Federal Circuit Says No to Indirect Patent Infringement Actions Against Government Contractors

On September 17, 2015, the U.S. Court of Appeals for the Federal Circuit issued an important decision reminding federal government contractors of their unique statutory protection from patent infringement actions where the contractor is not directly infringing a patent but rather is enabling the government to do so.

In Astornet Technologies, Inc. v. BAE Systems, Inc. et al., Nos. 2014-1854, 2015-1006, 2015-1007 (Fed. Cir. Sept. 17, 2015), Astornet Technologies, Inc. (“Astornet”) alleged that three corporations—NCR Government Systems, LLC; MorphoTrust USA, LLC; and BAE Systems, Inc.—induced the Transportation Security Agency (“TSA”) to use boarding pass scanners that infringed an Astornet patent.  Astornet filed three separate complaints in the District Court of Maryland.  The District Court, however, dismissed the complaints, holding that 28 U.S.C. § 1498 requires Astornet to file its complaint against the United States in the U.S. Court of Federal Claims.

On appeal, the Federal Circuit affirmed the dismissal.  The Federal Circuit held that Astornet could not maintain its suit against the three corporations in the District Court of Maryland because Astornet’s complaints alleged only indirect patent infringement and not direct patent infringement.  The Court explained that Astornet’s three complaints fell squarely within 28 U.S.C. § 1498, which expressly provides that infringement actions based on the unauthorized use or manufacture of a patented invention “by or for the United States” must be brought against the United States in the U.S. Court of Federal Claims.  Because Astornet’s complaint alleged only that the three corporations induced TSA to infringe Astornet’s patent – and not that the three corporations directly infringed the patent themselves – Astornet was required to file its suit against the TSA in the Court of Federal Claims.  In so holding, the Federal Circuit noted that 28 U.S.C. § 1498 was enacted to encourage contractors to fulfill government requirements without fear of liability for patent infringement.

Source:  http://assets.law360news.com/0704000/704215/opinion.pdf