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State of Florida Immune from Patent Infringement Suits

July 20, 2001

Decision icon Decision

Last Month at the Federal Circuit - August 2001

Judges: Dyk (author), Rader, and Gajarsa

In State Contracting & Engineering Corp. v. State of Florida, No. 00-1434 (Fed. Cir. July 20, 2001), the Federal Circuit affirmed-in-part, vacated-in-part, and remanded a district court’s decision granting SJ on issues of infringement, takings, and breach of contract concerning the State of Florida and several private contractors.

In 1989, State Contracting & Engineering Corporation (“State Contracting”) and State Paving Corporation (“State Paving”) (collectively “Plaintiffs”) successfully bid on a Florida Department of Transportation (“FDOT”) project to construct sound-barrier walls. In July 1990, the State of Florida accepted State Paving’s Value Engineering Change Proposal (“VECP”) to use a new design for sound walls in the completion of the project. State Paving later filed for and obtained two patents covering the structure (U.S. Patent No. 5,429,455) (“the ‘455 patent”) and method (U.S. Patent No. 5,234,288) (“the ‘288 patent”) described in the VECP.

This suit resulted from FDOT’s use of data from Plaintiffs’ VECP in subsequent requests for bids. The Plaintiffs sued the State of Florida and seven private contractors (“Defendants”) in August 1997. The complaint as amended alleged seven causes of action: direct patent infringement of the ‘455 and ‘288 patents by the State of Florida (counts I and II); direct patent infringement of both patents by the private contractors (count III); violations of the Lanham Act by the State of Florida (count IV); unconstitutional taking by the State of Florida (count V); breach of contract by the State of Florida for failure to compensate Plaintiffs for use of their technology (count VI); and contributory patent infringement by Joelson Concrete Pipe Company based on its manufacture, use, and sale of posts specially made as a component of the patented apparatus and method (count VII).

Defendants, in their answer, filed counterclaims seeking a DJ of noninfringement and invalidity of the ‘455 and ‘288 patents. Defendants also asked that the Lanham Act count be dismissed on grounds of sovereign immunity. Although the district court had denied the dismissal of the Lanham Act count, Defendants made an interlocutory appeal to the Federal Circuit, which remanded the case for further consideration in view of the Supreme Court’s rulings in Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999), and College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, 527 U.S. 666 (1999).

On remand, following cross motions for SJ, the district court had dismissed counts I, II, and IV on grounds of sovereign immunity. The district court had also granted SJ to the State of Florida on the takings claim, count V, and on the breach of contract claim, count VI. Finally, the district court had granted SJ on counts III and VII on the grounds that the contract with the State created a license to practice the patent. The district court did not address Defendants’ counterclaims for noninfringement and invalidity.

Because the district court had failed to rule on Defendants’ counterclaims, the Federal Circuit first addressed whether it had jurisdiction because the decision below was not a final judgment and, therefore, not appealable. In response to an order from the Federal Circuit, the parties had filed a Rule 54(b) Emergency Motion/Request for Certification of Final Order in the district court. The district court granted the motion and amended the Final Order to dismiss the pending claims as moot. The Federal Circuit ruled that a premature notice of appeal ripens upon entry of a proper Rule 54(b) certification and that it had jurisdiction to hear the appeal.

As to the substantive issues, the Court affirmed the district court’s holding that the State of Florida enjoyed immunity from patent infringement suits under the patent statute and unfair competition suits under the Lanham Act based on the Florida Prepaid and College Savings cases. The Court ruled that the State of Florida had not waived its sovereign immunity by filing a counterclaim in the case, because at the time of filing the State of Florida was reasonably unsure about the availability of an immunity defense.

The Court also affirmed the district court’s SJ on the takings issue. According to the Court, neither the language nor the history of 42 U.S.C. § 1983 shows a clear intent to abrogate state immunity and, therefore, the claim could not go forward.

With respect to the breach of contract claim, the Court held that sovereign immunity did not protect the State of Florida. The Court further determined, however, that the contract did not create an obligation for the State of Florida to pay Plaintiffs if FDOT used their data on future contracts. Therefore, the FDOT’s actions did not breach the contract with Plaintiffs, and the Federal Circuit sustained the grant of SJ.

Finally, having disposed of all claims against the State of Florida, the Federal Circuit addressed counts III and VII against the private contractors. The district court had granted SJ of noninfringepage ment on the theory that the claims were barred because Plaintiffs had agreed in the VECP to license the State of Florida under its patents. The Federal Circuit reversed, concluding that the licensing provision only conveyed to FDOT the right to use “data” in future contracts. The contract, therefore, did not convey the right to manufacture the invention, nor did it explicitly convey any patent rights. For this reason, the Federal Circuit remanded the case for further proceedings against the private contractors.