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Government Contractor Immunity Is Appropriate Where the Contract Required Use of Patented Method

February 21, 2007

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Last Month at the Federal Circuit - March 2007

Judges: Linn (author), Dyk

[Appealed from: W.D.N.Y., Judge Arcara]

In Sevenson Environmental Services, Inc. v. Shaw Environmental, Inc., Nos. 06-1391, -1408 (Fed. Cir. Feb. 21, 2007), the Federal Circuit affirmed the district court’s holding on SJ that government contractor immunity under 28 U.S.C. § 1498 barred suit against a hazardous waste remediation contractor because the contract was performed “for the Government” and “with the authorization and consent of the Government.”

The Corps of Engineers contracted with Shaw Environmental, Inc. (“Shaw”) for cleanup and remediation of hazardous waste at a governmentowned waste site. The contracts covering Shaw’s work included an authorization and consent clause and provisions for development of a Work Plan. The consent clause stated that the government authorized and consented to the use and manufacture of any inventions covered by U.S. patents whose use necessarily results from compliance with specifications or written provisions forming a part of the contract. The Work Plan provided the project specifications, detailed Shaw’s approach to the contracted project, and described the work necessary for Shaw to meet its obligations under the contract. Sevenson Environmental Services, Inc.

(“Sevenson”), the holder of several U.S. method patents, filed an infringement suit against Shaw, alleging that Shaw’s work for the Corps of Engineers infringed Sevenson’s method patents. Shaw moved for SJ, and the district court granted Shaw’s motion for dismissal pursuant to 28 U.S.C. § 1498, holding that the United States was the only proper defendant. Sevenson appealed, and Shaw cross-appealed.

The appeal turned on the application of 28 U.S.C. § 1498, which sets forth the provisions of government contactor immunity and limits a patent owner’s remedy for infringement to an action against the United States. The Federal Circuit evaluated whether under Shaw’s contract with the government, Shaw’s use of the accused method was (1) “for the Government” and (2) “with the authorization and consent of the Government.”

First, the Federal Circuit interpreted the “for the Government” prong to “impose only a requirement that the use or manufacture of a patented method or apparatus occur pursuant to a contract with the government and for the benefit of the government.” Slip op. at 6. The Court explained that Shaw’s use of the accused method was in its capacity as a government contractor and pursuant to its contract for the benefit of the government, and the question of who made the choice to use an infringing method (Shaw or the government) is not a factor. The fact that the government sought and received hazardous waste remediation services, and that Shaw performed those tasks for the benefit of the government, satisfied the “for the Government” prong.

Second, with respect to the “with the authorization and consent of the Government” prong, the Federal Circuit held that the government, through its contract with Shaw, expressly authorized and consented to the use of the accused method. The Court noted that the scope of the government’s authorization and consent resided in the language of the contract, and in evaluating the contract, the Court pointed to language that required Shaw to use the accused method. In particular, the Work Plan required use of the accused method. The Court distinguished the present case from a previous case, where a contractor could have chosen between an infringing and a noninfringing device to fulfill the terms of a contract. In the instant case, Shaw would have had to breach its contract to avoid using the accused process. Thus, the Court found that the accused use necessarily resulted from compliance with the contract and, thus, the government had authorized and consented to the use.

The Federal Circuit also affirmed the district court’s ruling related to Shaw’s cross-appeal on the issue of sanctions, as it discerned no error.