The U.S. Supreme Court will vote today whether to accept for review Zoltek Corporation v. United States, No. 06-1155. Pharmaceuticals, defense and manufacturing companies are closely watching the case, which centers on the types of protections, if any, that are available to a patent-holder whose inventions have been infringed by the Federal Government or its contractors.

Patent infringement under 35 U.S.C. § 271(a) includes “us[ing] * * * any patented invention, within the United States.” Patent infringement under 35 U.S.C. § 271(g) includes “import[ing] into the United States or … us[ing] within the United States a product which is made by a process patented in the United States.” Where a patented invention is “used or manufactured by or for the United States” 28 U.S.C. § 1498(a) provides that 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 or manufacture.” Under 28 U.S.C § 1498(c), § 1498 does “not apply to any claim arising in a foreign country.”

Where a government-authorized contractor performed some or all of the steps of a patented process outside the United States, but the products of that process were imported into and used in the United States by and for the United States, the questions presented by this Petition are:

1. Whether conduct by the government through its authorized contractors that would otherwise constitute patent infringement under § 271(g) or § 271(a) is a taking of property subject to the Fifth Amendment?

2. Whether a patent-holder can seek compensation in the Court of Federal Claims for such otherwise infringing conduct either: (A) under § 1498, notwithstanding that some or all steps of the process were performed outside the United States; or, if not, (B) as a claim for just compensation under the Fifth Amendment cognizable pursuant to the Tucker Act, 28 U.S.C. § 1491(a)?

Zoltek manufactures materials produced from carbon fiber and has patent protection under U.S. Patent No. RE 34,162, which claims a method for producing carbon-fiber sheets having properties useful in military applications, such as providing stealth qualities to aircraft.

Lockheed Martin and its subcontractors used Zoltek’s patented process to produce carbon-fiber sheets and imported such materials into the United States for use in making the F-22 Fighter Plane pursuant to a contract with the government.

Under 28 U.S.C. § 1498(a), Lockheed’s “use or manufacture of [a patented] invention” is “construed as use or manufacture for the United States.” Section 1498(a) further provides that whenever a patented invention “is used or manufactured by or for the United States without license of the owner thereof … the owner’s remedy shall be by action against the United States in the Court of Federal Claims for the recovery of his reasonable and entire compensation for such use or manufacture.”

Zoltek sued for infringement infringement of Zoltek’s patent and the government sought partial summary judgment arguing that the accused processes were used, in whole or in part, outside the United States and thus the claims were excluded from § 1498 by § 1498(c) as “claim[s] arising in a foreign country.”

The Court of Federal Claims ruled that, per § 1498(c), § 1498(a) does not apply to “claims arising in a foreign country,” and that a claim for the “use” of a patented process arises in a foreign country where any step in the process is performed in a foreign country.

The CFC ruled that the government’s actions, if proven, would constitute a taking under the Fifth Amendment and that it had jurisdiction under the Tucker Act, 28 U.S.C. § 1491, to hear a claim for just compensation not covered by §1498. It thus denied the government’s motion for partial summary judgment.

The CFC held that although Zoltek has an exclusive property right in its patented process and in the importation and use of the products thereof, § 1498 immunizes Lockheed against such claims and yet simultaneously the same provision and language does not cover those claims for purposes of providing compensation.

The CFC concluded that “Congress and the Supreme Court now see acts of the U.S. government that between private parties would be patent infringement as eminent domain takings.”

The Federal Circuit, per curiam, affirmed in part and reversed in part, in favor of the government on both issues on appeal holding that a patent-holder’s only “judicial recourse against the federal government, or its contractors, for patent infringement, is set forth and limited by” § 1498 and that a “‘process cannot be used within the United States as required by § 271(a) unless each of the steps is performed within this country.'”

The per curiam opinion also reversed the CFC’s holding that Zoltek could assert a Fifth Amendment takings claim under the Tucker Act.

Judge Plager observed that the decision below “is an invitation to strategic conduct if ever there was one.” Meanwhile, the government suggests that it should be left to Congress to correct any problems from the decision below.

See the lenghty Zoltek Petition for Certiorari here.

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