Governmental Indirection Patent Infringement: The Need to Hold Uncle Sam Accountable Under 28 U.S.C. § 1498

• Author: Richard J. McNeely
• Position: Associate, Dinsmore & Shohl, L.L.P, Dayton, Ohio
• Pages: 1065-1129

GOVERNMENTAL INDIRECT PATENT INFRINGEMENT:

THE NEED TO HOLD UNCLE SAM ACCOUNTABLE

UNDER 28 U.S.C. § 1498

RICHARD J. MCNEELY*

INTRODUCTION

The government bestows on a patent owner a bundle of rights to

exclude others from practicing the patented invention.1 A private

individual “directly” infringes the patent owner’s right to exclude others by

making, using, selling, or offering to sell the invention within the United

States, or by importing the invention into the United States.2 A private

individual can be liable to the patent owner also for “indirectly” infringing

the patent—in essence aiding and abetting someone else’s infringement.3

Unlike the private individual, the United States government enjoys

sovereign immunity except when it consents to be sued.4

Since 1910, the government has graciously consented to be sued for

many acts that approximate the list of direct patent infringements,5 but

courts do not extend the government’s consent to claims of liability for

indirect infringement.6 The courts reason that the statute waiving

sovereign immunity, 28 U.S.C. § 1498, equates direct infringement with an

Copyright © 2008, Richard J. McNeely.

*Associate, Dinsmore & Shohl, L.L.P, Dayton, Ohio; J.D. 2008, Capital University Law

School; Ph.D. chemistry 1999, Northwestern University; B.S. chemistry 1994, Indiana

University. Views and opinions expressed in this Article are solely those of the author and

do not represent the views or opinions of Dinsmore & Shohl, L.L.P., or its partners. Special

thanks to Dennis Crouch, of the blog Patently-O (http://www.patentlyo.com), for inspiring

this topic through his comment on April 3, 2006: “NOTE: There is lots more here for a law

review article.”

1 See 35 U.S.C. § 154(a) (2000).

2 See 35 U.S.C. § 271(a) (2000).

3 See id. 35 U.S.C. §§ 271(b), (c), (f) (2000).

4 United States v. Sherwood, 312 U.S. 584, 586 (1941).

5 Decca Ltd. v. United States, 640 F.2d 1156, 1169–70 (Ct. Cl. 1980). Federal Circuit

Judge Giles Rich is responsible for describing the consent as “gracious.” See W.L. Gore &

Assocs., Inc. v. Garlock, Inc., 842 F.2d 1275, 1283 (Fed. Cir. 1988).

6 See LiLan Ren, Comment, A Comparison of 28 U.S.C. § 1498(a) and Foreign Statutes

and an Analysis of § 1498(a)’s Compliance with TRIPS, 41 HOUS. L. REV. 1659, 1690

(2005).

1066 CAPITAL UNIVERSITY LAW REVIEW [36:1065

eminent domain taking of a compulsory license.7 Indirect infringement,

however, sounds in tort.8

Even for the incomplete list of direct infringements that render the

government liable, Congress explicitly limited the government’s waiver of

sovereign immunity by excluding liability for “claim[s] arising in a foreign

country.”9 Effectively, the government can infringe a patent directly and

openly, but as long as one small part of the infringement occurs in a

foreign country, the patent owner loses in court.10

Because the governmental direct infringements are eminent domain-

type takings, could the Fifth Amendment apply in the same manner as it

does when the government condemns a person’s house?11 Can a patent

owner call on the Fifth Amendment as an alternative theory to recourse

when the government infringes a patent but escapes liability because a

small part of the infringing acts occurred outside the United States?

According to the Federal Circuit in Zoltek v. United States, no, the Fifth

Amendment does not apply.12

This all begs another question. The operative rule that the government

cannot be liable for indirect patent infringement involves distinguishing

direct and indirect infringements as eminent domain takings and torts,

respectively.13 After Zoltek, however, direct patent infringement by the

government no longer involves an eminent domain taking.14 Does this

mean that both direct patent infringement and indirect patent infringement

by the government sound only in tort? If so, should courts and Congress

now reconsider the scope of government liability for indirect patent

infringement, with the taking/tort distinction removed? This Comment

7 Decca, 640 F.2d at 1166.

8 Id. at 1170 n.31.

9 See 28 U.S.C. § 1498(c) (2000).

10 NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1318 (Fed. Cir. 2005).

11 See U.S. CONST. amend. V (“[N]or shall private property be taken for public use,

without just compensation.”). See Justin Torres, Note, The Govenment Giveth, and the

Government Taketh Away: Patents, Takings, and 28 U.S.C. § 1498, 63 N.Y.U. ANN. SURV.

AM. L. 315, 328 (2007) (quoting language from the original House reports to the

predecessor act of § 1498 that seemed to indicate Congress thought patents and houses were

equally deserving of Fifth Amendment protection).

12 Zoltek Corp. v. United States, 442 F.3d 1345, 1353 (Fed. Cir. 2006) (per curiam),

reh’g and reh’g en banc denied, 464 F.3d 1335 (Fed. Cir. 2006), cert. denied, 127 S. Ct.

2936 (2007).

13 See Decca Ltd. v. United States, 640 F.2d 1156, 1170, n.31 (Ct. Cl. 1980).

14 See infra note 42 and accompanying text.

2008] GOVERNMENTAL INDIRECT PATENT INFRINGEMENT 1067

argues that, indeed, both types of infringement are torts and, yes, courts

and Congress should reconsider how to address the government’s liability.

This Comment examines and denounces the incongruity between

patent infringement liability for acts by a private individual and liability for

the same acts by the government.15 The innocent victims of the

incongruity—owners of United States patents—deserve stronger protection

than they currently have, because injustice abounds.16

Part I supplies a statutory framework comprising a brief, historical

overview of patents as property vis-à-vis the Takings Clause;17 a primer of

the types of patent infringement claims a patent owner can make against a

private individual;18 and a background of the scope of government liability

under 28 U.S.C. § 1498.19

Part II exposes the loopholes in the statutory framework through

examples of when a private individual or corporation would be liable to a

patent owner but when the government, performing the same acts, would

not be liable.

Part III illustrates how a line of cases, ending with Zoltek, has affected

the view of patent property with respect to the Fifth Amendment and

§ 1498.

Part IV questions whether government liability for indirect patent

infringement could be based on § 1498 alone, even without invoking the

Fifth Amendment. First, a single error in interpretation, propagated over

nearly thirty years, is explored as the primary cause of the plague of

confusion over § 1498.20 Second, the general history of indirect

infringement liability is juxtaposed onto the legislative history of § 1498 to

suggest strongly that Congress intended the government to be liable for

indirect patent infringement.21 Nevertheless, in the end, the requirement

15 For example, active inducement of infringement under 35 U.S.C. § 271(b),

contributory infringement under 35 U.S.C. § 271(c), or inducement to assemble a patented

machine abroad from components of the machine made within the United States under 35

U.S.C. § 271(f).

16 See, e.g., Ren, supra note 6, at 1690; Mark A. Lemley, Inducing Patent Infringement,

39 U.C. DAVIS L. REV. 225, 228 (2005) (“[I]nducement law can avoid injustice by holding

liable those who contract infringing work out to someone who cannot pay a damages

judgment.”).

17 See infra Part I.A.

18 See infra Part I.B.

19 See infra Part I.C.

20 See infra Part IV.A.

21 See infra Part IV.A.2.