U.S. Government Contractor Immunity for Patent Infringement Enhanced

March 26, 2012, 2:59 PM

As a general rule, federal government contractors can expect that they will not have liability for infringement of U.S. patents for things done in performance of their contract obligations to the U.S. government. This immunity arises under Section 1498 of Title 28 of the U.S. Code, which serves to shift the burden of liability for infringement of patents occurring in the course of performance under government contracts to the U.S. government. The pertinent statutory language is:

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner's remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.
Since it was initially filed in 1996, the case of Zoltek Corp. v United States has cast doubt on the efficacy of this statute to shield contractors from claims for infringement of U.S. patents, if the infringing activity occurs outside the United States. This issue has remained in play through multiple decisions by the Court of Federal Claims and the Court of Appeals for the Federal Circuit, the latest of which was handed down on March 14, 2012. In this decision the Federal Circuit overruled earlier decisions by it and the Court of Federal Claims to the effect that 28 U.S.C. 1498 does not make the government responsible for patent infringement liability arising from actions of federal contractors outside the U.S., and that the contractors can be sued for infringement arising from those actions. In doing so the Federal Circuit resolved a seeming conflict between various statutory provisions to rule that the statutory language quoted above amounts to a waiver of sovereign immunity by the government for patent infringement by federal contractors performing within the scope of their contracts, even if some of the infringing activities occur outside of the United States. It will not be surprising if this latest Federal Circuit decision in the Zoltek case is appealed to the Supreme Court; but, at least for now, this Federal Circuit ruling has improved the situation for federal contractors. --Robert E. Smartschan