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September 23, 2006

Taking the Fifth

It can be disgustingly impossible to hold the government accountable. Here we have a tale of evasion by the U.S. government, that the Fifth Amendment's takings clause no longer applies to patents, sanctioned by the federal courts (CAFC 04-5100), with a vigorous dissent by renowned gadfly Judge Newman.

Zoltek sued the U.S. government for compensation of patent infringement pursuant to 28 U.S.C. § 1498.

§ 1498. Patent and copyright cases

(a) Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, 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.

For the purposes of this section, the use or manufacture of an invention described in and covered by a patent of the United States by a contractor, a subcontractor, or any person, firm, or corporation for the Government and with the authorization or consent of the Government, shall be construed as use or manufacture for the United States

(c) The provisions of this section shall not apply to any claim arising in a foreign country.

Zoletk's asserted patent was RE 34,162, entitled "Controlled surface electrical resistance carbon fiber sheet product."

Alas, in summary judgment, the trial court barred Zoltek under § 1498 because the infringing component, part of the F-22 Raptor fighter jet, was manufactured in part in Japan. You may consider the ruling a misreading of the law, with regard to (c) the claim arising in a foreign country, as (a) specifies "used... for the United States."

The trial court did direct Zoltek to allege taking under the Fifth Amendment. The last section of the Fifth Amendment to the U.S. Constitution states "nor shall private property be taken for public use, without just compensation."

The Federal Circuit affirmed the the inapplicability of  § 1498 in this case, but reversed the lower court on Zoltek pursuing compensation under a Fifth Amendment claim. Zoltek then petitioned for an en banc rehearing, which Thursday was turned away by the majority.

Judge Newman dissenting -

The court today rules that the owner of a patent that the government uses for governmental purposes cannot bring an action under the Fifth Amendment for compensation for the use of this property, and cannot prevent such unauthorized use. The panel majority holds that there is no jurisdiction in the Court of Federal Claims -- or any other court -- of a Takings claim for compensation for unauthorized use by the government of a patented invention. This ruling is contrary to decision, statute, policy, and constitutional right. I must, respectfully, dissent from the court's endorsement of this ruling.

The Zoltek majority bases its decision on a statement in Schillinger v. United States, 155 U.S. 163 (1894), that since patent infringement is a tort, "cases sounding in tort are not cognizable in the Court of Claims." Id. at 169. The 1910 Patent Act expressly assigned to the Court of Claims jurisdiction of compensation for patent use by the United States, explaining that while the government cannot be enjoined from using an invention for governmental purposes, compensation must be paid. Soon thereafter the Court in Crozier v. Fried. Krupp Aktiengesellschaft, 224 U.S. 290 (1912) laid Schillinger to rest, establishing that the government's right to use patent property was based on eminent domain and subject to the Fifth Amendment: "we think there is no room for doubt that the [1910] statute makes full and adequate provision for the exercise of the power of eminent domain for which considered in its final analysis it was the purpose of the statute to provide." Id. at 307. It is curious indeed for this court, a century later, to resurrect Schillinger's long-rejected and long-overruled decision.

My concern with my colleagues' position starts with their apparent rejection of the premise that patents are property and subject to the Fifth Amendment. See Florida Prepaid Postsecondary Educ. Bd. v. College Sav. Bank, 527 U.S. 627, 642 (2002) ("Patents, however, have long been considered a species of property."); James v. Campbell, 104 U.S. 356 (1881) ("letters-patent for a new invention or discovery in the arts, confers upon the patentee an exclusive property in the patented invention"); Cammeyer v. Newton, 94 U.S. 225, 226 (1876) ("the right of the [patent] holder is as much entitled to protection as any other property"); Consol. Fruit-Jar Co. v. Wright, 94 U.S. 92, 96 (1876) ("A patent for an invention is as much property as a patent for land.").

Almost a century of precedent has implemented the right of patentees to the remedies afforded to private property taken for public use. There is no basis today to reject this principle. Indeed, even Schillinger was decided on a quite different ground, the Court simply observing that patent infringement is a tort and that the Tucker Act, as then written, dealt only with contracts. Schillinger, 155 U.S. at 168. Schillinger did not change the property status of patents and did not discuss constitutional principles; the only issue was whether the Court of Claims had jurisdiction under the Tucker Act. The Patent Act of 1910 assigned jurisdiction to the Court of Claims...

There can be no doubt that the unlicenced use of a patented invention by the United States is remediable in the Court of Federal Claims. This principle has been applied in decades of precedent...

The panel majority also produces the anomalous result that patent property receives less protection from the Constitution than other forms of intellectual property, in conflict with principles and precedent. In Ruckelshaus v. Monsanto Company, 467 U.S. 986 (1984) the Court held that a trade secret is constitutionally protected property, and a claim for its taking is within Tucker Act cognizance...

Posted by Patent Hawk at September 23, 2006 7:42 PM | Damages


An even more profound example of circumventing the 5th amendment, as it relates to patent law, is the little-known change that was made to the American Inventor Protection Act (AIPA) in an amendment to the law signed in late 2002. Essentially, what the amendment did (among other things) was to retroactively apply the new class of 102(e) prior art (published applications) to patents that were pending when the original AIPA went into effect two years earlier. The problem is that patents that were pending when the original AIPA went into effect, were specifically exempted from having this new type of prior art used against them. In fact, those who had pending applications at that time, were given the option to have their applications voluntarily published, in which case they would be entitled to retroactive royalties from the publication date (if the patent ultimately got issued with the claims intact) but, in agreeing to the voluntary publication, the would also be agreeing that this new class of prior art could be used against their application. Those who did not voluntarily publish could not receive retroactive royalties, nor could published applications be use against them as prior art. In other words, they were grandfathered under the old rules. Two years latter, buried in a technical amendment, was language that went back in time and "ungrandfathered" those applications REGARDLESS of whether or not they were voluntarily published. This has created a situation in which patents that issued on applications that were pending in November of 2000, could have been perfectly valid under the law that was in place when the patents issued, but became invalid as a result of a new law that went into effect LONG AFTER the applications were filed, and as long as two years AFTER THE VALID PATENTS WERE ISSUED. That is because the change in the law was retroactively applied to them. Introducing the novel concept (and oxymoron) of FUTURE PRIOR ART! Not to be confused with secret or unknown prior art, future prior art DID NOT EXIST as statutory prior art when these applications were filed and when these patents were issued. Talk about changing the rules AFTER the game has been played!

And what was the overriding public interest served by this change in the law? No longer would the patent office need to distinguish between the "grandfathered" applications filed prior to the AIPA, and the applications filed after the AIPA, when applying a 102(e) reference against a patent or an application. In other words, it just made them feel better to be able to apply a 102(e) reference equally to every application and every existing patent.

If this is not a law that unconstitutionally creates a legal basis to revoke an existing property right...then what is? I hope and expect that this blatantly unfair law will be shot down by the courts when challenged.

Posted by: Burt Lincoln at September 24, 2006 11:07 AM

Wow. I can only surmise that the current administration and its associated agencies has spent the United States Government into bankruptcy. As a result, anamolous happenings are occurring throughout our constitutional republic to preserve what wealth is left. This decision might very well be one of those anamoous happenings. My only question is to what end?

Posted by: Kenneth C. Brooks at September 25, 2006 1:14 PM