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June 11, 2007

Supreme Court 'taking' a break from patents; denies cert. in Zoltek Corp. v. U.S.

The Supreme Court today denied Zoltek’s petition for certiorari to review the Federal Circuit’s decision in Zoltek Corp v. U.S.

Zoltek accused Lockheed Martin of infringing a patented method for manufacturing carbon–fiber sheets that Lockheed used in the F-22 Raptor.

Normally, 28 U.S.C. § 1498 would permit Zoltek to sue the United States for damages since Lockheed manufactures the F-22 for the military.  The twist here is that the sheets were partially manufactured in Japan, and § 1498 excludes claims “arising in a foreign country.”  Unfortunately for Zoltek, the Federal Circuit ruled that a method is not infringed for purposes of § 1498 unless all steps are performed within the U.S.  This ruling is probably correct, considering the fact that the claims allegedly infringed were method claims rather than product claims, and the entity actually practicing the method was a foreign subcontractor of Lockheed Martin.

More troubling is the rejection of Zoltek’s Fifth Amendment takings claim, which the Federal Circuit based on the Supreme Court case of Schillinger v. U.S., decided in 1894, 16 years before even § 1498’s earliest predecessor, 36 Stat. 851, Chap. 423.  In so doing, the Federal Circuit seemingly ignored Fla. Prepaid v. College Sav. Bank, decided in 1999, which explicitly stated that patents "are surely included within the 'property' of which no person may be deprived by a State without due process of law."  527 U.S. 627, 642.  Unfortunately, the Supreme Court’s denial of certiorari will let the Federal Circuit’s decision stand, at least for the time being.

Specifically, the Federal Circuit held that patent rights are not property interests under the Fifth Amendment, reasoning that § 1498’s “new and limited waiver of sovereign immunity” would have been unnecessary if Congress intended for patents to be compensable rights under the Takings Clause.  Especially in light of Senior Judge Plager’s dissent, the majority opinion seems disingenuous.

Section 1498 provides that when a patent is infringed by or for the U.S., “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.”  The plain language of § 1498 does not seem to create a cause of action.  Instead, it presumes a remedy, assumes liability for contractors of the government, places jurisdiction in the Court of Federal Claims, and affirms that a patent owner is entitled to reasonable and entire compensation.

While it’s possible the Federal Circuit will independently recognize the error of their ways, it is more likely the decision will stand until the Supreme Court is presented with a case and circumstances warranting cert.  When that happens, I certainly hope the Court will explicitly hold what it has explicitly stated: patents "are surely included within the 'property' of which no person may be deprived by a State without due process of law."

Posted by Eagle H. Robinson at 04:35 PM.
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