In a decision addressing government contractor immunity, the U.S. Court of Appeals for the Federal Circuit held that a patent infringement case against a government contractor in the district court was barred by 28 U.S.C. § 1498. Sevenson Environmental Services, Inc. v. Shaw Environmental, Inc., Case Nos. 06-1391, -1408 (Fed. Cir., Feb. 21, 2007) (Linn, J.).

This case was born out of the cleanup of a lead-contaminated parcel of land near Colonie, New York (the Colonie site) owned by the federal government and managed by the Corps of Engineers (Corps). Shaw, a hazardous waste remediation firm, contracted with the Corps to engage in cleanup and remediation work at the Colonie site. Shaw’s contracts with the Corps contain an “authorization and consent” clause, based on § 1498(a), that authorized Shaw to use any invention described in and covered by a United States patent whose use “necessarily results from compliance” with the contract specifications. Shaw was the third contractor at the Colonie site, and based on a previous contractor’s recommendation, Shaw agreed to the contract specifications that required phosphoric acid for cleanup and remediation of the Colonie site.

Sevenson holds several patents regarding remediation work, including some that treat hazardous waste by applying phosphoric acid (Sevenson patents). In the district court, Sevenson alleged that Shaw’s cleanup and remediation work at the Colonie site infringed the Sevenson patents. Shaw moved for summary judgment on the ground that pursuant to its contracts and § 1498(a), the United States was the proper party and the suit should be dismissed. Under § 1498, the exclusive remedy for use of a patent without license or lawful right is by action against the United States in the Court of Claims. The district count granted Shaw’s motion.

On appeal, Sevenson argued that Shaw was not immune from suit in the district court because the contract use was not for the government, and it was not with the authorization and consent of the government.

The Federal Circuit noted that § 1498 imposes a requirement that use of a patent occur pursuant to a contract with the government and “for the benefit” of the government. In so doing, the Court distinguished Larson v. United States holding that infringing medical devices furnished by Medicare and Medicaid providers did not fall within § 1498 because the use of devices was not required by government, nor were the providers under government control. In contrast, the Federal Circuit held Shaw used the Sevenson patents as a government contractor for the benefit of the government.

The Federal Circuit also agreed with the district court that the government contracts granted Shaw its “authorization and consent” to use a United States patent that “necessarily results” from compliance with the “specifications” that are a part of the contract. According to the Federal Circuit, the contract “specifications” required Shaw to use the accused method of the Sevenson patents in order to comply with the contract. The Federal Circuit distinguished Carrier Corp. v. United States, which the court noted to be the only “on-point” binding precedent cited by the parties. In Carrier, the Court of Claims held that use of certain types of infringing equipment—the use of which became “operative after inspection and acceptance by the Contracting Officer” —was not necessary to comply with the contract specifications. According to the Federal Circuit, unlike the structure in Carrier, Shaw’s use of the accused method was “necessary” to meet the contract specifications. Therefore, under § 1498, Shaw was entitled to immunity from district court infringement suit.

Practice Note: The immunity from suit in district court under § 1498 is present only when contracts are for the benefit of the government and if the use of a United States patent is necessary to meet the contract requirements and contract specifications.