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Nonprofit Status of Alleged Infringer Does Not Mandate an Experimental-Use Defense

October 03, 2002
Carron, Virginia L.

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Last Month at the Federal Circuit - November 2002

Judges: Gajarsa (author), Bryson, and Linn

In Madey v. Duke University, No. 01-1567 (Fed. Cir. Oct. 3, 2002), the Federal Circuit reversed the district court’s grant of SJ of no infringement because the district court had erred in its application of the experimentaluse defense and reversed the district court’s dismissal-in-part of another infringement allegation, ruling that the district court had improperly applied 28 U.S.C. § 1498(a). The Federal Circuit affirmed the district court’s ruling that Duke University (“Duke”) did not infringe certain patents because it did not own or control the equipment at issue. The Court remanded the case for a proper factual analysis under section 1498(a) and instructed the district court to significantly narrow and limit its application of the experimental-use defense.

Dr. John M. J. Madey was a tenured professor at Duke and served for almost a decade as the director of Duke’s free electron laser research lab (“FEL lab”). Based upon a dispute between Madey and Duke, Madey was removed as the FEL lab director, and he therefore resigned from Duke. When Duke continued to operate some of the equipment in the FEL lab, Madey sued Duke for patent infringement of two patents covering the equipment and a variety of additional claims.

The patent-infringement claims pertain to three devices contained in the FEL lab; (1) the Mark III FEL; (2) the Storage Ring FEL (collectively “the FEL equipment”); and (3) the Microwave Gun Test Stand. The Federal Circuit noted that although it is not clear in the record, Duke seemed to concede infringement. Rather, Duke defended by asserting experimental use and government-license defenses as to the FEL equipment, and, as to the Gun Test Stand, Duke asserted that no one affiliated with Duke had used the equipment during the relevant time period.

Duke moved to dismiss the infringement claims under both Fed. R. Civ. P. 12(b)(1) for lack of subject-matter jurisdiction and Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. Duke’s position as to 12(b)(1) was that any alleged unauthorized use was in furtherance of an Office of Naval Research (“ONR”) grant, and, thus, Duke could not be sued for such use. The district court granted the 12(b)(1) motion as to use in the furtherance of the ONR grant (denying in part the motion as to Duke’s private use of the equipment) and denied the 12(b)(6) motion. In determining that partial dismissal was warranted, the district court applied Fourth Circuit law, under which the burden of proving subject-matter jurisdiction rests with the plaintiff, and reasoned that 28 U.S.C. § 1498(a) required Madey to sue the U.S. government in the Court of Federal Claims.

The Federal Circuit explained that a third party’s use or manufacture of infringing equipment must be by or for the United States and the government must have consented to being sued based upon such use or manufacture. The Federal Circuit determined that the district court had erred in granting the partial dismissal because it relied upon the Fourth Circuit doctrine of jurisdictional facts when, as between private parties, section 1498(a) is not jurisdictional but is an affirmative defense to which Federal Circuit law applies. The Federal Circuit remanded the issue because the district court had failed to provide any findings or analysis as to the ONR grant to establish the government’s authorization or consent to be sued, nor had the district court discussed or characterized Duke’s use or manufacture of the equipment to show how it might be classified as by or for the United States.

Duke also moved for SJ of noninfringement as to the FEL equipment based upon experimental use and moved for SJ of noninfringement as to the Gun Test Stand based upon nonuse. As to Duke’s experimentaluse defense, the district court acknowledged the defense and concluded that Madey needed to establish that Duke had not used the equipment at issue solely for an experimental or other nonprofit purpose by sufficiently establishing that Duke’s use of the patent had definite, cognizable, and not insubstantial commercial purposes.

On appeal, the Federal Circuit ruled that the district court had improperly shifted the burden to Madey to show that Duke’s use was not experimental. The Federal Circuit acknowledged that the experimental-use defense is a narrow, limited defense that must be established by the defendant and determined that the district court had applied an overly broad version of the defense. The Federal Circuit concluded that regardless of whether a particular institution or entity is engaged in an endeavor for commercial gain, so long as the act is in furtherance of the alleged infringer’s legitimate business and is not solely for amusement, to satisfy idle curiosity, or for strictly philosophical inquiry, the act does not qualify for the very narrow and strictly limited experimental-use defense. The Court cautioned that the profit or nonprofit status of the accused infringer is not determinative in this analysis.

The Federal Circuit affirmed the district court’s grant of the SJ motion for noninfringement as to the Gun Test Stand, agreeing that Duke had succeeded in showing that there was no genuine issue of material fact concerning Duke’s nonuse of the Gun Test Stand equipment during the relevant time period.