Federal Circuit Clarifies Rule on Scope of Government Contractor Defense to Patent Infringement Actions

In Sevenson Environmental Svs, Inc. v. Shaw Environmental Inc., 81 USPQ2d 1906 (Fed. Cir. February 21, 2007), Shaw Environmental contracted with the U.S. Army Corps of Engineers to clean up a lead-contaminated parcel of land.  The contract included the following authorization and consent clause:

The Government authorizes and consents to all use and manufacture, in performing this contract or any subcontract at any tier, of any invention described in and covered by a United States patent . . . used in machinery, tools, or methods whose use necessarily results from compliance by the Contractor or subcontractor with (i) specifications or written provisions forming a part of this contract or (ii) specific written instructions given by the Contracting Officer directing the manner of performance.

Sevenson Environmental ownsU.S.patents nos. 5,527,982; 5,732,367; 5,916,123; 5,994,608; and 6,139,485, which relate to hazardous waste remediation, including some that claim methods for treating hazardous waste by applying phosphoric acid.  Sevenson Environmental sued Shaw Environmental alleging that Shaw Environmental infringed these patents during performance of the contract.  Shaw Environmental moved for summary judgment based upon the authorization and consent clause of the contract and 28 U.S.C. §1498 requiring the suit to be dismissed as the suit must be maintained only against the United States Government.  The District Court granted the summary judgment dismissing the suit.

On appeal, the Federal Circuit noted that 28 U.S.C. §1498 precludes suits against Government contractors to the extent that the contractor’s use of a patented method is use for theUnited States.  In order to show that the use is for the United States, there needs to be evidence that “(1) the use is “for the Government”; and (2) the use is ‘with the authorization and consent of the Government.'”

Sevenson Environmental argued that the primary purpose of the contract was not to use the patented method such that Shaw Environmental’s use did not satisfy the first prong of this test.  The Federal Circuit rejected this argument since the first prong does not restrict the use to a primary purpose of the contract so long as the use falls within the contract.  So long as the Government exercises control over the use of the contractor’s performance of the contract and this control results in infringement, the first prong is satisfied.  In reviewing the facts of the case, the Federal Circuit held that, since the Shaw Environmental’s use was in its capacity as a Government contractor and the result was for the direct benefit of the Government in achieving environmental remediation, Shaw Environmental’s use of the patented method satisfied the first prong.

In contesting the second prong of the test, Sevenson Environmental argued that the contract’s authorization and consent clause was to be construed narrowly.  While the Federal Circuit acknowledged that the clause was to be construed narrowly, the Federal Circuit held that the clause’s language was broad enough to encompass the activities of Shaw Environmental.  Specifically, the Federal Circuit noted that the authorization and consent clause encompassed the specifications and work plans for the contract such that Shaw Environmental’s compliance with these plans was within the authorization and consent of the Government.  As such, any infringement, such as that alleged by Sevenson Environmental, that resulted from this compliance was within the explicit authorization and consent clause of the contract such that Shaw Environmental’s contract performance also satisfies the second prong of the test.

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