The opinion
In the United States Court of Federal Claims
No. 11-84C
(Filed Under Seal: December 19, 2014)
(Reissued: December 31, 2014)
**********************************
) Post-trial decision in patent case; U.S.
LIBERTY AMMUNITION, INC., ) Patent No. 7,748,325 entitled “Firearms
) Projectile;” patent validity; 35 U.S.C.
Plaintiff, ) § 103 (2006); infringement by M855A1
) and M80A1 ammunition; “reasonable and
v. ) entire compensation” for the compulsory,
) non-exclusive patent license; 28 U.S.C.
UNITED STATES, ) § 1498(a)
)
Defendant. )
)
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Stephen B. Judlowe, McElroy, Deutsch, Mulvaney & Carpenter, LLP, New York, New
York, for plaintiff. With him on the briefs and at trial were Joseph P. LaSala, Michael Rato, and
Riadh Quadir, McElroy, Deutsch, Mulvaney & Carpenter, LLP, New York, New York, and
Lawrence E. Bathgate, II and Daniel F. Corrigan, Bathgate, Wegener & Wolf, P.C., Lakewood,
New Jersey.
Walter W. Brown, Trial Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, Washington, D.C., for defendant. With him on the briefs and at
trial was Conrad J. DeWitte, Jr., Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, Washington, D.C. With them on the briefs were Joyce R. Branda,
Acting Assistant Attorney General, Civil Division, and John Fargo, Director, Commercial
Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C.
OPINION AND ORDER1
LETTOW, Judge.
This post-trial decision addresses plaintiff’s claims for damages for patent infringement
and for breach of non-disclosure agreements relating to the intellectual property rights to a
firearms projectile. Plaintiff, Liberty Ammunition, LLC (“Liberty”), alleges that the United
1
Because this order might have contained confidential or proprietary information within
the meaning of Rule 26(c)(1)(G) of the Rules of the Court of Federal Claims (“RCFC”) and the
protective order entered in this case, it was initially filed under seal. The parties were requested
to review this order and to provide proposed redactions of any confidential or proprietary
information. No redactions were requested.
States (“the government”) through the Department of Defense (“DOD”), has infringed upon its
patent, United States Patent No. 7,748,325 (“’325 patent”), entitled “Firearms Projectile.”
Since the mid-1990s, the DOD has been seeking a lethal, lead-free bullet to take the place
of the former 5.56 x 45mm (.223 caliber) standard-issue NATO round, the M855. In 2010, the
United States Department of the Army (“the Army”) began replacing the M855 with a new lead-
free bullet, the M855A1 Enhanced Performing Round (“EPR”). The Army is seeking to also
replace another bullet, the M80, with a similar lead-free design, designated as the M80A1 EPR.2
During the development of this ammunition, an individual now associated with Liberty, PJ Marx,
the inventor of the projectile covered by the ’325 patent, contacted individuals at the DOD to
share his design for a new, lead-free projectile. Liberty further alleges that through these
conversations with Mr. Marx, the Army copied its design and violated the terms of three non-
disclosure agreements (“NDAs”) by disclosing confidential information within the Army to
unauthorized recipients, including some who worked with vendors of ammunition to the Army.
The government denies both of Liberty’s claims and asserts that the ’325 patent is invalid. An
eleven-day trial was held in Washington, DC, commencing on June 23, 2014, and ending on July
8, 2014. Following post-trial briefing, a closing argument was held on October 24, 2014. The
case is now ready for disposition.
FACTS3
A. Army’s Standard Ammunition
During the Vietnam War, the Army discontinued its use of its earlier standard projectile
in favor of a .22 caliber bullet, the M855.4 See Pl.’s Pretrial Mem. at 1, ECF No. 56; see also Tr.
443:19-20 (Test. of George Joseph Phillips, Liberty’s CEO).5 The M855 was developed by
2
The M80 is a 7.62 x 51mm rifle cartridge that previously served as the standard small-
arms round among North Atlantic Treaty Organization (“NATO”) countries. It remains standard
for light machine guns. The round is roughly equivalent to a .308 caliber or the original 30-06
cartridge.
3
This recitation of facts constitutes the court’s principal findings of fact in accord with
Rule 52(a) of the Rules of the Court of Federal Claims. Other findings of fact and rulings on
questions of mixed fact and law are set out in the analysis.
4
A round, also known as a loaded cartridge, constitutes one unit of ammunition
containing: (1) a bullet, which is a solid projectile propelled from the ammunition upon firing;
(2) a propellant, which is explosive gun powder; (3) a primer, which ignites the propellant; (4) a
case, which holds the pieces of ammunition together; and (5) sometimes, a rim, found at the tail
end of the ammunition and which holds the round in the barrel of the firearm. Caliber denotes
the diameter of a bullet.
5
Citations to the trial transcript are to “Tr. __.” Citations to plaintiff’s exhibits are
identified as “PX __,” defendant’s exhibits are denoted as “DX __,” and joint exhibits are
referred to as “JX __.” Plaintiff’s demonstrative exhibits are cited as “PDX __.”
2
Belgium, Tr. 1554:23, 1557:9 (Test. of Dr. James Frederick Newill, Weapons and Materials
Research Directorate’s Force Application Capability Research Area Manager), and incorporates
a hardened steel penetrator; a lead slug; and a forward-drawn copper jacket, JX 11 at 1 (M855
Design), JX 83 at 4 (M855 Technical Drawing).6 The M855 features a 5.56mm (.223 in)
cartridge, JX 83 at 1, 4, and has a weight of 62 grains, JX 11 at 1. In 1983, the M855 became the
standard NATO ammunition in its caliber and has been used in infantry deployments overseas.
See Pl.’s Pre-Trial Mem. at 1; see also Tr. 306:7-8 (Test. of PJ Marx, ’325 Patent Inventor). A
similar, but larger and heavier lead projectile, the M80, is also used by the Army. See supra, at 2
n.2. The M80 weighs 147.5 grains, Tr. 2223:12 (Test. of Clarence Wesley Kitchens, Jr.,
defendant’s technical expert) and is the standard NATO 7.62 mm (.30 in) cartridge, see Tr.
1699:20-21 (Newill).
In the 1990’s, post-combat reports and surveys revealed discrepancies surrounding the
lethality of the standard ammunition. Tr. 1523:23 to 1524:6 (Newill); see also JX 25 at 3
(“M855 Enhanced Performance Round (EPR) Media Day” (May 4, 2011)). Some soldiers were
reporting instances of through-and-through hits on enemy combatants who would return fire
despite being struck by the standard ammunition, while other infantry units were experiencing no
issues with the projectiles’ performance. Tr. 183:21 to 184:6 (Test. of Tyler Ehlers, a
Mechanical Engineer with the Army Research Laboratories (“ARL”)); see also JX 20 at 6
(“Improved Performance 5.56mm Desired Characteristics”) (“We had a[n] enemy that had been
hit 14 times in the fatal zone and was still returning fire on us. . . . [A]fterwards when we
checked his body most of the shots went clean through him with minimal damage.”). These
inconsistencies were a result of the M855 and M80 being yaw-dependent. Tr. 53:4-5 (Test. of
Lt. Col. Glenn A. Dean, III, U.S. Army); see also Tr. 181:5-13 (Test. of Lee Smith Magness, Jr.,
ARL).7 At a high angle of yaw, the projectile typically strikes a soft target without exiting the
body. In doing so, the bullet transfers all of its energy within that target, which increases the
severity of tissue damage and therefore, the likelihood of incapacitation. Conversely, at a low
angle of yaw, the bullet may pass through a soft target. If it does not puncture a vital area, such
as an organ, the through-and-through hit will only cause minimal damage because the projectile
traverses the body without expending significant energy. Tr. 99:8-10 (Lt. Col. Dean); see Tr.
183:21 to 184:19 (Ehlers); see also Tr. 181:5-10 (Magness). Therefore, proficient marksmanship
6
In the M855, the penetrator is at the front of the bullet, the slug consisting of a lead core
is at the tail, and the jacket completely encompasses the penetrator and slug. See JX 11 at 1.
The jacket of the M855 is forward-drawn, i.e., the jacket “is formed, point first, the steel
penetrator is inserted into the jacket, with the lead core behind, and then the projectile is crimped
shut.” JX 15 at 6 (“In Search of Lethality: Green Ammo and the Development of the M855A1
Enhanced Performance Round” (May 9, 2011)).
7
Yaw is the rotation of a bullet along its longitudinal axis while in flight and yaw
angle is the degree to which the bullet deviates from its line of flight. See Tr. 233:2-13 (Test.
of Dr. Dipak Kamdar, Engineering Fellow with Alliant Techsystems (“ATK”)). The amount of
yaw depends on the environment; both the distance to the target and velocity of the projectile
affect yaw. See Tr. 99:1-18 (Lt. Col. Dean). In a yaw-dependent bullet, such as the M855 and
M80, tumbling, i.e., high yaw, will affect lethality. See id.; see also Tr. 232:23 to 233:1
(Kamdar).
3
becomes a necessary factor for engendering incapacitation and preventing an enemy combatant
from returning fire. See Tr. 51:11-15 (Lt. Col. Dean) (“The issue is . . . unless that through-and-
through passes through a critical organ like the brain, you don’t incapacitate the target.”); see
also Tr. 181:11-13 (Magness).
B. President Clinton’s Executive Order
In addition to the soft-target lethality issues in the standard ammunition, there were
mounting concerns that lead from lead slugs at small-caliber firing ranges was penetrating soil
and polluting ground water. See JX 32 at 1 (“Green Ammunition Phase II Program” (Apr. 7,
2005)); see also JX 125 at 3 (Small Business Innovative Research (“SBIR”) Program Proposal
(Jan. 13, 2006)) (“The lead can leach through the soil and contaminate ground water, leading to
exposure of the surrounding population.”). Given this concern, President Clinton signed
Executive Order 12856 in 1993 which “mandated the elimination of 50 percent of the hazardous
materials [in projectiles] by [1999].” Tr. 1952:15-18 (Test. of John R. Middleton, an Engineer
with the U.S. Army Armament Research, Development, and Engineering Center); see also Tr.
2428:11-21 (Kitchens).
Recognizing the need to mitigate the negative environmental externalities associated with
lead slugs and to enhance performance of its standard ammunition, the army initiated the Green
Ammunition Program (“the Program”) in 1995. See JX 32 at 1. Participating in the Program
were various Army departments and small-arms developers, including Project-Manager -
Maneuver Ammunition Systems (“PM-MAS”), ARL, the United States Army Infantry Center
(“USAIC”), and ATK. See JX 21 at 1 (“Green Ammunition Phase II Kick-off” (July 26, 2005));
see also JX 15 at 1. The Program’s goal was to develop a non-lead and yaw-independent bullet
as an alternative to the Army’s standard .22 cartridge, the M855. Tr. 2424:11 to 2425:19
(Kitchens); JX 31 at 4, 11 (Briefing to Congressman Sherwood (Mar. 7, 2005)).
In the late 1990’s, the Army produced the M855 Lead-Free Slug (“M855 LFS”), which
contained tungsten bound with tin or nylon in place of the lead core used in the M855. Tr.
1954:3-6 (Middleton); JX 83 at 9. The Army selected a tungsten core as a substitute for lead
because the two metals have approximately the same density. Tr. 1954:18-22, 1960:2-5
(Middleton); see also JX 83 at 4. By 2003, the Army’s Lake City Army Ammunition Plant
(“LCAAP”) was producing significant quantities of the M855 LFS. See Tr. 2002:8-9 (Test. of
Frank Joseph Hanzl, U.S. Army Maneuver Ammunitions Systems Office’s Project Manager); see
also Tr. 1956:4-5 (Middleton) (“[W]e had produced 88 million rounds [of the M855 LFS].”).
However, the scale-up in production resulted in irregularities in the slugs. Specifically,
anomalies created erratic and unstable flight trajectories. Tr. 1835:11-25 (Test. of Daniel J.
Mansfield, ATK’s Design Engineer) (“There were failure rates [in the 855 LFS] that were
approaching 50 percent, depending on the circumstances.”); see also Tr. 1516:14-19 (Newill)
(“[The M855 LFS bullets] were getting keyholes, which means the round goes and hits the target
sideways . . . indicating . . . at least sporadic performance problems with the [tungsten].”).
Consequently, in 2003, the Army initiated Phase I of the Green Ammunition Program to
identify the manufacturing problem that was causing erratic flight in the M855 LFS and to find
alternative slug materials that could replace the tungsten core. Tr. 1957:6-10 (Middleton); Tr.
4
230:23-25 (Kamdar). At the commencement of Phase I, PM-MAS directed scientists at ARL to
begin searching for new slug materials and drafting other projectile designs. Tr. 1511:2-13,
1518:7-14 (Newill). Additionally, ATK, the contract operator for the LCAAP, began
investigating potential causes of the erratic flight paths. Tr. 1833:25 to 1834:16 (Middleton). By
summer 2004, ATK had determined that an error in the manufacturing process at LCAAP was
creating unstable flight trajectories,8 and had found various tungsten-based materials that were
acceptable replacements for the M855 LFS slugs. Tr. 1839:1 to 1840:6 (Mansfield). By this
time, Dr. Newill and other scientists at ARL had also developed four redesigns of the projectile
with slugs comprised of tungsten-derived materials. On July 27, 2004, ARL presented its
conceptual designs to the Army. Tr. 1533:7-11 (Newill); JX 79 at 5-15 (“New Concepts for
M855 5.56mm Ball Ammunition” (July 27, 2004)).
Despite identifying the source of erratic flight in the M855 and designing slug
replacements, the Army was unsuccessful in its efforts to develop a non-lead and yaw-
independent bullet during Phase I. Tungsten as a substitute for lead was no longer a viable
solution for the Army because prices for the metal had rapidly increased, JX 32 at 1, see also JX
31 at 4 (finding that production of the M855 LFS was 50 percent more costly than that of a
leaded bullet), and alternative slug materials proposed by ammunition developers proved equally
ineffective because they were also derived from tungsten, JX 32 at 1. Furthermore, tungsten
alloys presented environmental concerns. JX 33 at 6 (“5.56mm Green Ammo Program Strategy”
(Apr. 14, 2005)).
C. Marx’s Experimental Work
Mr. Marx, a business owner living in Florida, was aware of the Army’s unsuccessful
endeavors to develop a replacement projectile for the standard ammunition. See Tr. 288:2 to
293:10 (Marx).9 Despite having little experience in ammunition design, Mr. Marx set out to
8
The consolidation process, in which the slug became consolidated in the jacket, was
imperfect, leaving a small gap between these two components. During flight, this gap prevented
the M855 LFS from “spinning fast enough to be gyroscopically stable.” Tr. 1519:16 to 1520:18
(Newill). The consolidation steps needed to be adjusted to account for the stiffness of tungsten
powder when inserted into the jacket. Tr. 1839:22 to 1840:2 (Mansfield).
9
Mr. Marx at the age of thirteen and with funds provided to him from his father became a
minority partner in a retail music store. Tr. 280:10-16 (Marx). In this capacity he attended trade
shows involving the music industry. See Tr. 281:8 to 282:23 (Marx). After finishing high
school, Mr. Marx formed and became president of Lady Amplification USA (“Lady”), a music
distribution company. Tr. 283:1-6 (Marx). While president of Lady, Mr. Marx created a product
line of vacuum tube amplifiers and electromagnetic transducers for the domestic market. Tr.
283:3 to 284:19 (Marx). He later formed PJ Marx Pickups and Electronics, which focused on
transducers and guitar assembly work. See Tr. 286:5 to 287:3 (Marx). Mr. Marx received two
United States patents for his guitar assembly designs. Tr. 285:12-15 (Marx). He currently is the
inventor of ten United States patents. The majority of these patents involve Mr. Marx’s music-
related endeavors. Tr. 285:7-15 (Marx). In the late 1990’s Mr. Marx moved from Nashville,
5
design a lethal, lead-free 5.56mm NATO round. Tr. 360:20 (Marx). His interest stemmed from
the 9/11 attacks. Specifically, Mr. Marx felt obligated to “to try to make a contribution to the
war effort.” Tr. 289:7-12 (Marx). After the 9/11 tragedy, Mr. Marx sold his business, and in
2003 he began meeting with members of the firearms industry to explore solutions to the M855.
Tr. 289:7-12, 290:2 to 293:6 (Marx). During summer 2004, parallel in time to the Army’s Phase
I presentations, see supra, at 5, Mr. Marx conceived of the Enhanced Performance Incapacitative
Composite (“EPIC”) round, JX 122 at Attach. (EPIC Brochure). Comparable to the M855, the
EPIC ammunition featured a 5.56mm bullet, but had a greater mass (approximately 100 grains)
and fragmented upon striking a soft target. Tr. 297:17 to 300:25 (Marx); JX 122 at Attach.10
According to Mr. Marx, the EPIC prototype projectile displayed “a much higher ballistic
coefficient,11 better penetration[,] and excellent terminal effects against soft targets,” JX 122 at
Attach., which could improve “the performance of [the Army] personnel’s existing weapons,”
JX 4 (Letter from Marx to Lt. Col. Dean (Nov. 16, 2004)).
In the fall of 2004, Mr. Marx contacted Lt. Col. Dean, then Chief of Small Arms for the
U.S. Army Infantry Directorate of Combat Development at Ft. Benning, to discuss the possibility
of commercializing his invention with the Army. JX 4; Tr. 47:22 to 48:1 (Lt. Col. Dean).
“[L]ooking at multiple opportunities to bring forth technology to the Army,” Tr. 350:15-16
(Marx), Mr. Marx also spoke with Paul Riggs, then Director of the Green Ammunition Program,
to arrange a meeting, which took place at Picatinny Arsenal on February 16, 2005, see Tr. 352:9-
19 (Marx). At this meeting, Mr. Marx presented a 5.56mm EPIC prototype, but did not leave
any rounds with Mr. Riggs or engage in technical discussions. Tr. 351:6-20 (Marx); Tr. 2100:23
to 2101:6 (Test. of Paul Riggs, Office of PM-MAS).12
The next day, on February 17, 2005, Mr. Marx met with Lt. Col. Dean and his civilian
aide, John Amick, at Ft. Benning. Tr. 321:7-12 (Marx). To protect the proprietary projectile
design, Mr. Marx had previously requested that Lt. Col. Dean and Mr. Amick sign a NDA on
behalf of the government, which provided that the countersigning party would keep secret all
confidential information disclosed by Mr. Marx. JX 3 (the “Dean NDA”); Tr. 319:9 to 320:10
where he had been touring with musical groups and playing guitar, to Florida. Tr. 287:14 to
288:5 (Marx).
10
Once a bullet fragments, or breaks apart, the detached pieces traverse the body in
distinct “wound channels,” which compound the degree of injury. Tr. 381:5-7, 418:16 (Marx);
Tr. 575:4-7 (Test. of Randall Michael German, plaintiff’s Technical Expert).
11
The higher the ballistic coefficient, the longer a projectile will travel. Tr. 963:16-17
(Test. of Thomas “Tucker” Campion, a contractor with United States Special Operations
Command (“SOCOM”)).
12
Mr. Marx testified that at the February meeting, Mr. Riggs “refused to sign [a NDA],
claiming that he didn’t have the authority.” Tr. 351:1-3 (Marx). Mr. Riggs did not recall any
such conversation with Mr. Marx. Tr. 2100:11-20 (Riggs).
6
(Marx).13 Upon executing the Dean NDA, Mr. Marx supplied Lt. Col. Dean and Mr. Amick with
fifty rounds of the 5.56mm EPIC ammunition along with performance test results. Tr. 361:8-14
(Marx); Tr. 491:12 to 492:18 (Amick). Following the meeting, and without going “into too
many details” so as to “respect [Mr. Marx’s] concerns about confidentiality,” Lt. Col. Dean
contacted various small-arms developers at the Army and at SOCOM to highlight the projectile’s
“very promising technology that line[d] up well with [the Army’s] lethality improvement efforts”
and to illustrate the potential uses and alternative applications surrounding the design. JX 8 (E-
mail from Lt. Col. Dean to Vernon Shisler, et al. (Feb. 17, 2005)). Lt. Col. Dean also suggested
that the EPIC round be considered “as an alternative” ammunition within the Green Ammunition
Program, recognizing the need for further evaluations by the Army. Id. Subsequently, in March
2005, Mr. Amick sent Mr. Riggs and the United States Army Marksmanship Unit a subset of the
fifty EPIC rounds for testing. See JX 37 (E-mail from Amick to Marx (Mar. 15, 2005)).
D. Transitional Events
On May 11, 2005, Mr. Marx attended an Industry Day conference, co-hosted by
Mr. Riggs, to further his connections in the small arms community and to learn more about the
Green Ammunition Program. Tr. 367:23 to 368:2 (Marx); JX 36 at 3 (“Welcome to Green
Ammo Industry Day” (May 11, 2005)). Program participants expected to hear about “the status
of the [P]rogram, and [who] would be potential suppliers of a concept in Phase II,” and were
disappointed when they discovered that Phase II of the Program would primarily be a “joint
government/ATK [re]design effort” and that the Army would no longer be considering slug
replacement designs from the industry. Tr. 2110:9 to 2113:22, 2118:17 to 2119:1 (Riggs); JX 36
at 18-19. Consequently, Mr. Riggs suggested to Mr. Marx that he might pursue commercializing
the EPIC technology with a boutique customer, such as SOCOM. Tr. 2112:21 to 2113:12
(Riggs).
On June 23, 2005, Mr. Marx met with Thomas Campion, a contractor at SOCOM, to
discuss the EPIC round. Tr. 961:6-12 (Campion). Mr. Campion was interested in submitting a
SBIR proposal14 involving ammunition with enhanced ballistics and was aware that Mr. Marx
had designed a heavier projectile with a large ballistic coefficient. See Tr. 963:11 to 965:16
(Campion). After signing a second NDA (the “Campion NDA”), Mr. Marx provided Mr.
Campion samples of the 5.56mm EPIC round and disclosed information about the proprietary
design. JX 124 (Campion NDA); JX 48 (E-mail from Campion to Shawn Spickert-Fulton (Aug.
5, 2005)). Mr. Campion subsequently e-mailed technical and performance data, such as “gel
shots” and a descriptive brochure about EPIC, to members of the Army, with the disclaimer that
13
The Dean NDA “imposes an affirmative duty to hold [disclosed] information in
confidence and protect it from dissemination to and use by an unauthorized person. In the
absence of the Disclosing Party’s prior written consent, the Receiving Party shall not reproduce
nor disclose the Confidential Information to any third party.” JX 3 § 2.1 (Dean NDA).
14
The SBIR program awards research and development grants to eligible small businesses
looking to commercialize a product. See Tr. 964:15-19 (Campion).
7
they “[t]reat th[e] [information] as proprietary.” JX 122 (E-mail from Campion to Charles
Marsh, et al. (Aug. 18, 2005)).15
By this time, Phase II of the Green Ammunition Program had commenced with a
redirected purpose to design a cost effective lead-free 5.56mm projectile that would also be more
lethal than its predecessor, the M855. JX 21 at 4. Several prototypes were designed and tested.
See JX 11 at 3-25. ATK had previously submitted ammunition redesigns to the Army, DX 584
at 10 (“Preliminary Program Review” (Feb. 22-24, 2005)), Tr. 1849:6 to 1850:1 (Mansfield), and
it provided the initial two concepts. Concept A comprised a modified M855 projectile with a full
metal jacket and a copper slug. JX 11 at 3. Concept B, later designated as B1, featured a three-
component projectile having a reverse jacket,16 exposed penetrator, and copper slug. See DX 214
at Attach. (E-mail from Mansfield to Kamdar & Dr. Joseph South (Aug. 19, 2005)); see also DX
122 at 1, 5 (South Lab Notebook (Aug. 2, 2005)).17 During July and August 2005, ATK made
final design modifications for Concept B and carried out computer-based simulations to
determine its lethality and large-scale manufacturing capability. See Tr. 1649:23 to 1653:13
(Newill); see also JX 11 at 4-6. The tests were completed in October 2005 with mixed results;
although Concept B was yaw-independent, it received low performance ratings. Tr. 1677:5-23
(Newill).
E. Marx’s Patent Application
On October 21, 2005, Mr. Marx filed a patent application for the EPIC projectile, which
in due course led to issuance of the ’325 patent on July 6, 2010. PX 1 at 2 (the ’325 patent).
After applying for the patent, Mr. Marx assigned the rights to his invention to Liberty, a business
he formed in 2005. JX 132 (Assignment of Rights in Patent Application (Apr. 5, 2010)); Tr.
416:19 to 417:3 (Marx).18 The patent describes a three-component projectile, one embodiment
15
“Gel shots” are either photographs or videos of projectiles fired into translucent blocks
of gelatin, or the actual gelatin blocks after being hit by the fired projectiles. See, e.g., Tr.
221:10-16 (Magness).
16
In a bullet having a reverse-jacketed design, the jacket is drawn last. Specifically, “the
slug is first inserted [into a cup,] and then the penetrator is inserted, and then the jacket [cup] is
deformed around the rear portion of the penetrator.” Tr. 218:9-12 (Ehlers); Tr. 1815:12-13
(Newill). This “method of construction . . . results in a [uniform tapered base] and more
consistent dispersion performance.” JX 15 at 6.
17
Concept A and Concept B originated as Concept 1 and Concept 2, respectively. Tr.
1602:23 to 1604:5 (Newill).
18
Mr. Marx is “an Officer and Chief of Research and Development of Liberty.” Mem. of
Law of Pl. in Opp’n to Def.’s 12(b)(1) Mot. to Dismiss Counts II and III of the First Amended
Complaint for Lack of Subject Matter Jurisdiction, Ex. 2, at ¶ 2 (Aff. of PJ Marx (Aug. 27,
2011)), ECF No. 14. After starting Liberty as a sole proprietorship, the business became
“Liberty Ammunition Inc., a Florida corporation, Liberty Ammunition LLC, a Delaware Limited
Liability Company – [and ultimately took] its current form[,] Liberty Ammunition Inc., a
8
of which has an exposed steel nose (penetrator), an exposed copper tail (slug), and a copper
interface (in place of a jacket) interconnecting the head and tail portions together during
discharge and flight. See generally ’325 patent. The interface portion is engineered to create a
reduced area of contact between the projectile and the rifle barrel, thereby decreasing barrel
friction and increasing the life of the gun barrel. ’325 patent, col. 2, lines 39-49. These
components of this embodiment are represented in Figure 1 of the patent:
Id. at 3.
This tripartite lead-free design “overcome[s] the disadvantages and problems associated
with conventional firearm projectiles.” ’325 patent, col. 2, lines 35-37. The bullet of the
invention is capable of penetrating a hard target, but engages in controlled fragmentation upon
hitting a soft target, id., col. 2, line 62 to col. 3, line 11. Controlled fragmentation is “facilitated
by one of both of the nose and tail portions being removably attached or connected to the
interface.” Id., col. 2, lines 62-67. An additional benefit of the patented invention is that it
“may be produced on a mass scale using materials and manufacturing equipment currently
available and known in the projectile production industry.” Id., col. 3, lines 36-38.
The ’325 patent contains two independent claims (Claims 1 and 32) and forty dependent
claims. Claim 1 reads as follows:
A projectile structured to be discharged from a firearm, said projectile comprising:
a body including a nose portion and a tail portion,
said body further including an interface portion disposed in
interconnecting relation to said nose and tail portions, said
interface portion structured to provide controlled rupturing of said
interface portion responsive to said projectile striking a
predetermined target,
Delaware corporation by conversion of the LLC pursuant to § 265 of the Delaware Corporation
Law.” Id. ¶ 10.
9
said interface portion disposed and dimensioned to define a
reduced area of contact of said body with the rifling of the firearm,
said interface portion maintaining the nose portion and tail portion
in synchronized rotation while being fixedly secured to one
another by said interface portion whereby upon said projectile
striking said predetermined target said interface portion ruptures
thereby separating said nose and tail portions of said projectile.
’325 patent, col. 7, line 57 to col. 8, line 5.
Claim 32 recites:
A projectile structured to be discharged from a firearm, said projectile comprising:
a body including a nose portion and tail portion,
said body further including an interface portion disposed
intermediate opposite ends of said body in interconnecting relation
to said nose and tail portions, said interface portion structured to
provide controlled rupturing of said interface portion responsive to
said projectile striking a predetermined target, said interface
portion maintaining said nose portion and tail portion in
synchronized rotation while being fixedly secured to one another
by said interface portion whereby upon said projectile striking said
predetermined target said interface portion ruptures thereby
separating said nose and tail portions of the projectile; and
said exterior surface of said interface portion disposed and
structured to define a primary area of contact of said body with an
interior barrel surface of said firearm.
Id., col. 9, line 55 to col. 10, line 16.
Additionally, a series of claims dependent upon Claim 1 describe embodiments in which
the interface encloses at least one of the nose or tail. These dependent claims derive either
directly or indirectly from Claim 8, which provides:
A projectile as recited in claim 1 wherein said interface comprises
an at least partially hollow interior dimensional and configured to
receive at least one of said nose or tail positions therein.
’325 patent, col. 8, lines 27-30. As a result, either a forward-drawn or reverse-jacketed design is
contemplated by Claim 1 and Claim 8.
10
F. Marx’s SBIRs with SOCOM
At the time the patent application was filed, the Army Marksmanship Unit was evaluating
the performance of the EPIC rounds previously provided by Mr. Marx. On November 1, 2005,
the Army Marksmanship Unit tested ten out of the fifty rounds and found weaknesses in the
bullet’s muzzle velocity, precision, and target penetration capability. See Tr. 539:17 to 545:18
(Amick); see also DX 212 (E-mail from Troy Lawton to Amick (Nov. 1, 2005)).19 Mr. Marx
was “surprised by th[ose] data,” because they were “inconsistent” with his own test results, Tr.
374:7-10 (Marx), and he was also “uncomfortable with the fact that [his ammunition] was tested
in a weapon . . . that didn’t appear to be a part of the weapons that were being utilized by the
U.S. Army,” Tr. 375:17-25 (Marx). Mr. Marx subsequently requested that the Army return the
remaining EPIC rounds to him. Tr. 376:1-4 (Marx); see also DX 63 (E-mail from Marx to
Amick (Jan. 3, 2006)).20
Mr. Marx then focused his efforts on a SBIR contract with SOCOM, collaborating with
Mr. Campion to complete a Phase I SBIR proposal. See Tr. 375:24-25 (Marx) (“I felt that . . .
my time was better spent working with SOCOM”). Shortly thereafter, on January 1, 2006,
Mr. Marx entered into a third NDA with Charles Marsh (the “Marsh NDA”), a Navy employee at
the Crane Naval Surface Warfare Center. JX 131 (Marsh NDA).21 Mr. Campion had requested
that Mr. Marx execute a NDA with Mr. Marsh because Mr. Marsh worked closely with SOCOM
and had experience with SOCOM weapon systems. Tr. 340:7-19 (Marx).22
The SBIR Phase I proposal, with an objective to evaluate the performance of the EPIC
ammunition and to make necessary modifications, was submitted on January 13, 2006. JX 125
at 1, 13. It recited that “Liberty . . . ha[d] developed green 5.56mm projectiles with range from
98-126 grains,” plus a “62 grain, green copper alloy 5.56mm projectile.” JX 125 at 3-4, 9-11;
see also Tr. 379:4-24 (Marx). The proposal featured a three-component projectile capable of
controlled fragmentation and comprising the same interface with exposed copper slug and steel
penetrator as found in an embodiment of the application that resulted in the ’325 patent. JX 125
at 7, 9-11. Dr. Newill and two additional evaluators reviewed Liberty’s SBIR proposal for its
19
“The lower the velocity . . . the more time that mother nature has the ability to move
the round or affect the round as it [is] going down range. Also, the lower the velocity, the lower
the . . . [hard and soft] target [penetration] potential associated with ammunition.” Tr. 541:24 to
542:6 (Amick).
20
Although ten out of the fifty rounds were tested, Mr. Marx testified that the Army only
returned “26 or so samples” of the EPIC ammunition. Tr. 377:7-17 (Marx).
21
Except for the name of the countersigning party, the Marsh NDA is identical to the
Campion NDA. Compare JX 124 (Campion NDA), with JX 131 (Marsh NDA).
22
Mr. Campion testified that he was “pretty sure” that Marx sent a subset of the 5.56
EPIC ammunition to Mr. Marsh. Tr. 985:2-4 (Campion); see also JX 48 at 2 (E-mail from
Campion to Mark Minisi (Aug. 4, 2008)). According to Mr. Marx, he did not provide Mr. Marsh
with any EPIC rounds, Tr. 659:9-12 (Marx), and there is no evidence in the record showing that
Mr. Marsh received samples of the EPIC ammunition.
11
technical merit and documented their findings in a written report. Tr. 1749:10-22 (Newill).
Although Dr. Newill did not retain a copy of this report, Tr. 1750:3-5 (Newill), computer records
from SOCOM reveal that he accessed the proposal on July 31, 2006. JX 89 at 1 (SOCOM
Computer Records).23
G. Army’s Completion of Development
Given the problematic results for Concept B, see supra, at 8, ATK revisited an earlier
prototype that it had developed, Concept L, in October 2006. JX 24 at 25 (“Green Ammo
Status” (Oct. 10, 2006)). Concept L was similar in structure to Concept B; both featured a
reverse jacket, copper slug, and steel penetrator. See Tr. 1677:12-23 (Newill); compare JX 24 at
16 (Concept B design), with JX 14 at 25 (Concept L design). In spring 2007, two versions of
Concept L, L2 and L3, were designed to replace the M855. While both had an optimal weight of
approximately 64 grains,24 displayed fragmentation behavior when striking a soft target, and
featured a reverse jacket and steel penetrator, Concept L2 employed a bismuth-tin slug, while
Concept L3 used a copper slug. Tr. 1686:13 to 1687:4 (Newill); JX 11 at 24-25. The Army first
produced the L2 concept in May 2007, see Tr. 1687:16 to 1688:1 (Newill), but later replaced the
bismuth-tin slug with a copper slug, featured in L3, after qualification testing revealed that
bismuth-tin slugs lost their shape under high temperatures, Tr. 1695:9-14 (Newill).
At the time of the L3 production by the Army and ATK, Liberty was awarded a SBIR
Phase I contract for $90,000. Liberty and SOCOM completed the ballistics tests outlined in the
SBIR Phase I proposal and presented the results in a Phase I report on August 30, 2007. Tr.
387:4-13 (Marx); JX 126 (Liberty SBIR Phase I Report). In 2010, for the SBIR Phase II
contract, SOCOM requested that Liberty “scale down [its] lead-free exposed-tip, [three]-piece
5.56mm Enhanced Performance Round, [which] had demonstrated both superior penetration of
hard targets and terminal effects in soft issue in [the] Phase I SBIR.” DX 270 at 9 (Liberty SBIR
Phase II Report). Specifically, Liberty was asked to create a 4.6mm prototype projectile that
would “exhibit enhanced internal, external[,] and terminal ballistics performance, as well as
defeat intermediate barriers such as auto glass and doors, when fired.” Id. at 9. In March 2013,
Liberty submitted a Phase II test report summarizing its progress. See id.
The projectile design found in L3 became what is now designated as the M855A1
Enhanced Performance Round and achieves several enhancements not found in M855.25 These
23
Although all of the information contained in the SBIR proposal was considered
confidential under SBIR regulations, see Tr. 1766:10 to 1767:5 (Newill); see also JX 125, the
EPIC projectile disclosed in the ’325 patent became public knowledge after the patent
application was published on April 26, 2007. See ’325 patent at 1.
24
ARL had previously determined that the weight of the original M855, 62 grains, was
optimal for a 5.56mm projectile. DX 156 at 13-14 (“Projectile Mass Study”).
25
“On May 7, 2010, the Army submitted Patent Application No. 61332631 for its bullet,
but this application apparently has been abandoned.” Liberty Ammunition, LLC v. United States
(“Liberty Ammunition II”), 111 Fed. Cl. 365, 370 n.6 (2013).
12
include superior hard target performance, greater soft target lethality, higher velocity, and
reduced muzzle flash. See JX 15 at 5-9.26 The design of the M855A1, reproduced below,
exhibits a tripartite construct comprising: a steel nose ogive with an exposed tip,27 a tail portion
containing a copper slug, and a surrounding thin jacket that connects the nose and tail.
Moreover, the jacket of the M855A1 is designed to rupture upon soft target impact, regardless of
the yaw angle. See Tr. 2366:16-21 (Kitchens); see also JX 25 at 5-7. These enhancements are
also achieved by Liberty’s EPIC projectile and are highlighted in the ’325 patent. See supra, at
9-10. Indeed, after examining the exterior surfaces of the EPIC and M855A1 EPR projectiles, a
senior contractor for the SOCOM “thought there was a fairly direct similarity between [the two
designs].” Tr. 778:25 to 779:6 (Test. of John D. Bennett, SOCOM’s Acquisition Logistician).
JX 54 at 2 (M855A1 Technical Drawing).
H. Army’s Adoption and Fielding of the M855A1
The M855A1 EPR was fielded in Afghanistan in 2010 and has since replaced the M855
round. See Tr. 1694:17-25 (Newill); see also JX 15 at 11. The developers of the M855A1 have
been awarded DOD’s highest acquisition award for their exemplary contribution to small arms
ammunition. JX 80 (“PEO Ammunition Team wins DOD’s highest award” (Oct. 5, 2012))
(“The result is the most effective and technically advanced small caliber cartridge ever
developed, designed to equip our troops with improved ammunition quickly, while also
supporting the Army’s requirement for an environmentally friendly projectile’” (quoting Col.
Paul Hill, PM-MAS)). As of 2013, LCAAP had produced over one billion rounds of the
M855A1, see Tr. 892:4 (Test. of Kimberly Mary McCleerey, PM-MAS Acquisition Manager),
see also Tr. 2041:8-9 (Hanzl), which is now the Army’s. 22 caliber standard issue ammunition,
Tr. 306:9-10 (Marx).
I. Adoption of the M80A1
“As soon as [the Army] knew [they] were very likely to be successful with the M855A1,”
Tr. 1698:15-16 (Newill), they began exploring how to “integrate to the M80 projectile the same
types of performance gains achieved in the M855A1 while removing the lead from the projectile
26
Muzzle flash refers to the flare of light created by the combustion of propellant in the
cartridge upon firing. See JX 15 at 8.
27
In architectural terms, an ogive is a curved, pointed arch, often represented in Gothic
windows or fan vaulting. See Merriam-Webster Online Dictionary, ogive, available at www.
merriam-webster.com/dictionary/ogive. For projectiles, an ogive can appear as a streamlined,
elliptical, rounded nose.
13
due to environmental reasons.” DX 175 at 7 (Defendant’s Responses to Plaintiff’s Third Set of
Interrogatories); Tr.189:12-18 (Ehlers). The 7.62mm M80A1, reproduced below, is the Army’s
most recent prototype round. Similar to the M855A1, the projectile of the M80A1 EPR employs
a steel penetrator, copper slug, and reverse copper jacket that ruptures upon striking a soft target.
However, the M80A1 features different dimensions and detailed features from those of the
M855A1. DX 175 at 7-9; see Tr. 1443:24 to 1445:6 (Middleton). As of the date of the trial,
qualification and performance evaluations were still being performed on the M80A1. See Tr.
1699:10-11 (Newill).
JX 144 at 2 (M80A1 Technical Drawing)
PROCEDURAL HISTORY
Liberty filed suit in this court on February 8, 2011 alleging that the Army’s “Green
Bullet” technology found in the M855A1 and the M80A1 infringed upon its ’325 patent, and that
Army breached its contractual obligations set forth in three NDAs by disclosing confidential
information to potential vendors. See Compl. at 2-3. After the government moved to dismiss the
breach-of-contract count, Liberty amended its complaint and included a pendent claim for unfair
competition under the Lanham Act and state law. See First Am. Compl., ECF 9. At that point,
the parties stipulated to a denial of the government’s motion to dismiss, see Joint Stipulation
Regarding Pl.’s First Am. Compl. (July 18, 2011), ECF No. 11, and the government filed its
second motion to dismiss on July 28, 2011 seeking to dismiss Liberty’s breach-of-contract and
unfair competition claims, see Def.’s Mot. to Dismiss Counts II & III of the First Am. Compl.,
ECF No. 13. Following briefing and a hearing, the court held that the Anti-Assignment Act did
not bar its subject matter jurisdiction over Liberty’s breach-of-contract claim, but dismissed
Liberty’s pendent Lanham Act and unfair-competition claim for lack of jurisdiction. Liberty
Ammunition, Inc. v. United States (“Liberty Ammunition I”), 101 Fed. Cl. 581, 586-92 (2011).
The parties then proceeded to submit briefs on claim construction and to present oral
arguments at a Markman hearing held on March 22, 2013. The court issued an order on June 13,
2013, construing fifteen terms of the patent. Liberty Ammunition II, 111 Fed. Cl. at 368-81.28
28
Most importantly for this post-trial decision, the court adopted a construction of
“‘reduced area of contact,’ as meaning that the area of contact between the interface and the
rifling of the firearm is less than that of a traditional jacketed lead bullet of calibers .17 through
.50 BMG,” and held that “‘intermediate opposite ends’ means that the interface is positioned
between or in the middle of the opposite ends of the forward end of the nose portion and the
trailing end of the tail portion.” Liberty Ammunition II, 111 Fed. Cl. at 375, 380. For the
additional thirteen claims construed by the court, see id. at 371-80.
14
After the parties completed discovery, an eleven-day trial began on June 23, 2014. In aid of trial,
the parties filed pre-trial briefs addressing the issues of patent infringement, breach-of-contract,
and damages. Following post-trial briefing and closing argument, the case is ready for
disposition.
STANDARDS FOR DECISION
A. Patent Infringement
Section 1498(a) of Title 28 serves as a congressional waiver of the United States’s
sovereign immunity and vests in the United States Court of Federal Claims the exclusive
authority to adjudicate patent infringement claims against the federal government “[w]henever
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.” 28 U.S.C. § 1498(a); see Martin v. United States, 99 Fed. Cl. 627, 632-
33 (2011) (recognizing that Section 1498, rather than the Tucker Act, 28 U.S.C. § 1491(a),
grants the court jurisdiction over a claim for patent infringement). The statute further states, in
pertinent part, that “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.” 28 U.S.C. § 1498(a).
1. Taking of a non-exclusive and compulsory license.
Pursuant to 28 U.S.C. § 1498, the government is authorized to “take” a non-exclusive and
compulsory license to any United States patent based on the theory of eminent domain. See
Motorola, Inc. v. United States, 729 F.2d 765, 768 (Fed. Cir. 1984) (recognizing that the taking
of a license equates to an eminent domain taking of property under the Fifth Amendment of the
United States Constitution). “The [g]overnment takes a license to use or to manufacture a
patented invention as of the instant the invention is first used or manufactured by the
[g]overnment.” Decca Ltd. v. United States, 640 F.2d 1156, 1166 (Ct. Cl. 1980). Because the
government has consented to being sued only for the compulsory taking of a non-exclusive
patent license, the basis for recovery against the government under 28 U.S.C. § 1498 diverges
from that in patent litigation between private parties under 35 U.S.C. § 271:
Expressed differently, section 1498 is a waiver of sovereign
immunity only with respect to a direct governmental infringement
of a patent. Activities of the Government which fall short of direct
infringement do not give rise to governmental liability because the
Government has not waived its sovereign immunity with respect to
such activities. Hence, the Government is not liable for its
inducing infringement by others, for its conduct contributory to
infringement of others, or for what, but for section 1498, would be
contributory (rather than direct) infringement of its suppliers.
15
Although these activities have a tortious ring, the Government has
not agreed to assume liability for them.
Decca, 640 F.2d at 1167 (emphasis added); see, e.g., Martin, 99 Fed. Cl. at 632 (recognizing that
injunctive relief is not available under 28 U.S.C. § 1498).
As it pertains to an action under Section 1498, direct infringement of a patent occurs
when the government directly uses or manufactures the patented invention without a license,
Decca, 640 F.2d at 1167 n.15, or when, through a procurement contract or otherwise, the
government consents to the use or the manufacture of the patented invention for its benefit
without first obtaining a license, id. at 1166-67; Hughes Aircraft Co. v. United States, 534 F.2d
889, 897 (Ct. Cl. 1976); Parker Beach Restoration, Inc. v. United States, 58 Fed. Cl. 126, 131
(2003). The court determines whether the government has engaged in direct infringement using
a two-step process that parallels the analysis for infringement litigation between private parties.
See Lemelson v. United States, 752 F.2d 1538, 1548 (Fed. Cir. 1985); see also Casler v. United
States, 15 Cl. Ct. 717, 731 (1988), aff’d, 883 F.2d 1026 (Fed. Cir. 1989). The court initially
construes the claims of the patent and then compares the construed claims to that of the accused
infringing product or process. See JVW Enterprises, Inc. v. Interact Accessories, Inc., 424 F.3d
1324, 1329 (Fed. Cir. 2005). When comparing the claims to the accused device or process, “‘the
plaintiff must show the presence of every element [for literal infringement] or its substantial
equivalent [for infringement under the doctrine of equivalents] in the accused device.’” Boeing
Co. v. United States, 69 Fed. Cl. 397, 426 (2006) (alteration in original) (quoting Lemelson, 752
F.2d at 1551); see also Pratt & Whitney Canada, Inc. v. United States, 17 Cl. Ct. 777, 781-84
(1989), aff’d, 897 F.2d 539 (Fed. Cir. 1990). The first step in this analysis, i.e., claim
construction, is a question of law to be determined by the court; the second step, i.e.,
infringement, either literal or under the doctrine of equivalents, involves questions of fact. See
Markman v. Westview Instruments, Inc., 517 U.S. 370, 388-90 (1996). The plaintiff has the
burden of proving direct infringement, whether by literal infringement or under doctrine of
equivalents, by a preponderance of the evidence. Lemelson, 752 F.2d at 1547; Hughes Aircraft
Co. v. United States, 717 F.2d 1351, 1361 (Fed. Cir. 1983).
2. Relief available under 28 U.S.C. § 1498(a).
The relief provided by 28 U.S.C. § 1498(a) for direct infringement is the “reasonable and
entire compensation” for the compulsory non-exclusive patent license. 28 U.S.C. § 1498(a); see
Decca, 640 F.2d at 1167; see also Honeywell Int’l Inc. v. United States, 107 Fed. Cl. 659, 679
(2012) (“Because [S]ection 1498(a) entails an eminent domain remedy, the Government must
pay ‘just compensation[.]’” (citations omitted)). “Generally, the preferred manner [for
computing reasonable and entire compensation] is to require the government to pay a reasonable
royalty for its license as well as damages for its delay in paying the royalty.” Standard Mfg. Co.
v. United States, 42 Fed. Cl. 748, 758 (1999), abrogated in other respects by Uniloc USA, Inc. v.
Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011); see also Wright v. United States, 53 Fed. Cl.
466, 469 (2002). When determining the amount of royalty required to adequately compensate
the plaintiff, the court must consider the “supposed result of hypothetical negotiations between
the plaintiff and defendant.” Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1544 (Fed. Cir. 1995)
(en banc) (citing Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078 (Fed. Cir. 1983)).
16
“The hypothetical negotiation requires the court to envision the terms of a licensing agreement
reached as the result of a supposed meeting between the patentee and the infringer at the time
infringement began,” id., which is the date of first use or manufacture, Brunswick Corp. v.
United States, 36 Fed. Cl. 204, 210 (1996), aff’d, 152 F.3d 946 (Fed. Cir. 1998). To aid in its
calculation of a reasonable royalty arising from a hypothetical negotiation, the court may rely on
a comprehensive list of factors elucidated in Georgia-Pacific Corp. v. U.S. Plywood Corp., 318
F. Supp. 1116, 1120 (S.D.N.Y. 1970), modified and aff’d, 446 F.2d 295 (2d Cir. 1971). See
Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1109-10 (Fed. Cir. 1996). The factors recognized by the
court in Georgia-Pacific are:
(1) current, established royalty rates under the patent at issue; (2) royalty rates
for comparable technology; (3) scope, exclusivity, and restrictiveness of a
retroactive license; (4) the patent holder's established licensing and marketing
practices; (5) commercial/competitive relationship of licensor and licensee;
(6) derivative/convoyed sales of unpatented, accompanying materials by patentee
and competitors; (7) duration of patent and license terms; (8) profitability and
commercial success of invention; (9) utility and advantages of invention over
prior art; (10) nature, character, and benefits of use; (11) extent and value of
infringing use; (12) allocation of a portion of profits or sales for use of invention;
(13) portion of realizable profits creditable to the invention alone; (14) expert
testimony on royalty rates; and (15) the totality of other intangibles impacting a
hypothetical negotiation between a willing licensor and licensee.
Georgia-Pacific Corp., 318 F. Supp. at 1120. Nonetheless, the court “is neither constrained by
[the factors] nor required to consider each one where they are inapposite or inconclusive.”
Brunswick, 36 Fed. Cl. at 211-12. The determination of a reasonable royalty “requires a highly
case-specific and fact-specific analysis, relying upon mixed considerations of logic, common
sense, justice, policy and precedent.” Boeing Co. v. United States, 86 Fed. Cl. 303, 311 (2009)
(internal citations omitted) (quotation marks omitted).
3. Available defenses.
Under Section 1498(a),“‘[i]n the absence of a statutory restriction, any defense available
to a private party is equally available to the United States.’” Motorola, 729 F.2d at 769
(alterations in original) (quoting 28 U.S.C. § 1498 Revisor’s Notes). Accordingly, the
government may avail itself of the invalidity defenses set forth in 35 U.S.C. § 282(b). See, e.g.,
Messerschmidt v. United States, 29 Fed. Cl. 1, 18-40, aff’d, 14 F.3d 613 (Fed. Cir. 1993)
(holding that patent was invalid for lack of novelty and for obviousness, addressing an
infringement claim brought under Section 1498(a)). The government has the burden of proving
invalidity by clear and convincing evidence, as opposed to merely the preponderance of the
evidence. Microsoft Corp. v. i4i Ltd. P’ship, __ U.S. __, __, 131 S.Ct. 2238, 2242 (2011));
Allergan, Inc. v. Sandoz Inc., 726 F.3d 1286, 1291 (Fed. Cir. 2013); Twin Disc, Inc. v. United
States, 10 Cl. Ct. 713, 727 (1986) (quoting SSIH Equipment, S.A. v. International Trade
Comm’n, 718 F.2d 365, 375 (Fed. Cir. 1983)). This burden of persuasion remains on the party
asserting invalidity throughout the pendency of the action. Stratoflex, Inc. v. Aeroquip Corp.,
713 F.2d 1530, 1534 (Fed. Cir. 1983); see also In re Cyclobenzaprine Hydrochloride Extended-
17
Release Capsule Patent Litig., 676 F.3d 1063, 1080 (Fed. Cir. 2012) (holding that the trial court
must “consider[] the objective evidence in its entirety before making an obviousness finding, and
consider[] that evidence in light of the actual burden imposed on a patentee and a patent
challengee”).
To invalidate a patent for lack of novelty pursuant to Section 102(a) of Title 35, the
asserted claim in the patent-in-suit must be anticipated. See 35 U.S.C. § 102(a) (2006) (“A
person shall be entitled to a patent unless . . . the invention was . . . patented or described in a
printed publication in this or a foreign country, before the invention thereof by the applicant for
patent.”). 29 Although validity is a legal issue, anticipation is a question of fact. Atofina v.
Great Lakes Chem. Corp., 441 F.3d 991, 995 (Fed. Cir. 2006). “A claim is anticipated only if
each and every element as set forth in the claim is found, either expressly or inherently
described, in a single prior art reference.” Verdegaal Bros. v. Union Oil Co. of Cal., 814 F.2d
628, 631 (Fed. Cir. 1987). If there is not strict equivalence between the prior art reference and
each and every element set forth in the claim, “the proper inquiry is obviousness, not
[anticipation].” Messerschmidt, 29 Fed. Cl. at 21; see Beckson Marine, Inc. v. NFM, Inc., 292
F.3d 718, 726 (Fed. Cir. 2002) (“Indeed the obviousness inquiry weighs the differences between
the claimed invention and non-anticipating prior art references to determine whether one of skill
in the art would have considered the invention obvious at the time of invention.”); see also
Connell v. Sears, Roebuck & Co., 722 F.2d 1542, 1548 (Fed. Cir. 1983) (“A prior art disclosure
that ‘almost’ meets th[e anticipation] standard may render the claim invalid under § 103; it does
not ‘anticipate.’”).
A patent is invalid for obviousness when “the differences between the subject matter
sought to be patented and the prior art are such that the subject matter as a whole would have
been obvious at the time the invention was made to a person having ordinary skill in the art to
which said subject matter pertains.” 35 U.S.C. § 103 (2006).30 “The determination of
obviousness under 35 U.S.C. § 103 is a legal conclusion based on underlying facts.” Allergan,
726 F.3d at 1290. These factual underpinnings include: (1) the scope of content of the prior art;
(2) the difference between the prior art and asserted claims; (3) the level of ordinary skill in the
relevant art; and (4) the objective evidence of non-obviousness. Graham v. John Deere Co. of
Kansas City, 383 U.S. 1, 17-18 (1966); see also KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398,
399-01 (2007). “A party asserting that a patent is obvious must demonstrate by clear and
convincing evidence that a skilled artisan would have had reason to combine the teaching of the
29
Section 102 was amended by Section 3 of the Leahy-Smith America Invents Act
(“AIA”), Pub. L. No. 112-29, 125 Stat. 284, and AIA Paragraph 3(n)(1) makes that change
applicable to any patent application filed 18 months after September 16, 2011, i.e., on March 16,
2013. Because the application for the ’325 patent was filed well before that date, the court will
reply on the pre-AIA version of § 102. See SD3, LLC v. Dudas, 952 F. Supp. 2d 97, 103 nn.4-5
(D.D.C. 2013).
30
Section 103 also was amended by Section 3 of the AIA. For reasons stated supra, at
n.29, the pre-AIA version of § 103 applies in this case. See Alcon Research Ltd. v. Barr Labs.,
Inc., 745 F.3d 1180, 1183 n.1 (Fed. Cir. 2014); see also I.E.E. Int’l Electronics & Eng’g, S.A. v.
TK Holdings Inc., No. 10-13487, 2014 WL 5371038, at *40 n.4 (E.D. Mich. Oct. 23, 2014).
18
prior art reference to achieve the claimed invention, and that the skilled artisan would have had a
reasonable expectation of success from doing so.” PAR Pharm., Inc. v. TWI Pharms., Inc., __
F.3d __, __, 2014 WL 6782649 (Fed. Cir. Dec. 3, 2014) (internal quotation marks omitted)
(quoting In re Cyclobenzaprine Hydrochloride, 676 F.3d at 1068-69 (in turn quoting Proctor &
Gamble Co. v. Teva Pharm. USA, Inc., 566 F.3d 989, 994 (Fed. Cir. 2009))).
B. Breach of Contract
The Tucker Act grants the Court of Federal Claims subject matter jurisdiction to hear
claims “against the United States founded either upon the Constitution, or any Act of Congress
or any regulation of an executive department, or upon any express or implied contract with the
United States, or for liquidated or unliquidated damages in cases not sounding in tort.” 28
U.S.C. § 1491(a)(1). Although the Tucker Act waives sovereign immunity, it does not create a
substantive right to relief against the United States. United States v. Testan, 424 U.S. 392, 398,
(1976); Martinez v. United States, 333 F.3d 1295, 1302-03 (Fed. Cir. 2003) (en banc). Rather,
the “substantive right must be found in some other source of law” that mandates payment from
the United States for the injury suffered. United States v. Mitchell, 463 U.S. 206, 216 (1983). A
damages claim arising from a breach-of-contract with the United States fits squarely within the
ambit of this requirement. Speed v. United States, 97 Fed. Cl. 58, 64 (2011), aff’d, 550 Fed.
Appx. 885 (Fed. Cir. 2014) (“Allegations of a contract with the government and breach of that
contract can suffice for this purpose, so long as monetary relief is sought.” (citing Ransom v.
United States, 900 F.2d 242, 244 (Fed. Cir. 1990) (“To maintain a cause of action pursuant to the
Tucker Act that is based on a contract, the contract must be between the plaintiff and the
government and entitle the plaintiff to money damages in the event of the government's breach of
that contract.”))).
To prevail on a breach-of-contract claim, the plaintiff bears the burden of proving: (1) the
existence of a valid contract between the parties; (2) a duty arising from the contract; (3) a
breach in duty; and (4) damages caused by the breach. San Carlos Irr. & Drainage Dist. v.
United States, 877 F.2d 957, 959 (Fed. Cir. 1989). A valid contract with the United States may
be express, Trauma Serv. Grp. v. United States, 104 F.3d 1321, 1325 (Fed. Cir. 1997), or may be
implied-in-fact, “founded upon a meeting of minds, which, although not embodied in an express
contract, is inferred, as a fact, from conduct of the parties showing, in the light of the
surrounding circumstances, their tacit understanding,” Baltimore & O.R. Co. v. United States,
261 U.S. 592, 597 (1923). For either type of contract, see Hanlin v. United States, 316 F.3d
1325, 1328 (Fed. Cir. 2003) (“[T]he requirements for an implied-in-fact contract are the same as
for an express contract; only the nature of the evidence differs.”), the plaintiff must demonstrate:
(1) mutuality of intent; (2) consideration; (3) an unambiguous offer and acceptance; and (4) the
existence of actual authority, express or implied, on part of the government signatory to bind the
government to the contract. Massie v. United States, 166 F.3d 1184, 1188 (Fed. Cir. 1999); see
also H. Landau & Co. v. United States, 886 F.2d 322, 324 (Fed. Cir. 1989) (recognizing that
“implied actual authority, like expressed actual authority, will suffice” for the fourth
requirement). The remedy for breach-of-contract is to award “damages sufficient to place the
injured party in as good a position as it would have been had the breaching party fully
performed.” Indiana Michigan Power Co. v. United States, 422 F.3d 1369, 1373 (Fed. Cir.
2005). The injured party, however, may only recover if: (1) the damages were reasonably
19
foreseeable; (2) there is a causal connection between damages and the breach; and (3) the
amount of recovery is not speculative. Id.
ANALYSIS
I. PATENT INFRINGEMENT
Liberty filed suit against the government under 28 U.S.C. 1498(a), alleging that the
M855A1 and the M80A1 (“A1 projectiles”) directly infringe, by literal infringement and under
the doctrine of equivalents, the ’325 patent. Specifically, Liberty charges the government with
infringement of independent Claims 1 and 32, as well as dependent Claims 2-3, 7-11, 18-20, 22,
25, 28-32, and 38-41. Pl.’s Post-Trial Br. at 5-6, ECF No. 99. The government maintains that
the A1 projectiles do not directly infringe independent Claims 1 or 32 or their dependent claims,
Def.’s Post-Trial Br. at 40-46, ECF No. 103, and contests the validity of “each and every claim
of the ’325 patent,” id. at 47. Before addressing the government’s invalidity contentions, the
court will make a factual determination regarding whether the A1 projectiles directly infringe the
foregoing claims in the ’325 patent.
A. Literal Infringement
1. Claim 32.
Liberty avers that the A1 projectiles literally infringe independent Claim 32, as well as
the associated dependent Claims 38-41. To prove literal infringement, Liberty has the burden of
demonstrating that the A1 projectiles embody each and every element in Claim 32. ZMI Corp. v.
Cardiac Resuscitator Corp., 844 F.2d 1576, 1578 (Fed. Cir. 1988); Judin v. United States, 27
Fed. Cl. 759, 784 (1993). If the language set forth in Claim 32 reads directly on the A1
projectiles, “the court may disregard additional components or elements of the [A1 projectiles] if
those additions do not produce a radically different result.” Judin, 27 Fed. Cl. at 784; see also
Becton Dickinson & Co. v. C.R. Bard, Inc., 922 F.2d 792, 797 (Fed. Cir. 1990).
The government concedes that the A1 projectiles infringe each and every element of
Claim 32 in the ’325 patent except the claim limitation “intermediate opposite ends.” See supra,
at 10, 15 n.28; Tr. 2375:16 to 2376:9 (Kitchens); Def.’s Post-Trial Br. at 45-46. In its claim
construction order, the court construed “intermediate opposite ends” to mean “that the interface
is positioned between or in the middle of the opposite ends of the forward end of the nose portion
and the trailing end of the tail portion.” Liberty Ammunition II, 111 Fed. Cl. at 379-80. The
court further acknowledged that “‘intermediate opposite ends’ indicates by its plain meaning an
embodiment where the interface is positioned between the tail and nose, though not necessarily
enclosing the tail or nose.” Id. at 379 (emphasis added).
The government now interprets that construction as precluding the interface from
“enclos[ing] an end of the projectile.” Def.’s Post-Trial Br. at 46; Tr. 2343:24 to 2344:9
(Kitchens). The government’s attempt to interpose this limitation into Claim 32 restates an
unsuccessful argument that it previously raised during claim construction. Then, the government
urged the court to adopt an additional limitation, “that the interface cannot extend to the front or
20
to the end of the projectile,” because no figures found in the ’325 patent depict an interface that
extends to the nose or tail portions. Liberty Ammunition II, 111 Fed. Cl. at 379. Given that “the
sampling of embodiments provided by the figures does not comprise the entirety of all
embodiments enabled by the patent,” the court declined to adopt the government’s proffered
limitation. Id. at 379-80 (citing Phillips v. AWH Corp., 415 F.3d 1303, 1323 (Fed. Cir. 2005)
(“[W]e have repeatedly warned against confining the claims to those embodiments . . . [and]
expressly rejected the contention that if a patent describes only a single embodiment, the claims
of the patent must be construed as being limited to that embodiment.”)).
The government further argues that an embodiment in which the interface encloses an
end portion contradicts the meaning of “intermediate opposite ends” because that interface no
longer is “positioned between or in the middle of the opposite ends [of the projectile].” See DX
203 at 34 (Dr. Kitchens’s Responsive Expert Report Regarding Infringement); see also Def.’s
Post-Trial Br. at 46. This supposition mischaracterizes the claim language. The claim term
“intermediate opposite ends” is preceded by the open transition term “including.” It is axiomatic
in patent law that the terms “including” and “comprising” have the same meaning, “namely that
the listed elements . . . are essential but other elements may be added.” Lucent Technologies,
Inc. v. Gateway, Inc., 525 F.3d 1200, 1214 (Fed. Cir. 2008). Therefore, as Liberty correctly has
recognized, “intermediate opposite ends” means that the interface must “cover[] at least the
‘middle’ portion of the round, but is not limited to covering only that middle portion.” Pl.’s Post-
Trial Br. at 9 (alteration in original); see Tr. 668:7-24 (German) (testifying that the court’s
construction of “intermediate opposite ends” permits, but does not require, the interface to
extend to the front or to the end of the projectile).31 The government’s attempt to limit this
claim term falls short.
Under the proper reading of “intermediate opposite ends,” the A1 projectiles literally
infringe Claim 32. A trial, Liberty demonstrated by a preponderance of evidence that the
reverse-drawn jackets of the M855A1 and M80A1 are disposed at “intermediate opposite ends”
because the jackets cover at least the middle portion of the round. See PDX 66-67 (“Disposed
Intermediate Opposite Ends” of the A1 Projectiles); see also Tr. 669:10-19 (German).
Moreover, the government’s expert, Dr. Kitchens, conceded that under the court’s construction,
the A1 projectiles are indeed “disposed at intermediate opposite ends.” Tr. 2344:20-22, 2395:24
to 2396:10 (Kitchens). Given that the jackets of the A1 projectiles fall within the scope of
“intermediate opposite ends,” each and every element in Claim 32 reads on the A1 projectiles.
Based on the foregoing, the M855A1 and the M80A1 literally infringe independent
Claim 32. It is self-evident that dependent Claims 38-41, which incorporate by reference all of
the limitations of Claim 32, are also infringed by the A1 projectiles. See Wahpeton Canvas Co.
31
The government’s expert, Dr. Clarence W. Kitchens, in his report had suggested that
Liberty’s interpretation of the claim term “is essentially identical to the limitation provided by
the language in [C]laim 32 that the interface be ‘dis[posed . . . in interconnecting relation to said
nose and tail and portion.’” DX 203 at 34. This juxtapositioning of claim terms is not
warranted. The terms “intermediate opposite ends” and dis[posed] . . . in interconnecting
relation to” serve different purposes in delineating the claim.
21
v. Frontier, Inc., 870 F.2d 1546, 1553 (Fed. Cir. 1989); see also Tr. 2376:6-9 (Kitchens).
2. Claim 1.
Liberty further contends that the A1 projectiles literally infringe, or alternatively infringe
under the doctrine of the equivalents, independent Claim 1 and the associated dependent Claims
1-3, 7-11, 18-20, 22, 25, and 28-31. Pl.’s Post-Trial Br. at 5. Unlike Claim 32, Claim 1
describes a projectile having a “reduced area of contact” with the “interior barrel surface of said
firearm.” See supra, at 9-10. There are “no clues within [Claim 1] itself as to what the area of
contact has been reduced from,” Liberty Ammunition II, 111 Fed. Cl. at 375 (alteration in
original), but the specification recites “a reduced contact area as compared to conventional
projectiles,” ’325 patent, col. 1, lines 65-66. During claim construction, Liberty argued that the
claimed reduction was “self-referential, defined by a comparison between the interface and part
of the interface.” Liberty Ammunition II, 111 Fed. Cl. at 375. In contrast, the government
maintained that an accurate comparator was that of a “traditional jacketed projectile, which
includes the M855.” Id. The court found that neither referent adequately addressed the missing
antecedent and looked to the entire patent to select the following appropriate referent: the area of
contact is reduced to that of a “traditional jacketed lead bullet of calibers .17 through .50 BMG.”
32
Id. (recognizing that “‘conventional projectiles’ referred to in the specification must logically
be limited to those projectiles comparable to the ones enabled by the ’325 patent, which is to say
‘all calibers generally ranging from .17 through [.]50 BMG.’”) (citing ’325 patent, col. 2, line
28)). Accordingly, the court construed “reduced area of contact” to mean “the area of contact
between the interface and the rifling of the firearm is less than that of a traditional jacketed lead
bullet of calibers .17 through .50 BMG.” Id.
Similar to Claim 32, the government only contests the infringement of one element found
in Claim 1: the “reduced area of contact” limitation. Tr. 2375:16 to 2376:8 (Kitchens). The crux
of the contention centers on the parties’ diverging selection of referent projectiles in accordance
with the court’s claim construction order. For each A1 projectile, Liberty and the government
selected jacketed lead comparators with the same caliber, but Dr. Kitchens further limited the
government’s comparison to projectiles with approximately the same mass. Dr. Kitchens
testified that the referent must have a similar weight as the accused projectile because a bullet’s
mass is positively correlated to its length and its area of contact. See Tr. 2192:2 to 2193:4
(Kitchens). According to Dr. Kitchens, “if heavier and larger bullets are considered proper
comparative projectiles, then every bullet could conceivably have a reduced area of contact, as
long as a heavier bullet was used as a comparator.” DX 203 at 17.33
32
“‘BMG” specifically refers to the Browning Machine Gun and thus “.50 BMG” refers
to the cartridge developed for that machine gun (used for some time with the military-standard
M2 heavy machine gun).” Liberty Ammunition II, 111 Fed. Cl. at 375 n.8.
33
According to Liberty’s expert, Dr. Randall M. German, a bullet does not necessarily
become longer as it becomes heavier. By “chang[ing] the material of construction,” the bullet’s
mass can increase without a corresponding expansion in length. Tr. 691:16-23 (German).
22
Dr. Kitchens determined that the M80 and the M855 “are the best comparators” because
they are “the same weight as [their successors], and they are both general-purpose Army rounds
that will be used in the same weapon.” Def.’s Post-Trial Br. at 42; see DX 203 at 15-16.
Recognizing that the specific predecessor rounds may be “excluded as a standard of
comparison,” see DX 203 at 17, Dr. Kitchens selected additional .22 caliber bullets with weights
between 40 and 70 grains as comparators for the M855A1, id. at 21. He also picked the M80 and
other .30 caliber projectiles with weights of 110 to 168 grains as referents for the M80A1. Id. at
27. Based on these comparators, Dr. Kitchens concluded that the “M855A1 has a larger area of
contact34 than the M855 it has replaced, as well as a larger area of contact than twenty other
representative 5.56mm (0.22 cal[iber]) traditional lead bullets,” id. at 22-23, and that “the
M80A1 has a larger area of contact than the M80 . . . , as well as a larger area of contact than
nine other 7.62mm (.30 cal[iber]) traditional jacketed lead bullets,” id. at 28. He then concluded
that neither the M855A1 nor the M80A1 “literally meet (or infringe) the ‘reduced are of contact
limitation.’” Id. at 24, 29.
The court finds that the M855 and M80 are not the sole comparators for the claim term
because the ’325 patent is silent as to this additional limitation. The specification simply recites
that the area of contact is reduced as compared to “conventional projectiles,” ’325 patent, col. 1,
lines 65 to 66, which are projectiles of “all calibers generally ranging from .17 through [.]50
BMG,” id. at col. 2, line 28. See Liberty Ammunition II, 111 Fed. Cl. at 375 (declining to adopt
the M855 as a referent when construing the claim term “reduced area of contact”). Comparing
the accused rounds by weight is equally problematic for three reasons. First, the standard of
comparison enunciated by the court is that of “traditional jacketed lead bullet of calibers .17
through .50 BMG.” Id. Notably absent from the court’s construction is any limitation on the
weight of the referent. See Tr. 604:22-24 (German). Accordingly, selecting referent rounds by
weight impermissibly limits the “reduced area of contact” claim term. Second, many of the
referents cited by Dr. Kitchens are not traditional jacketed lead bullets. Rather, a number of
those comparators are either partially- or non-jacketed bullets, non-military standard
ammunition, or civilian .22 caliber ammunition designated as .22 “shorts” or “longs” that are not
comparable in any meaningful way to ammunition used by the military. See DX 203 at 21, 27;
see also Pl.’s Post-Trial Br. at 10 n.5 (“While Dr. Kitchens purports to list a number of rounds
34
Dr. Kitchens’s methodology for calculating the contacting area was similar to that
employed by Dr. German. Compare DX 203 at 14 (“[Area of Contact] = πDL, where D is the
nominal outer diameter of the non-tapered cylindrical portion of the bullet, L is the bullet bearing
surface length.”), with PX 12 at 16 (Dr. German’s Expert Report Regarding Infringement)
(“[Surface Area] = 2πrh, where r is the radius of the largest diameter non-tapered outer section of
the jacket and h is the length of that non-tapered outer section.”). The only difference between
the two approaches is that Dr. Kitchens included the “length of any knurled cannelure” for the
value of L in bullets that featured a cannelure. See Tr. 2186:14-16 (Kitchens); see also DX 203
at 14. Accordingly, Dr. Kitchens calculated the contacting area of the M855A1 and M80A1 to
be .2648 square inches and to be .3653 square inches, respectively. DX 203 at 23, 25. In
contrast, Dr. German’s calculations were .2365 square inches for the M855A1 and .3260 square
inches for the M80A1. PX 12 at 17, 19. The difference in area value for projectiles counting the
cannelure is not dispositive. Both proffered values for the A1 projectiles are less than a number
of “traditional jacketed lead bullet of calibers .17 through .50 BMG.” See infra, at 24-25.
23
with a lesser contacting surface area than the M855A1, many of these rounds are .22 ‘shorts[,]’ a
rimfire munition that may or may not be characterized as a ‘traditional’ jacketed lead round.”).
Third, traditional jacketed lead bullets are intentionally manufactured to be different weights to
account for their intended shooting application, e.g., target practice versus hunting versus
combat. Tr. 604:11-21 (German) (recognizing that “the ammunition has a variety of
applications, and a variety of masses” because the bullets are “used in many different
applications”). In sum, Dr. Kitchen’s identification regarding comparable projectiles is fatally
flawed.35
The court accepts the findings of Liberty’s expert, Dr. German, because he assessed the
surface area values of the M855A1 and the M80A1 with those of traditional jacketed lead rounds
of the same caliber. Specifically, Dr. German compared the contacting surface area of the
M855A1 to the area values of traditional jacketed .22 caliber bullets. PX 12 at 17-18 (comparing
the M855A1 EPR to the “MK262 Sierra,” the “Sierra Black Hills 100,” the “Berger .22 caliber
77grain OTM Tactical,” the “Berger .22 caliber 80 grain VLD,” the “Berger .22 caliber 82 grain
Long Range,” the “Berger .22 caliber 90 grain VLD,” and the “ATK 86 Grain”). Likewise, he
examined the contacting surface areas of the M80 and traditional jacketed .308 caliber
projectiles. PDX 3 (comparing the M80 to the “Berger .30 caliber 155 grain VLD hunting,” the
“Sierra Pro Hunter,” and the “Barnes TSX”).36 Dr. German determined that the contacting
surface area for the M855A1 is “less than the contacting surface area of a number of traditional
jacketed .22 caliber projectiles (and, obviously, all 7.62 and .50 cal[iber] projectiles),” PX 12 at
18, and that the contacting surface area of the M80A1 is also “less than the contacting surface
area of a number of traditional jacketed [.308] caliber projectiles,” id. at 20.
Given that the M855A1 and the M80A1 have reduced areas of contact compared to
traditional jacketed lead bullets, the court finds that Liberty has proven by a preponderance of the
evidence that the A1 projectiles accused in this suit contain the “reduced area of contact”
limitation found in Claim 1, and therefore, the M855A1 and the M80A1 literally infringe
independent Claim 1. As such, claims 1-3, 7-11, 18-20, 22, 25, 28-31, which depend from
35
Dr. Kitchen testified that he did not know how many of the chosen comparators were
.22 shorts or .22 longs, partially- or non-jacketed projectiles, or other non-military ammunition.
See Tr. 2201:23 to 2202:7 (Kitchens). Upon examining the referents chosen by Dr. Kitchens, it
appears that at least the first eight of his referent projectiles for the M855A1 are .22 shorts, see,
e.g., the “Sierra .22 caliber (.224) 40 grain Hornet.” DX 203 at 21. The remainder referents for
both A1 projectiles feature partially-jacketed bullets, see, e.g., the “Sierra .30 caliber/7.62mm
(.308) 110 grain Round Nose,” id. at 27, or are advertised as non-military standard ammunition,
see, e.g., the “Sierra .22 caliber (.224) High Velocity 55 grain FMJBT” and the “Berger .22 cal.
52 gr. Match FB Varmint,” id.
36
Dr. German’s export report included the M80 as a referent. He testified that he “made a
mathematical error in [his] calculation for [the M80],” but did not recalculate the contacting
surface area value for trial because he was told it was not important since the expert report had
been filed. Tr. 706:15 to 707:8 (German). Consequently, Dr. German’s testimony at trial
excluded the M80 as a comparator. See PDX 3.
24
independent Claim 1, are also directly infringed by the A1 projectiles. See Tr. 2376:2-5
(Kitchens); see also Wahpeton Canvas, 870 F.2d at 1553.37
B. Anticipation
The government claims invalidity of the ’325 patent based on a lack of novelty. See 35
U.S.C. § 102(a)(1) (2006). For the court to invalidate the ’325 patent for lack of novelty, a
single prior art reference must anticipate each and every limitation of the claimed invention. See
Verdegaal Bros., 814 F.2d at 631. A prior art reference may anticipate without expressly
disclosing a limitation of the claimed invention if the absent limitation is inherent, or necessarily
present, in the prior art reference. See id. To prove anticipation, the government points to three
prior art references: the Leussler ’416 patent (U.S. Patent No. 1,967,416), the Nosler ’420 patent
(U.S. Patent No. 3,003,420), and the M855/M855 LFS rounds. The government maintains that
Claim 32 and the claims that depend from Claim 32 are anticipated by both above-mentioned
patents and that Claim 1 and those claims that depend on Claim 1 are anticipated by the Nosler
’420 patent and are inherently anticipated by the M855/M855 LFS. Liberty argues that these
prior art references are not anticipatory of any claim in the ’325 patent because the references
lack the element of “controlled rupturing,” found in both independent Claim 32 and independent
Claim 1. See Pl.’s Post-Trial Reply Br. at 15-16, 19, ECF No. 106.
1. Leussler ’416 patent.
The Leussler ’416 patent describes a projectile with an exposed nose ogive and an
interface portion that encloses the tail end of the projectile. DX 281 at 1 (Leussler ’416 patent).
Liberty avers that the Leussler ’416 projectile is not anticipatory because the interface portion
expands, or mushrooms,38 upon impact, and therefore, is not “structured to provide controlled
rupturing.” Pl.’s Post-Trial Reply Br. at 15-16. 39 Liberty points to disclosures in the prior art to
show that “[t]he Leussler ’416 round mushrooms on contact to increase its lethality, but not to
the point of separating the component parts.” See id. at 15. Indeed, the Leussler ’416 patent
highlights a “projectile having one part . . . which is readily deformed, [or] flattened . . . , but
continues to advance as a unit, thereby insuring deep and effective penetration.” Leussler ’416
patent, col. 1, lines 30-35 (emphasis added). The government sets forth the perfunctory
argument that the Leussler patent nonetheless discloses a fragmenting projectile because a
limitation found in Claim 6 of the ’416 patent recites that “the sections are separated on impact
of said projectile against a target.” Leussler ’416 patent, col. 4, lines 114-15; see Def.’s Post-
37
Because Claim 1 is literally infringed under 28 U.S.C. 1498(a), it is not necessary for
the court to determine infringement under the alternative test, i.e., the doctrine of equivalents.
38
A mushrooming projectile “fold[s] back on a thickened base at target impact[,]
increasing its lateral cross-section.” Pl.’s Post-Trial Reply Br. at 12.
39
In its claim construction order, the court construed “structured to provide controlled
rupturing” to mean “that the interface portion is structured to rupture (i.e., break) upon striking a
target or object, separating two or more of the components of the projectile.” Liberty Ammunition
II, 111 Fed. Cl. at 374.
25
Trial Br. at 51. The court finds this argument unpersuasive. A mushrooming bullet “[is] a very
different style of lethal mechanism . . . compared to [a fragmenting bullet],” Tr. 1475:1-16
(Newill), and the Leussler patent unambiguously discloses a projectile with a deformable point
section (nose portion) “that mushrooms upon impact.” Leussler ’416 patent, col. 3, lines 38-45.
The objective of the Leussler ’416 projectile is not to rupture upon impact, and accordingly, it
does not anticipate each and every element of Claim 32 or its dependent claims.
2. Nosler ’420 patent.
The Nosler ’420 patent describes a projectile with an exposed nose portion, a tail portion,
a jacket, and a relief band in the middle portion of the projectile, which serves to reduce friction
between the projectile and a rifle barrel. See DX 279 (Nosler ’420 patent), col. 2, lines 4-71.
Similar to the Leussler ’416 bullet, the Nosler ’420 projectile mushrooms upon impact. Id., col.
1, lines 57-79 (reciting that the forward portion of the jacket in the Nosler ’420 projectile will
split and fold back in petal-like fashion to increase the shocking power of the bullets.”); see also
id. at Fig. 4. Again, Liberty makes the argument that the “controlled rupturing” limitation in the
’325 patent is not anticipated by this prior art reference, as the Nosler projectile is not structured
to fragment. The government agrees that “Nosler [’420] projectile is designed to deform upon
impact,” but insists that the jacket and head portion nonetheless fragment upon striking a soft
target. Def.’s Post-Trial Br. at 49. For reasons similar to those stated regarding the Leussler
’416 patent, this argument related to the Nosler ’420 patent falls short. As Liberty correctly
recognizes, “the lethality mechanism that the Nosler ’420 [projectile] is designed to use is an
expanding/mushrooming [nose portion,] reinforced and enhanced by an intact expanding jacket,”
and modifying the Nosler ’420 projectile to induce fragmentation would “alter [its] express
operating principle . . . – the creation of larger wound channels (and shocking power) through the
mechanism of an expanding projectile diameter upon impact.” Pl.’s Post-Trial Reply Br. at 14
(referring to the Nosler ’420 patent); see Nosler ’420 patent, col. 1, lines 33-58, col. 3, lines 3-27.
Given that the lethality mechanism provided for in the Nosler ’420 patent is that of deformation
and expansion, rather than fragmentation, it does not anticipate each and every element of Claim
32, Claim 1, or the attendant dependent claims.
3. M855/M855 LFS.
The M855 and the M855 LFS rounds feature a three-component projectile. See supra, at
3 n.6, 5. In arguing inherent anticipation of Claim 1, the government avers that the M855 and
M855 LFS rounds are inherently structured to rupture upon soft target contact, causing
fragmentation. Def.’s Post-Trial Br. at 51-52. The government maintains that controlled
rupturing is inherent, or “necessarily present,” in the predecessor rounds because ballistics tests
conducted by Dr. Kitchens confirm that the rounds fragment shortly after impacting a soft target.
Id.; see DX 290-92 (Dr. Kitchens’s Test Report and Results). 40 The record does not support this
40
The government places substantial reliance on these test results, but their probative
value is limited. Contrary to the 10 percent gelatin standard for Army tests, Dr. Kitchens ran
ballistics tests with a 20 percent gel block. Tr. 2782:1-20 (German). Dr. Kitchens also modified
the propellant without documenting the modification, which prevents replicating the experiment.
Tr. 2889:3-7 (German). Finally, “[t]he results [of his tests] demonstrated a highly unlikely
26
factual postulate. To the contrary, “the through[-]and[-]through rounds complained of by U.S.
warfighters [were] [from] a M855 projectile that did not rupture/break upon hitting the enemy
combatant.” See supra, at 3, see also Tr. 2425:11-21 (Kitchens) (testifying that there were
instances of through-and-through hits). Moreover, the Army acknowledged this lethality issue,
see supra, at 3, see also Pl.’s Post-Trial Reply Br. at 19 (“The M855’s inconsistency and
ineffectiveness in combat was one of the principal shortcomings to be addressed by the
Defendant’s Green Ammo [and] Lethality program.”), and the lethality mechanism of
fragmentation featured in the M855A1 was the chosen solution to this problem, see supra, at 13,
see also JX 25 at 4-6 (recognizing that the M855A1 is designed to rupture upon soft target
impact, irrespective of the yaw angle). This evidence establishes that the claim element of
“controlled rupturing” is neither present nor inherent in the M855 or the M855 LFS. These
predecessor rounds do not anticipate each and every element of Claim 1 or its dependent claims.
The ’325 patent is not invalid for lack of novelty, as it was not anticipated by any of the
three prior art references cited by the government.
C. Obviousness
The government’s second asserted ground for patent invalidity is that a combination of
prior art references renders the ’325 patent obvious under 35 U.S.C. § 103. In particular, to
invalidate the ’325 patent based on obviousness, the government must show that “a skilled
artisan would have had reason to combine the teaching of the prior art references to achieve the
claimed invention.” PAR Pharm., __ F.3d at __, __, 2014 WL 6782649, at *5 (quoting In re
Cyclobenzaprine Hydrochloride, 676 F.3d at 1068 (in turn quoting Procter & Gamble, 566 F.3d
at 994)); see also ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc., 694 F.3d 1312, 1327
(Fed. Cir. 2012). When undertaking such an inquiry into obviousness, the court “must step
backward in time and into the shoes worn by [the skilled artisan] when the invention was
unknown and just before it was made . . . [and] then determine whether the patent challenger has
convincingly established . . . that the claimed invention as a whole would have been obvious at
that time to that person.” Panduit Corp. v. Dennison Mfg. Co., 810 F.2d 1561, 1566 (Fed. Cir.
1987) (alteration in original) (citations omitted); see also Graham, 383 U.S. at 3. Hindsight may
not be considered when making this determination. Innogenetics, N.V. v. Abbott Labs., 512 F.3d
1363, 1374 n.3 (Fed. Cir. 2008) (recognizing that courts must “be careful not to allow hindsight
reconstruction of references to reach the claimed invention without any explanation as to how or
why the references would be combined to produce the claimed invention.”). The court must also
consider secondary evidence of non-obviousness, such as “commercial success, long[-]felt but
unsolved needs, [and] failure of others,” before concluding that a patent is invalid as obvious.
Graham, 383 U.S. at 17-18.
1. Motivation to combine.
To demonstrate obviousness, the government points to ten prior art references: (1) the
Leussler ’416 patent; (2) the Nosler ’420 patent; (3) the M855; (4) the M855 LFS; (5) the
statistical discrepancy between tested round velocity and round lot referenced velocities.” Pl.’s
Post-Trial Reply Br. at 18; see Tr. 2786:12 to 2787:2 (German).
27
Katzmann ’172 patent (U.S. Patent No. 4,753,172); (6) the Frey ’016 patent (U.S. Patent No.
3,154,016); (7) the Kruze ’508 patent (U.S. Patent No. 4,884,508); (8) DX 284, George E. Frost,
Ammunition Making (1990) (“Frost on Ammunition”); (9) the McElroy ’879 patent (U.S. Patent
No. 6,973,879); and (10) the Auxier ’287 patent (U.S. Patent No. 2,958,287). DX 202 at 12, 57
(Dr. Kitchens’s Expert Report Regarding Validity). Liberty avers that Dr. Kitchens failed to
explain the motivation that would have led a skilled artisan to combine those references at the
time the invention was made and that he used impermissible hindsight to conclude that the
claimed invention in the ’325 patent is obvious. Pl.’s Post-Trial Br. at 15-19. The opinion by
Dr. Kitchens regarding the motivation to combine the ten prior art references states:
[The] asserted claims of the ’325 patent require little more than a
three-piece projectile that, based on its structure, is capable of
staying intact and in synchronized rotation until reaching a target
and breaking apart on impact. Given the long history of small-
arms ammunition, the asserted claims represent general types of
projectile (often designed for soft targets) that were known and
being built by those of ordinary skill in the art decades before the
filing of the ’325 patent in 2005. . . . The general motivation to
combine these references emanates from the desire for three
known and desirable performance characteristics: stable and
accurate bullet flight; reduced barrel friction and wear; and proper
lethality characteristics on impact.
DX 202 at 7-8 (emphasis added).
This reasoning “fails to explain why a person of ordinary skill in the art would have
combined elements from specific references in the way the claimed invention does.” ActiveVideo
Networks, 694 F.3d at 1328 (emphasis in original) (citing KSR, 550 U.S. at 418 (“[I]t can be
important to identify a reason that would have prompted a person of ordinary skill in the relevant
field to combine the elements in the way the claimed new invention does . . . because inventions
in most, if not all, instances rely upon building blocks long since uncovered, and claimed
discoveries almost of necessity will be combinations of what, in some sense, is already
known.”)); see also PAR Pharm., __ F.3d at __, __, 2014 WL 6782649, at *5-8. The
government has only established that there was a motivation to increase performance in small-
arms ammunition, which is “entirely different from [a] motivation to combine particular
references.” Innogenetics, 512 F.3d at 1373 (“[K]nowledge of a problem and motivation to
solve it are entirely different from motivation to combine particular references.”); see also In re
Kahn, 441 F.3d 977, 988 (Fed. Cir. 2006) (“[The test for obviousness] asks . . . whether a person
of ordinary skill in the art, possessed with the understandings and knowledge reflected in the
prior art, and motivated by the general problem facing the inventor, would have been led to make
the combination recited in the claims.” (emphasis added)). As Liberty correctly notes, “[u]nless
one knew that combining separate elements from ten disparate references would yield improved
lethality, consistency, accuracy, and be environmentally friendly, there would be no reason to
combine the prior art to arrive at the claimed device.” Pl.’s Post-Trial Br. at 19.
28
2. Impermissible hindsight.
Additionally, Dr. Kitchen’s testimony at trial illustrates the use of improper hindsight in
the selection of the prior art references. Dr. Kitchens acknowledged that he divided the ’325
patent into claim elements and then searched for a prior art reference that would correspond to
each element. See Tr. 2422:1-15, 2423:6-20 (Kitchens). For example, for the “reduced area of
contact” limitation, see DX 202 at 12, Dr. Kitchens surveyed the prior art and found a carrier for
a cluster munition, which carrier featured annular grooves in two driving bands around the shell,
id. at 23, see also DX 286 (Kruse ’508 patent), col. 3, lines 6-65. That patent is entitled “Spin
Stabilized Carrier Projectile Equipped with a Driving Band.” Kruse ’508 patent, col. 1, lines 1-2.
The cluster shell was fired from a gun, the barrel of which was rifled to induce stabilizing spin
during flight.41 Dr. Kitchens argued that the driving bands in the claimed invention
corresponded to an interface and that the grooves equated to a reduction in the area of contact
between the interface and firearm. DX 202 at 23. By this mode of reasoning, Dr. Kitchens was
ignoring the “as a whole” requirement of 35 U.S.C. § 103 and was engaging in a part-by-part
analysis that relied on hindsight. As the Federal Circuit explained in Princeton Biochemicals,
Inc. v. Beckman Coulter, Inc., 411 F.3d 1332, 1337 (Fed. Cir. 2005):
In making the assessment of differences between the prior art and the
claimed subject matter, [S]ection 103 specifically requires consideration
of the claimed invention “as a whole.” Inventions typically are new
combinations of existing principles or features. The “as a whole”
instruction in title 35 prevents evaluation of the invention part by part.
Without this important requirement, an obviousness assessment might
successfully break an invention into its component parts, then find a prior
art reference corresponding to each component. This line of reasoning
would import hindsight into the obviousness determination by using the
invention as a roadmap to find its prior art components.
Id. (internal citations omitted) (emphasis added); see also Monarch Knitting Mach. Corp. v.
Sulzar Morat GmbH, 139 F.3d 877, 881 (Fed. Cir. 1998) (“Defining the problem in terms of its
solution reveals improper hindsight in the selection of the prior art relevant to obviousness.”).42
41
The driving bands had a diameter that was sufficiently large to engage the rifling,
sealing the gas generated by firing the propellant, as well as imparting spin. Kruse ’508 patent,
col. 1, lines 11-16.
42
The Nosler ’420 and Leussler ’416 patents teach mushrooming bullets that provide
through-and-through hits, intended for use in hunting large game animals. See DX 284 (“Frost
on Ammunition”) 115 (referring to a bullet with “desirable expansion characteristics”). The
Auxier ’287 patent teaches a mushrooming bullet for “use in game hunting rifles which will offer
correct penetration and expanding characteristics.” DX 283 (Auxier ’287 `patent), col. 2, lines
10-13. Mushrooming bullets are prohibited for military use by international treaties on the laws
of war. Pl.’s Post-Trial Reply Br. at 13 n.9. It would be non-obvious for a person of ordinary
skill in the art seeking to develop military ammunition to combine elements from projectiles that
breach the laws of war with features of the M855, M855 LFS, and other references that are
29
The government’s argument for obviousness fails to provide a motivation to combine the
ten prior art references and is predicated on an improper, part-by-part, retrospective
reconstruction of the claimed invention.
3. Secondary considerations.
Secondary considerations, “‘can be the most probative evidence of non-obviousness in
the record, and enable[] the . . . court to avert the trap of hindsight.” Crocs, Inc. v. Int’l Trade
Comm’n, 598 F.3d 1294, 1310 (Fed. Cir. 2010) (alteration in original) (quoting Custom
Accessories, Inc. v. Jeffrey-Allan Indus., Inc., 807 F.2d 955, 960 (Fed. Cir. 1986)). Secondary
considerations are deserving of significant weight in this case. As Judge Learned Hand aptly
said in Safety Car Heating & Lighting Co. v. General Elec. Co., 155 F.2d 937, 939 (2d Cir.
1946),
In appraising an inventor’s contribution to the art, as we have often
said, the most reliable test is to look at the situation before and
after it appears. Substantially all inventions are for the
combination of old elements . . . [courts] had best appraise the
originality involved by the circumstances which preceded, attended
and succeeded the appearance of the invention. Among these will
figure the length of time the art, though needing the invention,
went without it: the number of those who sought to meet the need,
and the period over which their efforts were spread: how many, if
any, came upon it at about the same time, whether before or after:
compliant with such international laws. See PX 24 at 72 (German’s Reply Expert Report on
Validity).
Additionally, a skilled artisan would not have been motivated to combine the Katzmann
’172 patent, DX 282 (Katzmann ’172 patent), and the Kruse ’508 patent, DX 286 (Kruse ’508
patent), with a mushrooming projectile. The lethality mechanisms of the Katzmann ’172 patent
(a sabot projectile) and the Kruse ’508 patent (a carrier projectile) are diametrically opposed to
the mushrooming mechanism taught by the Nosler ’420 patent, the Leussler ’416 patent, the
Auxier ’287 patent, and Frost on Ammunition. See Katzmann ’172 patent, col. 1, lines 23-26,
col. 2, lines 24-26, 45-56 (teaching a large caliber munition intended to combat airborne targets
by fragmenting on a time delay after entering the target); see also Kruse ’508 patent, col. 2, lines
56-65, col. 4, lines 4-17 (teaching a carrier projectile capable of exploding while in flight).
Correspondingly, it would have been unexpected to combine the McElroy ’879 patent, DX 287
(McElroy ’879 patent), with the Katzmann ’172 and Kruse ’508 patents, promoting
fragmentation because the McElroy ’879 patent teaches a uniform projectile that remains intact
when striking a soft target. McElroy ’879 patent, col. 7, lines 31-34; see also Frost on
Ammunition at 115 (teaching away from a fragmentation mechanism by noting that a preferred
projectile is one where the “core and jacket . . . stay together”); see also Auxier ’287 patent, col.
1, lines 63-65 (teaching against fragmentation and promoting a projectile construction that will
not “permit a separation of the jacket and core upon impact”). Finally, the Frey ’016 patent, DX
285 (Frey ’016 patent), teaches a method of using annular flanges to reduce contact area, which
is not employed in the ’325 patent. Frey ’016 patent, col 1, line 35 to col. 2, line 39.
30
and—perhaps most important of all—the extent to which it
superseded what had gone before. We have repeatedly declared
that in our judgment this approach is more reliable th[a]n prior
conclusions drawn from vaporous, and almost inevitably self-
dependent, general propositions.
Id.
Liberty has presented evidence of secondary considerations of non-obviousness,
including: (1) a long-felt need since 1993 for a lethal, lead-free replacement projectile for the
standard ammunition, (2) the combat-proven success of the M855A1, and (3) the acclaim and
recognition for the development of the A1 technology.43 The government does not challenge the
existence of this evidence, but opines that there is not a “nexus with the claimed invention and
the secondary consideration[s].” Def.’s Post-Trial Br. at 54 (emphasis added).
“The term ‘nexus’ is often used, in this context, to designate a legally and factually
sufficient connection between the proven success [or other secondary considerations] and the
patented invention, such that the objective evidence should be considered in the determination of
non[-]obviousness.” Demaco Corp. v. F. Von Langsdorff Licensing Ltd., 851 F.2d 1387, 1392
(Fed. Cir. 1988); see also Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1328 (Fed. Cir.
2008). The plaintiff has the burden of presenting evidence sufficient to establish a prima facie
case of nexus. Demaco, 851 F.2d at 1392 (citing Cable Elec. Prods., Inc. v. Genmark, Inc., 770
F.2d 1015, 1027 (Fed. Cir. 1985), overruled on other grounds by Midwest Indus. Inc. v. Karavan
Trailors, Inc., 175 F.3d 1356 (Fed. Cir. 1999)). “However, if the marketed product embodies the
claimed features, and is coextensive with them, then a nexus is presumed and the burden shifts to
the party asserting obviousness to present evidence to rebut the presumed nexus.” Brown &
Williamson Tobacco Corp. v. Philip Morris Inc., 229 F.3d 1120, 1130 (Fed. Cir. 2000); see also
Ormco Corp. v. Align Tech., Inc., 463 F.3d 1299, 1312 (Fed. Cir. 2006).
In this instance, a nexus is presumed because the A1 projectiles are coextensive with and
embody the features claimed in the ’325 patent. See J.T. Eaton & Co. v. Atlantic Paste & Glue
Co., 106 F.3d 1563, 1571 (Fed. Cir. 1997) (“When a patentee can demonstrate commercial
success, usually shown by significant sales in a relevant market, and that the successful product
is the invention disclosed and claimed in the patent, it is presumed that the commercial success is
due to the patented invention.”) (citations omitted)). Accordingly, the government must adduce
evidence to negate the connection between the evidence of secondary considerations and the
patented invention. Brown & Williamson Tobacco, 229 F.3d at 1130. The government agrees
with Liberty that the M855A1 was a successful solution to the long-felt need for an
43
The court also takes account of the fact that copying is “strong evidence” of non-
obviousness. Pandirect Corp. v. Dennison Mfg. Co., 774 F.2d 1082, 1099 (Fed. Cir. 1985); see
also Diamond Rubber Co. of N.Y. v. Consolidated Rubber Tire Co., 220 U.S. 428 (1911). Just
before the ’325 patent issued in July 2010, the Army submitted Patent Application No.
61332631, filed May 7, 2010, for a projectile that was similar in all pertinent respects to that
covered by the ’325 patent. See supra, at 12 n.25. The Army’s application was abandoned, id.,
but it does show the correspondence between the Army’s projectile and that of the ’325 patent.
31
environmentally-sound and lethal projectile. Def.’s Post-Trial Br. at 54; PX 24 at 10
(Dr. German’s Reply Expert Report Regarding Validity). However, the government maintains
that “both concerns have no nexus to the claimed invention(s) of the ’325 patent [because] none
of the patent claims require the use of non-lead materials . . . or projectiles with the yaw-
independent (and in turn more lethal) behavior of the M855A1.” Def.’s Post-Trial Br. at 54.
This reasoning is deficient because it forces Liberty to disprove a negative in its prima facie
case, thus contravening the basic tenet of the presumption. See Demaco, 851 F.2d at 1394 (“A
requirement for proof of the negative of all imaginable contributing factors would be unfairly
burdensome, and contrary to the ordinary rules of evidence.”). Placing the burden on Liberty to
prove that commercial success was not due primarily to the lead-free and yaw-independent
design amounts to the tail wagging the dog. Further, “it is not necessary . . . that the patented
invention be solely responsible for the commercial success, in order for this [secondary
consideration] to be given weight.” Continental Can Co. USA v. Monsanto Co., 948 F.2d 1264,
1273 (Fed. Cir. 1991) (emphasis added). Finally, while the technology in the patent does not
require a lead-free slug and a yaw-independent projectile, the claim language expressly covers
these elements.44 The government’s conjecture is inadequate to rebut the presumed nexus.
The government has failed to provide clear and convincing evidence that the ten prior art
references would enable a skilled artisan to achieve the claimed invention. The ’325 patent is
not invalid for obviousness.
D. Damages
The government’s infringement of the ’325 patent entitles Liberty to recover “reasonable
and entire compensation” for the compulsory non-exclusive patent license. 28 U.S.C. § 1498(a).
The proper measure of damages is the reasonable royalty, see Standard Mfg., 42 Fed. Cl. at 758,
that would have resulted from a hypothetical negotiation, see Rite-Hite, 56 F.3d at 1554.45
Reasonable royalty is “calculated by determining a reasonable royalty rate and multiplying it by
a reasonable compensation base.” Brunswick, 36 Fed. Cl. at 209.
44
Notably, the claimed invention in the ’325 patent contemplates the use of a non-lead
materials, see, e.g., ’325 patent, col. 4, lines 33-53, col. 7, line 44. The claimed projectile in the
’325 patent is also yaw-independent based in part on its “hardened steel exposed tip arrowhead
penetrator [and] thin copper alloy interface secured opposite the penetrator skirt.” Pl.’s Post-
Trial Reply Br. at 20 n.12, which produces “controlled rupturing of said interface portion
responsive to said projectile striking a predetermined target.” ’325 patent, col. 7, lines 62-64.
45
Both parties agree that the date of the hypothetical negotiation would have taken place
on July 2010, the date of issuance for the ’325 patent. Def.’s Post-Trial Br. at 56 n.53; Pl.’s
Post-Trial Br. at 40; see also Applied Med. Res. Corp. v. U.S. Surgical Corp., 435 F.3d 1356,
1361 (Fed. Cir. 2006) (“We have held that a reasonable royalty determination for purposes of
making a damages evaluation must relate to the time infringement occurred.”).
32
1. Reasonable compensation base.
Liberty and the government agree that the reasonable compensation base includes the
amount of infringing rounds ordered by the government. See Tr. 2569:7-8, 2570:1-3 (Test. of
Christopher J. Bokhart, defendant’s damages expert); see also Pl.’s Post-Trial Br. at 40. More
specifically, the reasonable compensation base is the number of M855A1 and M80A1 rounds
ordered from July 6, 2010, the issuance date of the ‘325 patent, through October 20, 2027, the
expiration date of the ’325 patent.46 Thus, for the period of July 6, 2010 through April 30, 2013,
the reasonable compensation base is 1,115,538,120 rounds. See PX 21 at 32.47
2. Baseline royalty rate.
The parties acknowledge that there is no established reasonable royalty rate, i.e. royalty
per round, in these circumstances. Def.’s Post-Trial Br. at 56. They recommend substantially
different rates, drawing upon the Georgia-Pacific factors, quoted supra, at 17.48 Liberty’s
expert, Creighton G. Hoffman, opined that to properly determine a reasonable royalty rate, it was
necessary to calculate a starting royalty based on the government’s total cost savings per round.
PX 21 at 13-19; see also DX 527 at 25 (Mr. Bokhart’s Expert Report Regarding Damages) (“As
a prudent licensee, the [g]overnment would have been aware of the alternative technologies
available to it, and would take the costs associated with them into consideration when
negotiating a license to the patent-in-suit at the hypothetical negotiation.”). According to
Mr. Hoffman, the advantages of the ’325 patented technology (Georgia-Pacific factor 9) and its
benefits to users (Georgia-Pacific factor 10), i.e., the environmentally-sound design and
46
Pursuant to 35 U.S.C. § 154(b), the patent term was extended by 729 days. See ’325
patent at 1.
47
The number of infringing rounds for each fiscal year is as follows:
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Total
2010 [1] 2011 2012 2013 [2]
M855A1
Rounds 294,137,160 383,337,440 279,425,680 158,637,840 1,115,538,120
Ordered
Notes:
[1] Assumes all units ordered in 2010 were made or used after the issuance of the ’325
patent.
[2] Includes the period through April 30, 2013.
PX 21 at 32 (Mr. Hoffman’s Expert Report Regarding Damages); see also DTX 528, tab 5, at 1,
(Mr. Bokhart’s calculation of rounds ordered).
48
Georgia-Pacific factors 1 through 6 and factor 12 are neutral and do not affect the
determination of a reasonable royalty rate in this case. See PX 21 at 11-20; see also DX 527 at
30-35 (Mr. Bokhart’s Expert Report Regarding Damages).
33
increased lethality, saved the government $0.28 per round and $0.23 per round, respectively. PX
21 at 19. Mr. Hoffman explained the basis for these values as follows:
The [costs savings] to the [g]overnment can be measured against
the best available alternatives . . .
To achieve environmental greenness, the best alternative to the
M855A1 is to incur the cost of lead remediation at firing range
sites . . . . [T]he remediation effort undertaken at Fort Dix in 1999
cost approximately $0.28 per round. . . .
To achieve comparable lethality, the best alternative to the
M855A1 is the leaded [Special Operations Science and
Technology (“SOST”)] round . . . In fiscal year 2012, the U.S.
Navy purchased 700,000 SOST rounds at $0.50 per round. This
reflects a cost premium of approximately $0.23 over the M855A1
average cost of $0.265 per round in fiscal year 2013.
Thus, the total cost savings to the [g]overnment from the use of the
patented technology amounts to approximately $0.51 per round
($0.28 + $0.23)
Id.49
49
The government’s expert on damages, Christopher J. Bokhart, did not calculate a
baseline royalty per round, but posited that the existence of two alternative scenarios, by that fact
itself, reduces the amount of royalty:
[T]he government would have simply continued the Green
Amm[unition] Project, using the leaded M855 until an alternative
lead-free round could be developed that would meet the project’s
cost and performance criteria. . . . The total cost of this alternative
would be $40.1 million to $45.8 million, or $0.012 to $0.017 per
round over the life of the ’325 patent.
[Alternatively, the government would have] convert[ed] to the
SOCOM SOST round. . . . [T]he cost of the SOST round would
have been the same as, if not slightly less than, the current
M855A1 cost . . . [so] there would be little, if any, risk of incurring
incremental remediation costs if the government continued to use
leaded rounds. Thus, the costs associated with this alternative
would be less than $0.11 per round, if any at all.
DX 527 at 25-30.
34
Mr. Hoffman’s approach in arriving at a baseline royalty of $0.51 per round is deficient
because it overstates the remediation costs that the parties would have anticipated during a
hypothetical negotiation. The Fort Dix study upon which Mr. Hoffman relied involved the use
of phytoremediation, a remediation treatment using hypo-accumulating plant species to uptake
toxic metals, see DX 495 at 59 (“Treatment and Management of Closed or Inactive Small Arms
Firing Ranges” (June 2007)), see also DX 527 at 41, that has since “fallen out of favor as a
method [of lead remediation] because . . . it depends upon the time and the amount of soil, and
also . . . [is] expensive,” Tr. 2605:12-21 (Bokhart). “Had the [g]overnment anticipated potential
remediation at the 2010 hypothetical negotiation, it would not likely have envisioned using
phytoremediation as there were other techniques that had been found to be more economical and
or/more effective for lead remediation at [small arms firing ranges] by that point in time.” DX
527 at 41; see also Tr. 2605:7 to 2607:7 (Bokhart). For example, physical separation techniques
were readily available at the time of the hypothetical negotiation, which the government’s expert,
Mr. Bokhart, calculated to be less than $0.02 per round. DX 527 at 41; see also Tr. 2592:22 to
2593:16 (Bokhart). Equally problematic is the fact that the Fort Dix data relied upon by
Mr. Hoffman would not have been current at the time of the hypothetical negotiation. DX 527 at
39. This is significant because the effectiveness of lead remediation technologies has improved
over time, thus decreasing remediation costs. Id.; see also Tr. 2592:4 to 2593:16 (Bokhart).
The starting royalty per round proposed by Mr. Hoffman is further flawed because it
inflates the costs associated with a SOST round. It is axiomatic that manufacturing costs
decrease over time as the production process becomes more efficient, yet Mr. Hoffman
“compares the cost of the [g]overnment’s first orders for the SOST round with the cost of the
M855A1 EPR in [its third year of production].” DX 527 at 38 (emphasis added). Moreover, the
SOST and the M855A1 have inherently incommensurate costs because the former is purchased
in small quantities, while the latter is ordered in bulk. Given that the government receives a
discount for purchasing the M855A1 in large quantities, “the unit price associated with the
purchase of a relatively small quantity of the SOST round is not comparable to the unit price
associated with high volume purchases of the M855A1.” Id. at 37.
In light of the foregoing, a baseline royalty of $0.51 per round is exorbitant and
untethered from the facts in existence at the time of the hypothetical negotiation. The court finds
that a proper baseline under the circumstances is $0.05 per round.
3. Final royalty rate.
Mr. Hoffman ultimately arrived at a royalty rate of $0.20 per round by adjusting the
baseline figure of $0.51 downward to account for production costs incurred at LCAAP (Georgia-
Pacific factor 13). PX 21 at 19 (“In addition to the cash paid for each round, the government
provides its contractor, ATK, with the facilities and the equipment necessary to make the
rounds.”).50 Mr. Bokhart responded by contending that the parties to a hypothetical negotiation
50
The government contends that a figure of 20 cents per round equates to a reasonable
royalty rate of approximately 74% because the government’s cost per round is roughly $0.27.
Def.’s Post-Trial Br. at 56. Liberty argues that because the government produces its own rounds,
it is “entitled to a reasonable royalty on the full selling price for the infringing [round,]” which is
35
would have agreed to a lower royalty rate of $0.01 per round. DX 527 at 34-35. In arriving at a
reasonable royalty of $0.01 per round, Mr. Bokhart balanced the relevant Georgia-Pacific
factors, see id. at 30-35 (finding that factor 8 indicates a higher royalty, while factor 5 suggests a
lower royalty), but notably left unanswered how and from what starting royalty the increment or
decrement for each factor was calculated, see Pl.’s Post-Trial Reply Br. at 22.
Neither proffered value is justified because both experts failed to account for the state of
development and commercialization (Georgia-Pacific factor 8) of the round covered by the ’325
patent. Georgia-Pacific, 318 F. Supp. at 1120 (reciting factor 8: “The established profitability of
the product made under the patent; its commercial success; and its current popularity.”); see also
7 Donald S. Chisum, Chisum on Patents (“Chisum”) § 20.07[2][h] 20-1380 (2014) (“The state of
development and commercialization affects both the estimated amount of economic benefit to
the prospective licensee and the level of uncertainty as to its future realization.”). “The theory is
that a willing licensee in a hypothetical negotiation at the time infringement began would have
been more disposed to agree to a high royalty if the product or process was fully developed.”
Chisum § 20.07[2][h] 20-1380 to 81; see also Georgia-Pacific, 318 F. Supp. at 1120 (reciting
factor 15: “The amount that a licensor (such as the patentee) and a licensee (such as the
infringer) would have agreed upon (at the time the infringement began) if both had been
reasonably and voluntarily trying to reach an agreement.”). Correspondingly, the licensee would
have been less inclined to pay a high royalty where features disclosed in the patent were
“unaccompanied by technology or practical know-how necessary to design and incorporate the
invention into [a commercial product].” Hughes Aircraft Co. v. United States, 31 Fed. Cl. 481,
489 (1994), aff’d, 86 F.3d 1566 (Fed. Cir. 1996), cert. granted, judgment vacated, 520 U.S. 1183
(1997), and aff’d, 140 F.3d 1470 (Fed. Cir. 1998); see also Chisum § 20.07[2][h] 20-1381.
In Hughes Aircraft, the court determined that a licensee during a hypothetical negotiation
would have been willing to pay a royalty rate of only 1 percent to use an attitude control process
covered by the patent because the licensor did not have a commercially proven product or the
practical know-how to offer assistance to the government-licensee. 31 Fed. Cl. at 488-89.
Rather, the “non-exclusive license taken by the government was a mere ‘naked’ license . . . .
The user of the license was left to expend the financial resources to develop [a commercial]
design necessary for implementation of the attitude control system.” Id. at 488. The court
considered that these circumstances “have the effect of lowering rather than enhancing the level
of a reasonable royalty.” Id.; see also Ellipse Corp. v. Ford Motor Co., 461 F. Supp. 1354, 1370,
1376 (N.D. Ill. 1978), aff’d, 614 F.2d 775 (7th Cir. 1979) (finding a reasonable royalty of $0.01
per product where plaintiff “did not have a commercially proven product; nor did it have any
manufacturing experience or other technical assistance to offer to [the licensee].”).
In this case, the government would not have been disposed to a high royalty rate. At the
time of the hypothetical negotiation, Liberty would have been offering only a bare, non-
exclusive license because its patented projectile would have required substantial refinement and
elaboration before a resulting projectile would have become suitable for use by the Army in
combat. Instructively, Liberty’s own interactions with SOCOM in connection with the SBIR
$1.50. Pl.’s Post-Trial Reply Br. at 23. Under the methodology employed by Liberty, a royalty
of $0.20 per round amounts to a royalty rate of 13%. Id.
36
contracts reveal that the projectile disclosed in the ’325 patent was still being refined at the time
of the hypothetical negotiation. For example, in its Phase I SBIR report, Liberty recognized that
“potential refinements of the projectile designs included in the SOCOM SBIR proposal” were
needed in light of live fire test results. JX 126 at 1. Likewise, Liberty’s Phase II SBIR proposal
indicates that SOCOM operators relayed “[s]ignificant concerns about penetration of hard target
and terminal effects on impact with the current ammunition,” DX 270 at 9, and had asked
Liberty to “scale down [its] lead-free exposed-tip, [three]-piece 5.56mm Enhanced Performance
Round,” id., see also JX 82 at 1 (After Action Report). In these circumstances, the government
would have had to spend significant time and financial resources modifying the ’325 design for
large-scale military use. Cf. Tr. 1686:13 to 1695:21 (Newill) (testifying that ATK had to make
several design improvements before the final M855A1 projectile could be fielded as the standard
ammunition). Given the extensive contribution required to refine and hone the ’325 patented
projectile, at the time of the hypothetical negotiation the government would have been able to
negotiate a royalty several cents less than $0.05 per round.
Based on the record as a whole, a reasonable royalty rate in this instance is $0.014 per
round. Applying the reasonable royalty rate of 1.4 cents per round to the reasonable
compensation base of 1,115,538,120 rounds yields a reasonable royalty of $15,617,533.7 as of
April 30, 2013. This value must be adjusted to account for the accrual of interest that Liberty is
owed. In addition, the government is also responsible for making periodic royalty payments in
the amount of $0.014 per round until the ’325 patent expires on October 20, 2027.
4. Delay compensation.
Reasonable and entire compensation necessarily includes the prejudgment interest for
delayed compensation of royalty “to ensure that the patent owner is placed in as good a position
as he would have been in had the infringer entered into a reasonable royalty agreement.”
General Motors Corp. v. Devex Corp., 461 U.S. 648, 655 (1983) (citing Waite v. United States,
282 U.S. 508, 509 (1931) (addressing a patent infringement suit against the United States)). “An
award of interest from the time that the royalty payments would have been received merely
serves to make the patent owner whole, since his damages consist not only of the value of the
royalty payments but also of the foregone use of the money between the time of infringement
and the date of the judgment.” Id. “Generally, the interest rate should be fixed as of the date of
infringement, with interest then being awarded from that date to the date [the judgment is
actually paid.]” Boeing, 86 Fed. Cl. at 322.
Determining the proper rate of delay-based interest involves a factual inquiry left largely
to the discretion of the court. See Dynamics Corp. of America v. United States, 766 F.2d 518,
520 (Fed. Cir. 1985); see also Datascope Corp. v. SMEC, Inc., 879 F.2d 820, 829 (Fed. Cir.
1989). Rates used in the past include, inter alia, the prime rate, the prime rate plus a percentage,
a U.S. Treasury bill or note rate, the tax-overpayment rate based upon 26 U.S.C. § 6621, and the
Contract Disputes Act rate based upon 41 U.S.C. § 611. See Brunswick, 36 Fed. Cl. at 219 n.4;
see also Chisum § 20.03[4][a][v] 20-316 to 24. Correlatively, courts frequently compound the
delay-based interest, see, e.g., Brunswick, 36 Fed. Cl. at 219, ITT Corp. v. United States, 17 Cl.
Ct. 199, 234-40 (1989), “reflecting, in this regard, not only the expectation of a prudent,
commercially reasonable investor, but also the way that post-judgment interest is calculated
37
under 28 U.S.C. § 1961(c)(3),” Boeing, 86 Fed. Cl. at 323. In making a determination regarding
the frequency of compounding, i.e. annually, semi-annually, quarterly, etc., courts consider how
often the licensee would have made payments in accordance with the hypothetical negotiation.
See id. (citing Datascope, 879 F.2d at 829); see also Chisum § 20.03[4] [a][v] 20-327 to 28.
Based on the facts and circumstances in this case, the court is persuaded that the proper
and most prudent method of apportioning interest is the 5-year Treasury note rate.51 This rate
adequately compensates Liberty because a Treasury note reflects minimal risk, the 5-year term
roughly approximates the length of time from the date of infringement to the date of judgment,
and there is ample precedent favoring the use of rates on Treasury securities. For infringement
that occurred several years before judgment, as here where the infringement began over 4 years
ago, the court would ordinarily compound the prejudgment interest. Given that the interest on a
Treasury note is paid semi-annually, compounding semi-annually is appropriate in this instance.
Based on the foregoing, the court sets the interest rate for delay compensation at the 5-
year Treasury note rate prevailing as of July 6, 2010. Interest on the royalties owed shall be
calculated using the 5-year Treasury note rate for the period from July 6, 2010 until the date the
judgment is actually paid, compounded semi-annually.
II. BREACH OF CONTRACT
Liberty’s breach-of-contract claim is predicated on the government’s disclosure and use
of the EPIC technology in violation of three NDAs, see supra, at 6-7, 11. As an initial step, the
court must address whether the NDAs constitute valid contracts between Mr. Marx and the
government. Lublin Corp. v. United States, 98 Fed. Cl. 53, 56 (2011) (“As in any claim for
breach of contract, in order to recover, plaintiff must establish, inter alia, that a valid contract
existed between it and the government.”). According to Liberty, Lt. Col. Dean, Mr. Amick,
Mr. Campion, and Mr. Marsh entered into valid contracts binding on the government in which
they agreed to “protect (and not misappropriate) Mr. Marx’s proprietary technology disclosed to
them.” Pl.’s Post-Trial Br. at 22. 52 The government maintains that those NDAs do not meet the
requirements for a valid contract because the government signatories lacked actual authority to
51
Mr. Hoffman selected a 3.25% prime rate, compounded quarterly. PX 21 at 31. The
court declines to adopt this rate because a prime rate is more appropriate where “the patentee is a
large, established and credit-worthy corporation.” Boeing, 86 Fed. Cl. at 323.
52
Liberty has also raised an attendant trade secret misappropriation claim. See Pl.’s Post-
Trial Br. at 32-39. Because the misappropriation of a trade secret is a tort, see ABB Turbo Sys.
AG v. TurboUSA, Inc., __ F.3d __, __, 2014 WL 7156709, at *1 (Fed. Cir. Dec. 17, 2014);
Radioptics, Inc. v. United States, 621 F.2d 1113, 1130 (Ct. Cl. 1980), this court does not have
jurisdiction under the Tucker Act to grant relief on such a claim, unless it is specifically derived
from contractual duties; see Demodulation, Inc. v. United States, 103 Fed. Cl. 794, 813 (2012)
(citing Awad v. United States, 301 F.3d 1367, 1372 (Fed. Cir. 2002)); see also Wood v. United
States, 961 F.2d 195, 198 (Fed. Cir. 1992). As discussed infra, a contractual relationship does
not exist between Liberty and the government, which forecloses this court’s jurisdiction over
Liberty’s misappropriation claim. See Radioptics, 621 F.2d at 1130.
38
obligate the United States in contract and there is no evidence that any government superior with
contracting authority ratified the NDAs. Def.’s Post-Trial Br. at 31-33.
A. Express Contracting Authority
When entering into a contract with the government, one assumes “the risk of having
accurately ascertained that he who purports to act for the [g]overnment stays within the bounds
of his authority,” even if the “agent himself is unaware of the limitations upon his authority.”
Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384 (1947). The Supreme Court has cautioned
that “[t]he scope of this authority may be explicitly defined by Congress or be limited by
delegated legislation, properly exercised through the rule-making power. And this is so even
though, as here, the agent himself may have been unaware of the limitations upon his authority.”
Id.; see also Council for Tribal Employment Rights v. United States, 112 Fed. Cl. 231, 243
(2013), aff’d, 556 Fed. Appx. 965 (Fed. Cir. 2014). “Although apparent authority will not
suffice to hold the government bound by the acts of its agents, implied actual authority, like
expressed actual authority, will suffice.” See H. Landau, 886 F.2d at 324 (internal citation
omitted).
A government agent has express actual authority to obligate the government in a contract
“only when the Constitution, a regulation, or a statute grants such authority in an unambiguous
manner.” Roy v. United States, 38 Fed. Cl. 184, 188 (1997); see also Tracy v. United States, 55
Fed. Cl. 679, 682 (2003). Liberty has failed to identify any statute, regulation, or constitutional
provision conferring express contracting authority to Lt. Col. Dean, Mr. Amick, Mr. Campion, or
Mr. Marsh. Thus, the government signatories lacked the requisite express actual authority to
bind the government to the NDAs.
B. Implied Contracting Authority
Even where express actual authority is lacking, a government agent may have implied
actual authority to contract “when such authority is considered to be an integral part of the duties
assigned to a [g]overnment employee.” H. Landau, 886 F.2d at 324; see also P & K
Contracting, Inc. v. United States, 108 Fed. Cl. 380, 391 (2012), aff’d, 534 Fed. Appx. 1000
(Fed. Cir. 2013) (quoting Winter v. Cath-dr/Balti Joint Venture, 497 F.3d 1339, 1346 (Fed. Cir.
2007)). “Contracting authority is integral to a government employee’s duties when the
government employee could not perform his or her assigned tasks without such authority and the
relevant agency regulation does not grant such authority to other agency employees.” Flexfab,
LLC v. United States, 62 Fed. Cl. 139, 148 (2004), aff’d, 424 F.3d 1254 (Fed. Cir. 2005);
compare Telenor Satellite Services, Inc. v. United States, 71 Fed. Cl. 114, 123 (2006) (holding
that the Deputy Assistant Secretary for Analysis and Information Management, Department of
State, had implied authority to enter into a bailment contract binding the government because, as
the primary person responsible for information management programs, he could not perform his
assigned tasks if he had to “obtain approval from another person before borrowing the equipment
necessary to implement those programs”), and Brunner v. United States, 70 Fed. Cl. 623, 643
(2006) (determining that a Drug Enforcement Administration agent had implied authority to
contract for expenses and salaries on behalf of the agency based on the agent’s power to spend
money for such purposes), with Leonardo v. United States, 63 Fed. Cl. 552, 558 (2005), aff’d,
39
163 Fed. Appx. 880 (Fed. Cir. 2006) (finding that an assistant to the Cultural Affairs Officer,
United States Information Services, in Brussels, Belgium, who was responsible for developing
and implementing cultural programs, lacked implied contracting authority because, inter alia,
“[n]othing in this position description implie[d] either that [he] led any [cultural] programs or
that contracting authority was necessary for him to discharge his duties successfully”).
Liberty contends that Lt. Col. Dean had implied authority to contractually bind the
government because that authority was integral to his duties as the Chief of Small Arms for the
U.S. Army Infantry Directorate of Combat Development. Pl.’s Post-Trial Br. at 24-27. Lt. Col.
Dean testified that he was responsible for evaluating new technologies and for drafting
requirements for ammunition. See Tr. 48:5 to 49:6 (Lt. Col. Dean); see also Tr. 488:19-20
(Amick). In this capacity he “interacted with [members of] industry to find out what the art of
the possible might be, and [] used that to generate requirements that the material developers
whose responsibility it was to design, develop and procure systems would use to conduct their
duties,” Tr. 48:16-20 (Lt. Col. Dean), and also signed “a few” NDAs, Tr. 65:24 to 66:3 (Lt. Col.
Dean). Although Lt. Col. Dean interacted with small-arms ammunition representatives, he “was
not a contracting officer during his two years as Small Arms Chief, did not have a contracting
warrant, and did not interact with contracting officers insofar as his duties related to interacting
with industry personnel like Mr. Marx.” Def.’s Post-Trial Br. at 31; see also Tr. 131:8 to 132:1
(Lt. Col. Dean). The record is also devoid of any evidence that “Lt. Col. Dean . . . had the
authority to make any financial arrangements with the industry representatives that would visit
[his office].” Def.’s Post-Trial Br. at 32; see Tr. 488:19-22 (Amick) (testifying that the Lt. Col.
Dean’s office had no power to purchase ammunition); cf. Brunner, 70 Fed. Cl. at 643
(concluding that the “power to spend the [government’s] money implicitly includes the power to
contract for the same purposes.”). Lt. Col. Dean’s job required him to write requirements and to
facilitate discussions with the industry, which does not imply that it was necessary for him to
execute NDAs to discharge those duties successfully. Cf. Tr. 132:8-9 (Lt. Col. Dean)
(acknowledging that the duties of his job did not explicitly involve signing NDAs); Telenor
Satellite Services, 71 Fed. Cl. at 123 (concluding that the Deputy Assistant Secretary for
Analysis and Information Management of the Department of State had authority to select and
obtain equipment). In light of the nature of Lt. Col. Dean’s position as Chief of Small Arms, the
court concludes that he lacked implied actual authority to bind the government to a NDA.
Mr. Amick, Mr. Campion, and Mr. Marsh also did not possess the requisite implied
actual authority to form an enforceable contract on behalf of the government. Liberty broadly
avers that Mr. Amick had implied authority since he worked with Lt. Col. Dean as a civilian aid
on new ammunition technologies, see Pl.’s Post-Trial Reply Br. at 4, and that Mr. Campion “had
implied actual authority because his Project Manager responsibilities included researching,
identifying, and promoting technologies for acquisition by SOCOM to satisfy its weapons
needs,” Pl.’s Post-Trial Br. at 29, see also Tr. 956:12 to 959:16 (Campion). No such authority
exists, however, because both individuals were civilian contractors, rather than government
employees, and absent very explicit express authority, contractors cannot bind the government.
See Peninsula Grp. Capital Corp. v. United States, 93 Fed. Cl. 720, 731 (2010) (holding that a
government contractor’s acceptance of a proposal to the Army was not a valid acceptance
40
because, as “a non-government employee, [the contractor] could not bind the government to a
contract.”).
Mr. Amick testified that he was working “as a contractor supporting the Small Arms
Branch” at the time he signed the NDA. Tr. 475:16-17 (Amick). Likewise, Mr. Campion
acknowledged that he was brought in by SOCOM to work as a contractor, Tr. 958:1-2, 959:3-13
(Campion), and “had no contracting authority at all,” Tr. 970:9-11 (Campion). While both
signatories could have been given express authority to act on behalf of the government, no such
authority was conferred. With regard to Mr. Marsh, Liberty makes the statement that Mr. Marsh
had implied contractual authority because “integral, essential and appropriate to [his] duties to
test ammunition for Mr. Campion – was the ability to execute the NDA with Mr. Marx.” Pl.’s
Post-Trial Br. at 30. The court agrees with the government that this argument in untenable
because “there is no testimony from Mr. Marsh or others to determine exactly what
[Mr. Marsh’s] duties were (or are) or to know whether signing NDAs are integral to those
duties.” Def.’s Post-Trial Br. at 33. Accordingly, Mr. Amick, Mr. Campion, and Mr. Marsh
lacked implied actuality authority to enter into a contract for the government ensuring
confidentiality.
C. Ratification
Because the signatories lacked actual authority to execute a NDA on behalf of the
government, the resulting contracts will be found valid only if Liberty proves that they were
ratified. “Individual ratification, in the government contracts context, is defined particularly as
“the act of approving an unauthorized commitment by an official who has the authority to do
so.” Gary v. United States, 67 Fed. Cl. 202, 215 (2005) (quoting 48 C.F.R. § 1.602-3(a)); see
also Schism v. United States, 316 F.3d 1259, 1289 (Fed. Cir. 2002) (en banc) (“Ratification is
‘the affirmance by a person of a prior act which did not bind him but which was done or
professedly done on his account, whereby the act, as to some or all persons, is given effect as if
originally authorized by him.’” (quoting Restatement (Second) of Agency § 82 (1958)). The
doctrine of individual ratification requires that “a superior must not only (1) have possessed
authority to contract, but also (2) have fully known the material facts surrounding the
unauthorized action of her subordinate, and (3) have knowingly confirmed, adopted, or
acquiesced to the unauthorized action of her subordinate.” Leonardo, 63 Fed. Cl. at 560 (citing
California Sand & Gravel, Inc. v. United States, 22 Cl. Ct. 19, 27-28 (1990), aff’d, 937 F.2d 624
(Fed. Cir. 1991)).
Liberty has not adduced any evidence that meets the requisite conditions for individual
ratification, but contends that the contracts were nonetheless institutionally ratified. See Pl.’s
Post-Trial Br. at 30. To support this contention, Liberty points to Philadelphia Suburban Corp.,
217 Ct. Cl. 705, 707 (1978). In Philadelphia Suburban, a chief petty officer of the Coast Guard
directed personnel to use a private company’s flame-retardant foam to fight a ship fire, which
suggested to the owners that the Coast Guard would pay for the foam. 217 Ct. Cl. at 706. The
Court of Claims held that ratification exists “where the [g]overnment has or takes the benefit of
another’s property” and remanded the case for trial “to determine the authority of the Coast
Guard personnel, present at the fire-site . . . and also to decide whether a contract-implied-in-fact
arose in the circumstances.” Id. at 707 (emphasis added). Since then, courts have found
41
institutional ratification “when the government seeks and receives the benefits from an otherwise
unauthorized contract.” Digicon Corp. v. United States, 56 Fed. Cl. 425, 426 (2003); see also
Janowsky v. United States, 133 F.3d 888, 891-92 (Fed. Cir. 1998). According to Liberty, the
Army “obtained the ‘benefit’ of receiving Marx/Liberty’s proprietary information . . . which is
more than sufficient to support a finding of ratification” for the NDA signed by Lt. Col. Dean
and Mr. Amick. Pl.’s Post-Trial Br. at 30-31; see also Pl.’s Post-Trial Reply Br. at 5. Liberty
further states that “SOCOM’s acceptance and review of the propriety information contained in
Liberty’s SBIR proposal constituted an acceptance of benefits that ratified and rendered
enforceable the NDAs [signed by Mr. Campion and Mr. Marsh].” Pl.’s Post-Trial Br. at 31; see
also Pl.’s Post-Trial Reply Br. at 5.
This argument is unavailing because Liberty’s concept of institutional ratification lacks
any requirement of a ratifying authority. In addition to the government’s acceptance of benefits,
an official with the power to ratify must also know of the unlawful promise, for “such knowledge
is a key element of an institutional ratification claim.” Gary, 67 Fed. Cl. at 216 (2005); see Doe
v. United States, 58 Fed. Cl. 479, 486 (2003), aff’d, 112 Fed. Appx. 54 (Fed. Cir. 2004)
(“Knowledge is the key distinguishing factor in all cases discussing institutional ratification; that
is, in the absence of some indication, beyond mere assertions, that officials with ratifying
authority knew of the unlawful promise, institutional ratification has not been upheld.”); see also
City of El Centro v. United States, 922 F.2d 816, 821 (Fed. Cir. 1990) (finding no institutional
ratification when there was “no express promise, by an official empowered to bind the
Government to pay for the care rendered . . . [and no] individual with contracting authority
exercised that authority to bind the United States in this matter”). Without such a constraint,
millions of federal employees could contractually bind the United States under an institutional
ratification theory by accepting benefits from a contract. See City of El Centro, 922 F.2d at 820.
In this case, Liberty does not identify any Army or SOCOM official with ratifying authority that
knew of the promises of confidentiality entered by Lt. Col Dean, Mr. Amick, Mr. Campion, and
Mr. Marsh. See Def.’s Post-Trial Br. at 34-35. Without this evidence, Liberty has failed to show
that either the Army or SOCOM ratified the NDAs.
Because the signatories lacked actual authority to bind the government to the NDAs and
no government official with the power to ratify knew of these contracts, Liberty’s contentions
regarding a breach of contract are fatally flawed.53
CONCLUSION
For the reasons stated, court finds that the claims in the ’325 patent are valid and directly
infringed by the M855A1 and the M80A1. The court awards Liberty $15,617,533.68 in
damages, as of April 30, 2013. Liberty is entitled to interest for delayed compensation at the 5-
year Treasury note rate from July 6, 2010, compounded semi-annually, until the date the
53
In light of the court’s holding, it is not necessary to reach a decision as to whether the
NDAs are barred by the Anti-Assignment Act, 41 U.S.C. § 6305. See Def.’s Post-Trial Br. at 35-
37.
42
judgment is actually paid.54
Within 90 days of the close of each of the government’s fiscal years after April 30, 2013,
the government shall provide a royalty report to Liberty accounting for the number of infringing
rounds ordered and delivered, and 30 days thereafter shall make a royalty payment to Liberty for
those rounds at a rate of $0.014 per round.55 This further obligation shall terminate when the
patent expires on October 20, 2027. Final judgment to this effect shall be issued under RCFC
54(b) because there is no just reason for delay. The clerk shall enter final judgment as specified.
In due course, Liberty may apply for an award of attorneys’ fees and expenses under 28
U.S.C. 1498(a). Proceedings related to any such request for attorneys’ fees and costs shall be
deferred until after any appellate process has been concluded or, alternatively, after the time for
taking an appeal has expired.
It is so ORDERED.
s/ Charles F. Lettow
Charles F. Lettow
Judge
54
The government prevails on Liberty’s contractual claims.
55
As an exception, the first report, i.e., that for fiscal year 2014, shall be due March 20,
2015, and the attendant royalty payment shall be made April 20, 2015. In addition, the report for
the balance of fiscal year 2013 may be combined with the report for fiscal year 2014.
43