Right and wrong ways to use others' patents.

• Author: Stouck, Jerry
• Position: Ethics Corner

In the private sector, using another firm's patented invention without a license may infringe upon patent rights, giving rise to damages liability and treble damages and an award of attorney fees if deemed willful. Federal contractors, however, can use patent fights owned by others without obtaining a license or paying royalties. By statute, the military and other government agencies have the right to use any patented invention to further valid government missions, and this right may be extended to government contractors.

The result is that the unlicensed use of patented inventions by federal contractors may not be illegal, or wrongful, depending on the usage.

Whether a patent is used by the government itself or one of its contractors, the patent owner is generally entitled to receive compensation (usually in the form of a reasonable royalty), but only from the government. Contractors have no liability to the patent owner, although they may be required under some contracts to reimburse the government for compensation it pays to the patent owner.

To avoid unnecessary patent infringement liability, knowing the boundaries of these special rules is critical. Particularly in the current environment of heightened scrutiny of contractor conduct--mastering these special rules of patent use will also help contractor personnel distinguish right from wrong in the use of patent rights owned by others.

Broadening patent usage to the government and its contractors is permitted so as to facilitate military and other governmental missions. Indeed, this is the policy rationale for special rules governing patent use by contractors.

For example, patent infringement typically gives rise to the right to a court injunction, barring further use of the patent, but not so in the context of a government contract, where the patent owner's sole remedy is compensation from the government. Federal contractor patent use also may be protected from both injunctions as well as monetary liability, provided the contractor meets certain requirements.

Most importantly, the contractor's use of the patent must be government-authorized. Several standard contract clauses address the authority issue and the related issue of financial liability for use of unlicensed patents. It is important that contractors that use (or may be accused of using) unlicensed patents in performing federal contracts closely abide by the clauses in their contract. Indeed, one clause, the "Patent Indemnity...