because of construction delays, the LCS-3 waterjets were not installed until July 2010, and the hull was delayed until August 2010. The asserted patents expired on May 18, 2010.

Prior to trial, the US government moved for summary judgment on the issue of LCS-3 infringement, arguing that the LCS-3 was not “manufactured” within the meaning of § 1498 prior to the expiration of the patent term. The claims court granted the government’s motion and, after a bench trial, found that the LCS-1 infringed and awarded damages to FastShip. FastShip appealed the finding as to the LCS-3, and the government appealed the finding as to the LCS-1.

The Federal Circuit affirmed both findings, with a slight modification to the damages amount due to “inadvertent [mis-]copying” of the numbers used to determine the reasonably royalty. With respect to the LCS-1 infringement finding, the government argued that the lower court improperly modified its construction of the term “increases the efficiency of the hull” because it converted LCS-1 shaft power measurements from imperial to metric units in order to compare values with graphs in the asserted patents. In affirming the lower court’s ruling, the Federal Circuit found that the decision was not clearly erroneous, as the lower court “needed to assure itself that the[] graphs expressed efficiency ratios in the same unit of measure.” Therefore, the construction was “at most [a] clarifi[cation]” of its previous decision.

The bulk of the Federal Circuit’s LCS-3 analysis centered on the definition of the term “manufactured.” The Court analyzed the plain meaning, context and legislative history of the term, ultimately finding that “manufactured” requires “each limitation of the claims” to be “suitable for use.” Because the LCS-3 waterjets and hull were not “suitable for use” prior to the expiration of the asserted patents (having missed the crucial date by mere months), the LCS-3 was not “manufactured” within the meaning of § 1498. Thus, there was no infringement with respect to the LCS-3.

Practice Note: The Federal Circuit noted that its definition of “manufactured” is consistent with the Supreme Court of the United States’ 2012 decision in Samsung Elecs v. Apple (IP Update, Vol. 15, No. 12), where it interpreted “manufacture” the same way in the context of 35 USC § 289. Thus, while the FastShip decision is only applicable to § 1498, broadly interpreted, the Court’s definition of “manufactured” may have precedent throughout Title 35.