Petition for Writ of Certiorari — Zoltek Corp. v. United States, 127 S. Ct. 2936 (2007) (No. 06-1155)

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IN THE

Supreme Court of the United States

ZOLTEK CORPORATION,

Petitioner,

UNITED STATES OF AMERICA.

Respon lent.

On Petition for Writ of Certiorari

to the United States Court of Appeals for the Federal Circuit

PETITION FOR WRIT OF CERTIORARI

CHARRY S. GROSSMAN DEAN AV. Mosco

Scullp FIARDIN LEP Counsel of Record

loo66 K Street. \.W JOHN S. MORTIMER

Washington. D.C. 20006 BRAD R. BERTOGELIO

(202) 778-6400 Woob PHILLIPS

S00 W. Nadisen Street.

ERIKS. Jaret Suite 3800

ERIK'S. Jarre. Pa . Chieage, IL. 60661

50} 34° Street. NW (312) 876-1] S00

Washington, DLC) 20008

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Cawmine! for Peoentione:

Dated Februar 20. 20"

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QUESTIONS PRESENTED

Patent infringement under 35 U.S.C. § 271(a) includes

“us[ing] * * * any patented invention, within the United

States.” Patent infringement under 35 U.S.C. § 271(g) in-

cludes “import[ing] into the United States or * * * us[ing]

within the United States a product which is made by a process

patented in the United States.” Where a patented invention is

“used or manufactured by or for the United States” 28 U.S.C.

§ 1498(ay provides that the “owner’s remedy shall be by ac-

tion against the United States in the United States Court of

Federal Claims for the recovery of his reasonable and entire

compensation for such use or manufacture.” Under 28 U.S.C

§ 1498(c), § 1498 does “not apply to any claim arising in a

foreign country.”

Where a government-authorized contractor performed

some or all of the steps of a patented process outside the

United States, but the products of that process were imported

into and used in the United States by and for the United

States, the questions presented by this Petition are:

1. Whether conduct by the government through its

authorized contractors that would otherwise constitute

patent infringement under § 271(g) or § 271(a) is a tak-

ing of property subject to the Fifth Amendment?

2. Whether a patent-holder can seek compensation in

the Court of Federal Claims for such otherwise infring-

ing conduct either: (A) under § 1498, notwithstanding

that some or all steps of the process were performed out-

side the United States; or, if not, (B) as a claim for just

compensation under the Fifth Amendment cognizable

pursuant to the Tucker Act, 28 U.S.C. § 1491(a)?

PARTIES TO THE PROCEEDINGS BELOW

Petitioner Zoltek Corporation (“‘Zoltek”) was the appellee

and cross-appellant in the Court of Appeals and the plaintiff

in the Court of Federal Claims. Zoltek Corporation is 100%

owned by Zoltek Companies, Inc., a publicly traded company.

Respondent the United States (“Government” or “U.S.”)

was the appellant and cross-appellee in the Court of Appeals

and the defendant in the Court of Federal Claims.

ill

TABLE OF CONTENTS

Pages

CFR BAPE FIT ees sccsnies teins ivcmhenthocintinigliaiieasopenendiies i

PARTIES TO THE PROCEEDINGS BELOW ..............::0006+ il

SPE CRT Petite sivklisnacieintdinnmebieguoanetiigbuniadins ili

SP IE FT CR FOR sinied cthocecestainh ects teciinbesiaplincisniatihins Vv

PETITION FOR WRIT OF CERTIORARI ............ccsceeeeeeeees ]

Fee Ra AF icossiccnseschssidibkiaiesnikceitiniensedenauidencniabaiiabesaaaabiaes ]

EPG TAIT scsitphissnnciilhedicshininanala den dicialigeracias ecpoanaaiaes l

CONSTITUTIONAL AND STATUTORY

PIRI V LeeRT ee BE ley O OEED ies neccersdsnessesebeineeiciseounticoeonies ]

EP ERIC CO BRR CI a osoieccicscsnsctretcavscanvenenrvebivrtwens 3

REASONS FOR GRANTING THE WRIT..............cceeseeeees 13

I. This Petition Raises Important National Issues

that Should Be Decided by this Court. ..................004 14

I]. The Decision Below Conflicts with Numerous

Decisions of this Court and Others, which Hold

that Patents Are Property Protected by the

Takings Clause of the Fifth Amendment.................... 17

A. Patent Rights Are Property..........-<cesescesssesceseeccoores 17

B. The Identical Activity in this Case, If

Conducted by a Wholly Private Party, Would

Constitute Inffinge:nent..........:.<cscccccesssereseessceveeeess 22

III. The Decision Below Erroneously Denies Patent-

Holders Any Recourse for Government Takings

OF CURE FRI ss incsicsivcistiadathmieceanteataidiiiedine ston Oe

A. Statutory Compensation for the Infringement

in this Case Is Available under 28 U.S.C.

Re i: Bes a Se Te 24

B. In the Alternative, the Tucker Act Allows a

Constitutional Claim for Just Compensation

under the Fifth Amendment to Be Brought in

i a cciacdanstnnniensbnaciale

CONCLUSION. .........ssccecsscesscsssseececesesorenesscsenensensnsenecscsesanses 28

TABLE OF AUTHORITIES

Cases

Ajinomoto Co. v. Archer-Daniels-Midland Co., 228

F.3d 1338 (CA Fed. 2000)

Biotec Biologische Naturverpackungen GmbH & Co.

v. Biocorp, Inc., 249 F.3d 1341 (CA Fed. 2001)

Biotechnology General Corp. v. Genentech, Inc., 80

F.3d 1553 (CA Fed. 1996)

Cammeyer v. Newton, 94 U.S. (4 Otto) 225 (1876)

Consolidated Fruit-Jar Co. v. Wright, 94 U.S. (4

Otto) 92 (1876)

Crozier v. Fried, Krupp Aktiengesellschaft, 224 U.S.

290 (1912)

Festo Corp. v. Soketsu Kinzoqu Kogyokabusiki Co.,

535 U.S. 722 (2002)

First English Evangelical Lutheran Church of

Glendale v. County of Los Angeles, 482 U.S. 304

(1987)

Hughes Aircraft Co. v. United States, 86 F. 3d 1566

(CA Fed. 1996)

Jacobs v. United States, 290 U.S. 13 (1933)

James v. Campbell, 104 U.S. 356 (1882) uo... eceeeeeeeeesereees ;

Leesona Corporation v. United States, 599 F.2d 958

(Ct. Cl. 1979)

NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282

(CA Fed. 2005)

Phelps v. United States, 274 U.S. 341 (1927)

Pitcairn v. United States, 547 F.2d 1106 (Ct. Cl.

Regional Rail Reorganization Act Cases, 419 USS.

102 (1974).....cccscssseccssssessseeersrersssenssesnsnensesesnsenenenenenanenenens 27

Richmond Screw Anchor Co. v. United States, 275

U.S. 331 (1928).......scecssccssssececenresreesssersesonsees sear eos 10, 25

Ruckelshaus v. Monsanto, 467 U.S. 986 (1984).......... 8, 18, 27

Schillinger v. United States, 155 U.S. 163 (1894)......-.++0+. 7, 20

United States v. Causby, 328 U.S. 256 (1946) ......secceeseeeeees 26

Statutes

11 U.S.C. § LOL. ceseccssssssssssececeescessnesenerseneesessenensnnensaasrees 18

11 U.S.C. § 365.0......cccccsscssssssssnssceeseescneseccenenevscsancerssenanenrentes 18

19 U.S.C. § 1337....ccccccssscsssssvsvevecesnensersrsesssessevenarersacssnssensesenes 7

26 U.S.C. § 1235 ....scsccccsssesccssscsessenencesseenensrsrsnserenssnenssronsereres 18

QB U.S.C. § 1254(1) ....eessescsccrseserersersneneneserecneenesesscneeensereneess ]

2B U.S.C. § T4GL ....cceccrscecserecsscccnsvereresseresesosvonesnsosnnenss i, 2, 6, 26

2B U.S.C. § 1498(a) ....cceceesesereeeeececestserseeseensenneennecnees passim

28 U.S.C § L498(C) ....ccsceseesesseeseseretesecoeerenesenressensesenes passim

$5. U.S.C. & USF vcccescrcvvsvsverseceevsveveesevesseenseossenereneeners 2, 1, dae ae

35 ULS.C. § 261......c.sccossssecsersoccsrersseseresnecenerenenrearersneseenes 2,18

35 U.S.C. § 271 (a) ....sescsssscssereescessereseseanenensensennsenseeesees passim

35 U.S.C. § 271g) ...cesccsssserseeresseeseeeeeeceesssecersensenseeneenees passim

Rules

Sr pom ase CT. BR. 301 ......ciccceceroscorsrerceveecescsessorsecnrsvesasensuevecnoarss |

Constitutional Provisions

U.S. CONST., AMEND. V .........ccsceseceeeesseenreeeceenensennereneeneenes La

Other Authorities

Government Executive Magazine website,

WWW. ZOVEXCC.COM, .o..ccceccsescenerrecseessssesensneeenenacerecsesensn sess }4

Jill Carroll & Ron Winslow, Bayer to Slash Price U.S.

Pays for Cipro Drug, Wall St. J., October 7. . , oe 16

Vil

Robert Pear, Democrats Demand Inquiry into Charge by

Medicare Officer, New York Times, March 14, 2004 ..... 16

Shankar Vedantam, Cipro is Not the Only Pill That

Fights Anthrax Wash. Post, October 17, 2001 ................. 16

PETITION FOR WRIT OF CERTIORARI

Petitioner Zoltek Corporation (“Zoltek”) respectfully peti-

tions for a writ of certiorari to review the judgment of the

United States Court of Appeals for the Federal Circuit.

OPINIONS BELOW

The opinion of the Court of Federal Claims (“CFC”) ad-

dressing plaintiff's claims under 28 U.S.C. § 1498(a) is pub-

lished at 51 Fed. Cl. 829 and is attached as Appendix B

(pages B1-B19). The opinion of the CFC addressing the

availability of a Fifth Amendment takings claim and denying

the government partial summary judgment is published at 58

Fed. Cl. 688 and is attached as Appendix C (pages C1-C41).

The decision of the Federal Circuit affirming the CFC’s rejec-

tion of the statutory claims and reversing as to the availability

of a takings claim is published at 442 F.3d 1345 and is at-

tached as Appendix A (pages Al-A68). The Federal Circuit’s

denial of rehearing and rehearing en banc is published at 464

F.3d 1335 and is attached as Appendix D (pages D1-D9).

JURISDICTION

The Federal Circuit issued its opinion on March 31, 2006

and denied rehearing and rehearing en banc on September 21,

2006. The Chief Justice granted petitioner an extension of

time to file this petition through January 19, 2007, and a fur-

ther extension through February 18, 2007, which, per Su-

preme Court Rule 30.1, extends through February 20, 1987.

This Court has jurisdiction pursuant to 28 U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY PROVISIONS

INVOLVED

The Fifth Amendment provides, in relevant part:

[NJor shall private property be taken for public use,

without just compensation.

U.S. CONST., AMEND. V.

Section 154(a)(1) of the Patent Act, 38. USL.

§ 154(a)(1), provides, in relevant part:

Every patent shall contain * * * a grant to the patentee,

his heirs or assigns, of the right to exclude others from

making, using, offering for sale, or selling the invention

throughout the United States or importing the invention

into the United States, and if the invention is a process,

of the right to exclude others from using, offering for

sale, or selling throughout the United States, or import-

ing into the United States, products made by that process

* * *

Section 261 of the Patent Act, 35 U.S.C. § 261, provides,

in relevant part: 7

Subject to the provisions of this title, patents shall have

the attributes of personal property.

Section 271(a) of the Patent Act, 35 U.S.C. § 271(a), pro-

vides, in relevant part:

[W]hoever without authority makes, uses, offers to sell,

or sells any patented invention, within the United States

or imports into the United States any patented invention

during the term of the patent therefore, infringes the pat-

ent.

Section 271(g) of the Patent Act, 35 U.S.C. § 271(g), pro-

vides, in relevant part:

Whoever without authority imports into the United

States or offers to sell, sells, or uses within the United

States a product which is made by a process patented in

the United States shall be liable as an infringer, if the

importation, offer to sell, sale, or use of the product oc-

curs during the term of such process patent.

The Tucker Act, 28 U.S.C. § 1491, provides, in relevant

part:

(a)(1) The United States Court of Federal Claims shall

have jurisdiction to render judgment upon any claim

against the United States founded either upon the Con-

stitution, or * * * upon any express or implied contract

with the United States, or for liquidated or unliquidated

damages in cases not sounding in tort.

Section 1498(a) of Title 28 of the United States Code pro-

vides, in relevant part:

Whenever 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,

the owner’s remedy shall be by action against the United

States in the United States Court of Federal Claims for

the recovery of his reasonable and entire compensation

for such use and manufacture. * * *

For the purposes of this section, the wse 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 orconsent of the Government, shall be

construed as use or manufacture for the United States.

_ Section 1498(c) of Title 28 of the United States Code pro-

vides:

The provisions of this section shall not apply to any

claim arising in a foreign country.

STATEMENT OF THE CASE!

1. Petitioner Zoltek manufactures sophisticated materials

produced from carbon fiber. Zoltek holds U.S. Patent No. RE

34,162 (the “ ‘162 Patent”), which claims a method for pro-

ducing carbon-fiber sheets having properties useful in mili-

tary applications, such as providing stealth qualities to air-

craft. The patented method uses partially carbonized fibers

that are then processed into sheets for use on military aircraft.

' Unless otherwise noted, the facts are taken from the decisions below.

As relevant to this case, Lockheed Martin Corporation

(“Lockheed”) and its subcontractors used Zoltek’s patented

process to produce carbon-fiber sheets and imported such ma-

terials into the United States for use in making the F-22

Fighter Plane pursuant to a contract with the government.

Under 28 U.S.C. § 1498(a), Lockheed’s “use or manufac-

ture of [a patented] invention” is “construed as use or manu-

facture for the United States.” Section 1498(a) further pro-

vides that whenever a patented invention “is used or manufac-

tured by or for the United States without license of the owner

thereof * * * the owner’s remedy shall be by action against

the United States in the [CFC] for the recovery of his reason-

able and entire compensation for such us¢ or manufacture.”

2. Pursuant to § 1498(a), Zoltek brought an action against

the United States in the CFC seeking compensation for Lock-

heed’s infringement of Zoltek’s patent. The First Amended

Complaint addressed the use of Zoltek’s process to produce,

import, and use two types of carbon-fiber sheets. App. A4-52

The first type at issue involved Nicalon® silicon carbide fi-

bers produced and formed into sheets in Japan, which were

then imported into the United States. The second type at is-

sue involved Tyranno® silicon carbide fibers produced in Ja-

pan and imported into the United States, and then formed into

sheets in the United States. Both types of sheets were then

used on the F-22 Fighter Plane in the United States.

The government sought partial summary judgment on

Zoltek’s claims under § 1498(a), arguing that the accused

processes were used, in whole or in part, outside the United

States and thus the claims were excluded from § 1498 by

§ 1498(c) as “claim[s] arising in a foreign country.”

3. On March 14, 2002, the CFC ruled that, per § 1498(c),

§ 1498(a) does not apply to “claims arising in a foreign coun-

2 Zoltek’s complaint also addressed infringing activities in connection

with the B-2 Bomber. Those activities are not relevant to this petition.

try,” and that a claim for the “use” of a patented process

arises in a foreign country where any step in the process is

performed in a foreign country. App. B8, B13.? Although

recognizing that the “general purpose of § 1498 was to pro-

vide a cause of action against the government for patent and

private parties,” App. B10-B11, the CFC rejected Zoltek’s

argument that § 1498(a) should be construed to apply to all

forms of direct infringement, including infringement by im-

portation and use of the products of a patented process under

35 U.S.C. § 271(g), and not merely to infringement by do-

mestic use of the process itself under § 271(a). App. B13-15.

Instead, the CFC held that because § 1498 was adopted

before Congress added § 271(g) to the Patent Act, there was a

“legislative gap” such that § 1498(a) only covered infringe-

ment under the pre-existing § 271(a), but not infringement

under § 271(g). The CFC reasoned that it was unable to fill

that gap because it lacked sufficient evidence that the cover-

age of § 1498 was intended to expand with the expansion of

infringement under 35 U.S.C. § 271. App. B15-B17.*

Having determined that § 1498(c) precluded Zoltek’s

cause of action under § 1498(a) for infringing “use” insofar as

any step of its patented processes was performed outside the

United States, the CFC nonetheless held that other forms of

”

* The CFC held that the phrase “arising in a foreign country” in § 1498(c)

had the same meaning as the phrase “within the United States,” a phrase

that limits infringement by use or manufacture of an invention under

§ 271(a). App. B7 n. 7. Similar language appears in § 271(g) limiting

infringement by importation or use of the products of a patented process,

but such language applies only to the location where such products were

imported or used, regardless where they were manufactured.

* Despite its conclusion that § 1498(a) did not apply to claims under

§ 271(g), the CFC nonetheless stated that Zoltck could not sue Lockheed

under § 271(g) because the very same language of § 1498 that did not

apply to Zoltek’s claims nonetheless did apply to those claims for pur-

poses of immunizing Lockheed from such claims. App. B4 nn. 4 & 5.

patent infringement by the government could constitute a

Fifth Amendment taking. App. B18-B19. It thus ordered fur-

ther briefing on whether the alleged infringement here consti-

tuted a Fifth Amendment taking and whether its construction

of § 1498(c) therefore violated the Fifth Amendment.”

4. On December 9, 2003, tt CFC ruled that the govern-

ment’s actions, if proven, would constitute a taking under the

Fifth Amendment and that it had jurisdiction under the

Tucker Act, 28 U.S.C. § 1491, to hear a claim for just com-

pensation not covered by § 1498. It thus denied the govern-

ment’s motion for partial summary judgment. App. C2.

After reiterating its earlier ruling that § 1498 only applied

to claims for use of a process where all of the steps of that

process were performed inside the United States, and finding

that such construction meant that § 1498 did not cover

Zoltek’s claims in connection with the Nicalon® and Tyr-

anno® fiber sheets, the CFC recognized the “curious posi-

tion” now facing Zoltek: Although Zoltek has an exclusive

property right in its patented process and in the importation

and use of the products thereof, § 1498 immunizes Lockheed

against such claims and yet simultaneously the same provi-

sion and language does not cover those claims for purposes of

providing compensation. App. C4-C5.

The CFC then undertook an extensive review of the cases

from this Court and others and concluded that patents are

property rights and government activity that would otherwise

infringe patent rights, but that is not covered by § 1498, con-

’ The CFC also sought further briefing on where the Nicalon® fiber sheets

were manufactured, a question not resolved by the evidence then before

the court. The Tyranno® fiber sheets at issue were shown to be partially

manufactured abroad, imported into the United States, and then assembled

and used in the United States.

stitutes a taking of a compulsory license, subject to a claim

under the Fifth Amendment. App. C17-C26.°

The CFC rejected the government’s claim that there was

no taking because § 1498 narrowed the scope of patent rights

by failing to provide compensation for conduct not covered

therein. It instead held that Zoltek’s property rights were de-

fined by the substantive grant of rights in the Patent Act, in-

cluding the rights regarding importation and use of products

made by patented processes set forth in 35 U.S.C. §§ 154 and

271(g). App. C23 & n. 19. Section 1498, by contrast, only

provides a “remedy” for violation of an otherwise existing

patent right, does not “grant the government anything” or

limit the “metes and bounds” of Zoltek’s patent rights, and

hence does not negate the existence of property rights not

covered therein. App. C23-26 (emphasis in original).

Addressing this Court’s decision in Schillinger v. United

States, 155 U.S. 163, 169 (1894), which held that a particular

claim for patent infringement against a government contractor

sounded in tort and hence was not within the grant of jurisdic-

tion under the Tucker Act, the CFC held that Schillinger was

no longer good law and that for over 80 years a claim for

government patent infringement has been deemed a Fifth

Amendment takings claim, over which the Tucker Act pro-

vides jurisdiction. App. C26-C30 (discussing, inter alia, Jus-

tice Harlan’s dissent in Schillinger, the adoption in response

to Schillinger of the 1910 precursor to § 1498, this Court’s

decision in Crozier v. Fried, Krupp Aktiengesellschaft, 224

U.S. 290 (1912), and this Court's earlier decision in James v.

Campbell, 104 U.S. 356, 357-58 (1882)). The CFC con-

cluded that “Congress and the Supreme Court now see acts of

the U.S. government that between private parties would be

patent infringement as eminent domain takings.” App. C31.

® The CFC also addressed a side-issue regarding 19 U.S.C. § 1337(/),

which deals with importation of infringing articles, and held that § 1337

had no affect on this case. App. C15. That section is not at issue here.

Finally, the CFC rejected the notion that the limited statu-

tory remedies provided in § 1498 implicitly repealed its juris-

diction under the Tucker Act over the constitutional remedies

for takings not covered by § 1498. Finding that “the Tucker

Act can provide jurisdiction to this Court without conflicting

with § 1498,” and citing this Court’s decision in Ruckelshaus

v. Monsanto, 467 U.S. 986, 1017 (1984), for the proposition

that such implied partial repeals of the Tucker Act are disfa-

vored, the CFC concluded that the two sources of jurisdiction,

read together, “both confer jurisdiction on this court to hear

Zoltek’s claim, albeit for different rights.” App. C32-C34.

The CFC then granted Zoltek leave to file a Second

Amended Complaint in order to add a count for a Fifth

Amendment taking. App. C40-C41.

The CFC certified both the statutory and constitutional is-

sues for interlocutory appeal, both parties appealed, and the

Federal Circuit accepted jurisdiction. App. Al.

5. On March 31, 2006, the Federal Circuit, per curiam,

affirmed in part and reversed in part, in favor of the govern-

ment on both issues on appeal. Judges Dyk and Gajarsa each

issued a separate concurring opinion. Judge Plager dissented.

The per curiam opinion affirmed the CFC’s initial holding

that Zoltek’s claims were not covered by § 1498(a), though it

did so on slightly different grounds. The court began with the

implicit and erroneous suggestion that a patent-holder’s only

“judicial recourse against the federal government, or its con-

tractors, for patent infringement, is set forth and limited by”

§ 1498. App. A6. It then quoted its earlier decision in NTP,

Inc. v. Research in Motion, Lid., 418 F.3d 1282, 1316 (CA

Fed. 2005), to hold that “‘[dJirect infringement under 35

U.S.C. § 271 (a) is a necessary predicate for Government li-

ability under § 1498,’” and that a “‘process cannot be used

“within” the United States as required by § 271(a) unless each

of the steps is performed within this country.”” App. Aé.

Rather than relying on the territorial exclusion contained in

§ 1498(c), as the CFC had done, the court imported the terri-

torial limits of § 271(a) directly into § 1498(a) itself and held

that because some or all of the steps of the patented process

were performed outside the United States, government “liabil-

ity does not exist pursuant to § 1498(a).” App. A7.

The per curiam opinion also reversed the CFC’s holding

that Zoltek could assert a Fifth Amendment takings claim un-

der the Tucker Act and found that this Court’s 1894 decision

in Schillinger, that a particular claim for patent infringement

by a government contractor sounded in tort and hence could

not be brought against the United States under the Tucker

Act, remained the law and had not been overruled. App. A7.

The court distinguished this Court’s subsequent 1912 decision

in Crozier as not involving the Tucker Act, and only discuss-

ing the potential for filing in the Court of Claims under the

then-newly enacted 1910 Act (the precursor to § 1498). App.

A8. The court below viewed Crozier as endorsing the de-

scription of the law in Schillinger and argued that passage of

the 1910 Act confirmed that the right to sue the government

for patent infringement did not “already exist{] under the

Fifth Amendment” because otherwise the added jurisdiction

would have been unnecessary. App. A9.

The court rejected the CFC’s discussion of the subsequent

century of takings jurisprudence, arguing that patent rights

were not “property” protected by the Fifth Amendment, but

rather were “a creature of federal law” protected only by such

relief as the federal government saw fit to grant under § 1498.

App. Al0-Al1.’ It distinguished inverse condemnation and

regulatory takings claims, which are covered by the Tucker

Act and not barred as torts, with the argument that “the ‘tak-

” Although seeming to recognize the inconsistency between its view of

patents and this Court’s holding in Monsanto that government interference

with trade secrets could constitute a taking, the court held that because

Monsanto did not expressly overrule Schillinger, the earlier case remained

controlling law.

ing’ of a license to use a patent creates a cause of action under

§ 1498,” and allowing a takings claim under the Tucker Act

would render § 1498 “superfluous.” App. All.

In a concurring opinion, Judge Gajarsa concluded that

while the panel was bound by N7P regarding the scope of §

1498(a), N7P was wrongly decided. App. A12-A20. He ar-

_gued that § 1498(a) is neither identical to nor limited by

§ 271(a), and that an interpretation incorporating the provi-

sions of § 271(a) into § 1498(a) would render § 1498(c) un-

necessary. App. Al6-Al7. Judge Gajarsa would have

reached the same result, however, by holding, as the district

court did, that § 1498(c) excludes coverage for inflinging use

of a patented process where some or all steps of the process

are performed outside the United States. App. A21.

In another concurring opinion, Judge Dyk disagreed with

Judge Gajarsa and supported applying N7P to incorporate the

territorial limits of § 271(a) into § 1498(a). App. A37-A42.

Curiously, he noted that the 1918 amendments to the 1910

Act, which extended the Act’s coverage to infringing conduct

by authorized government contractors in addition to conduct

by the government itself, “confirm that the purpose of the

statute was simply to obligate the United States to the same

extent as private parties.” App. A40. Judge Dyk quoted this

Court’s decision in Richmond Screw Anchor Co. Vv. United

States, 275 U.S. 331, 343, 345 (1928), for the propositions

that the intention of the 1918 amendments was “‘to relieve the

contractor entirely from liability of every kind for the in-

fringement of patents in manufacturing anything for the gov-

ernment,”” to substitute a remedy against the United States for

the patent owner’s “‘reasonable and entire compensation,’”

and that in “‘attempt[ing] to take away from a private citizen

his lawful claim for damage to his property by another private

person which but for this act he would have against the pri-

vate wrongdoer[,] * * * [w]e must presume that Congress in

the passage of the act of 1918 intended to secure to the owner

of the patent the exact equivalent of what it was taking away

from him.’” App. A40-A41.8

Judge Dyk also rejected the takings analysis of the CFC

and the dissent, arguing that patent rights are “creatures of

federal statute,” the right to compensation under § 1498(a) is

no broader that the rights against a private party under

§ 271(a), and hence there is “no taking resulting from the re-

fusal to recognize a greater right against the government.”

App. A42.

Judge Plager dissented. Viewing this case to be of “major

significance to our understanding of the Constitutional obliga-

tions of the United States,” App. A42-A43, he explained that

the per curiam opinion misconstrued this Court’s decision in

Schillinger and ignored nearly 80 years of holdings by this

Court that a takings claim for just compensation is a separate

and independent cause of action under the Fifth Amendment,

jurisdiction over which is provided by the Tucker Act. App.

AS50-A54. Regarding Schillinger’s treatment of the patent

infringement in that case as a tort, Judge Plager noted that it

was not until Jacobs v. United States, 290 U.S. 13 (1933),

that this Court recognized that the Fifth Amendment itself

provided “a separate, non-statutory, constitutional basis for

takings remedies,” and that the Tucker Act’s provision of ju-

risdiction for such constitutional claims was “separate from

its other bases.” App. A52. He further quoted Jacobs, 290

U.S. at 16, for the proposition that the absence of a statutory

basis for compensation was irrelevant because:

* Judge Dyk inexplicably stated he had no occasion to consider whether

suit could be brought against the government for conduct violating

§ 271(g), App A4l1 n. 4, even though such section was precisely the sub-

ject of the CFC’s holdings on the limited scope of § 1498 and the avail-

ability of a takings claim. App. B4 n. 4, B17, C5 & n. 6, C31-C32, C38.

The per curiam opinion likewise resolved precisely such issue in affirm-

ing the CFC’s holding that § 1498 was limited to conduct violating

§ 271(a) and in reversing the CFC’s holding that § 271(g) could provide

the property nghts that formed the basis of a takings claim.

The form of the remedy did not qualify the right. It

rested on the Fifth Amendment. Statutory recognition

was not necessary. A promise to pay was not necessary.

Such a promise was implied because of the duty to pay

imposed by the amendment. The suits were thus

founded upon the Constitution of the United States.

App. A52-53 (Plager emphasis omitted). After reviewing ad-

ditional cases where regulatory takings and inverse condem-

nations were cognizable under the Tucker Act notwithstand-

ing their origins in tort, he concluded that whatever relevance

Schillinger may have had to constitutional takings and Tucker

Act jurisdiction as applied to contracts and tort claims, “it has

none now.” App. A54. Addressing the majority's “remark-

able view” of the Constitution that because there “is no rem-

edy on these facts under § 1498, there is no right either,”

Judge Plager observed that arguing that “§ 1498 successfully

cabined the Constitution is the reverse of the understanding

that the Constitution trumps legislation.” App. A55.

Regarding Zoltek’s claim for compensation under

§ 1498(a), Judge Plager, like Judge Gajarsa, rejected the di-

rect incorporation of § 271(a) into § 1498(a), and rejected the

proposition that § 1498(c)’s exclusion for claims “arising in a

foreign country” applied to the performance of a single step in

a multi-step patented process outside the United States. App.

AS7-A63. He also concluded that such an interpretation

would frustrate the purpose of the statute to compensate pat-

ent holders for government takings, and, insofar as it allowed

§ 1498(a) to provide less than just compensation for other-

wise actionable patent infringement, “would be unconstitu-

tional.” App. A66-A67.

Zoltek petitioned for rehearing and rehearing en banc.

6. On September 21, 2006, the Federal Circuit denied re-

hearing and rehearing en banc. App. D1-D7. Judge Newman

dissented from the denial of rehearing en banc, disputing the

panel’s “apparent rejection of the premise that patents are

property subject to the Fifth Amendment.” App. D3. Refer-

ring to “almost a century of precedent” and the legislative his-

tory of the 1910 Act that confirmed that government in-

fringement of a patent constitutes a taking of property, she

argued that the panel’s reliance on Schillinger “is almost a

century out of date.” App. D3-D6. And citing this Court’s

treatment of trade secrets in Monsanto, she noted that the de-

cision below “produces the anomalous result that patent prop-

erty receives less protection from the Constitution than other

forms of property” and concluded that the denial of jurisdic-

tion in the CFC to hear the claims in this case “is contrary to

clear statutory text and long-resolved application of constitu-

tional remedy.” App. D6-D7.

7. This petition for certiorari followed.

REASONS FOR GRANTING THE WRIT

Certiorari should be granted because the decision below

strips an entire class of property owners — patent holders — of

their Fifth Amendment right to just compensation for the tak-

ing of their patent rights. Under the Federal Circuit’s deci-

sion, the government, either itself or through its authorized

contractors, is free to use a patented process, and to import

and use the products of such process, without compensation if

any step of the accused process is performed outside the

United States. Identical infringing activity by a wholly pri-

vate party would result in liability for patent infringement.

The decision below conflicts with numerous decisions of

this Court, of the Federal Circuit, and of the predecessor

Court of Claims recognizing that patent nghts are property

that is “taken” by otherwise infringing government conduct,

and that takings claims are within the Tucker Act’s grant of

jurisdiction.

Furthermore, the Federal Circuit’s limiting construction of

§ 1498 to deny petitioner any statutory rights to compensation

for the government-authorized infringement here reflects deep

division within the Federal Circuit, undermines Congress’

intent to live up to its Fifth Amendment obligations, and un-

necessarily forced the court to address serious constitutional

issues that could have been avoided by a more sensible statu-

tory construction.

Because of the significant role that patents occupy in the

economy and the substantial governmental abuse of its tak-

ings power sanctioned by the decision below, this petition

presents vitally important questions on which this Court

should grant a writ of certiorart.

4 THIS PETITION RAISES IMPORTANT NATIONAL ISSUES

THAT SHOULD BE DECIDED BY THIS COURT.

Because the Federal Circuit is the sole court of appeals

that can hear patent infringement and takings claims against

the federal government and its agents, the decision below de-

nying statutory or constitutional compensation for a wide

class of government patent infringement is of tremendous na-

tional importance and will have a devastating national effect.

Numerous companies and entire industries have devel-

oped over the decades to meet the technological needs of the

federal government, particularly in the area of defense. In

Fiscal 2001, the government purchased more than $143 bil-

lion of equipment and services from the top 100 defense con-

tractors. In Fiscal 2003, the figure was more than $198 bil-

lion” A substantial portion of such purchases was and is pro-

tected by United States patents. By way of example, between

2001-06, five of the large defense contractors collectively

were issued 7,678 U.S. patents." Numerous other contrac-

tors, subcontractors, and their competitors likewise rely on

° See Government Executive Magazine website, www.govexec.com.

'0 Between 2001-06, the number of U.S. patents issued to the following

major defense contractors, as reported by Delphion, were: (1) Northrop

Grumman Corp. - 2,063; (2) Lockheed Martin Corp. — 1,749; (3) Boeing

~ 2,063; (4) Raytheon - 1,583; and (5) General Dynamics Corp. - 220.

patented products and processes to provide for defense and

other government needs.

The Federal Circuit’s decision renders those patents sec-

ond-class property not entitled to Fifth Amendment protec-

tion, barring recourse to the CFC under § 1498 and the

Tucker Act. According to the Federal Circuit, the myriad

patents driving the defense and other industries are no longer

matters of property, but instead are matters of government

grace, to be taken with or without compensation as the gov-

ernment sees fit.

The negative economic consequences of the Federal Cir-

cuit’s decision will be widespread and substantial. This case

alone involves a taking of a compulsory license worth more

than $1 billion. And the decision below actively invites nu-

merous such takings in the future. As Judge Plager noted in

his dissent below, allowing the government, without liability,

to appropriate the products of a patented process merely by

performing “any one step” of such process outside the United

States “‘is an invitation to strategic conduct if ever there was

one.” App. A63. Indeed, by encouraging the government and

its contractors to shift infringing activities abroad, the Federal

Circuit’s decision causes substantial harm to domestic indus-

tries producing items used or desired by the government.

By reducing the security, and hence the value, of patent

property, patent-driven industries that provide technologies

useful to the government will become far riskier endeavors,

causing capital to flow out of those industries and into other,

less risky, investments, Many patent-dependent industries are

highly capital intensive, with long time-horizons required for

product development. Stripping patent holders of their con-

stitutionally protected property rights will lead inevitably to a

substantial chilling effect on investment in these high-risk ar-

eas where federal government takings are a real possibility,

and the development of innovative products and processes to

meet government needs will suffer accordingly.

Nor are the ramifications of the decision below limited to

the defense industry. Numerous other industries likewise rely

on patented products and processes coveted by the govern-

ment. For example, the pharmaceutical industry may be par-

ticularly vulnerable to loss of protection for patent property

rights as against the government. Between 2001-06, five of

the large pharmaceutical manufacturers were issued 7,653

US. patents. The government’s desire to take or break the

patent for Bayer’s antibiotic Cipro® is well-documented.’

Similarly, the government’s interest in demanding compul-

sory licenses from drug-makers at fees below what would be

just compensation under the Fifth Amendment has been

growing in light of the Medicare Prescription Drug Act en-

acted in 2003. That program has an estimated ten-year cost

through 2013 of $500 - 600 billion.'® Under the Federal Cir-

cuit’s decision, the government could simply legislate that

pharmaceutical manufacturers accept whatever level of com-

pensation it chooses for the drugs it takes or buys, without

'! Between 2001-06, the number of U.S. patents issued to the following

pharmaceutical companies, as reported by Delphion, were: (1) Pfizer

Corp. ~ 2,721; (2) Eli Lilly and Co. - 547; (3) Glaxo Smith Kline Corp. -

1,554; (4) Merck & Co. — 1,754; and (5) Bristol Myers Squibb - 1,037.

2 41) Carroll & Ron Winslow, Bayer to Slash Price U.S. Pays for Cipro

Drug, Wall St. J., October 25, 2001 at A3 (discussing “high-stakes threat

by Tommy Thompson, H.H.S. Secretary, to break the Bayer Patent for

Cipro if he didn’t get the price he wanted”), Shankar Vedantam, Cipro is

Not the Only Pill That Fights Anthrax Wash. Post, October 17, 2001 at

A20 (Reporting public appeal by Senator Schumer for “the Government

[to] suspend Bayer’s patents and allow generic companies to add to the

supply’).”

'3 Robert Pear, Democrats Demand Inquiry into Charge by Medicare Offi-

cer, New York Times, March 14, 2004. On January 12, 2007, the House

of Representatives passed the Medicare Prescription Drug Price Negotia-

tion Act, H.R. 4, that requires the Secretary of HHS to negotiate the bulk

purchase of pharmaceuticals for indiv iduals participating in the Medicare

and/or Medicaid programs.

concern for the Fifth Amendment’s constraint of just compen-

sation.

The Federal Circuit’s decision also undermines the entire

patent system by treating patents as second-class, constitu-

tionally unprotected, property. To the extent possible, inven-

tors thus will be incented to protect their inventions as trade

secrets in order to receive the Fifth Amendment protection

provided by this Court’s decision in Monsanto. The decision

below thus undermines the public disclosure and other bene-

fits of the patent system by driving inventors and investors

toward less socially beneficial means of protecting their intel-

lectual property. Such an affront to the economy and to the

patent system amply warrants review by this Court.

Il. THE DECISION BELOW CONFLICTS WITH NUMEROUS

DECISIONS OF THIS COURT AND OTHERS, WHICH

HOLD THAT PATENTS ARE PROPERTY PROTECTED BY

THE TAKINGS CLAUSE OF THE FIFTH AMENDMENT.

Flying in the face of statute and precedent, the decision

below held that patent rights are not subject to the Fifth

Amendment. That proposition is shockingly wrong.

A. Patent Rights Are Property.

The Fifth Amendment to the United States Constitution

states, in pertinent part:

[NJor shall private property be taken for public use,

without just compensation.

Pursuant to its constitutional power under Article I, sec-

tion 8, clause 8, Congress has provided for patents since

1790. The current Patent Act, as enacted in 1952 and

amended thereafter, provides that,

[s]ubject to the provisions of this title, patents shall have

the attributes of personal property.

35 U.S.C. § 261 (emphasis added).”* It is difficult to imagine

anything simpler or more clearly articulated in the law than

the proposition that patents are property.

This Court has likewise recognized, fur over a century,

that patents constitute property. See Consolidated Fruit-Jar

Co. v. Wright, 94 U.S. (4 Otto) 92, 96 (1876) (“A patent for

an invention is as much property as a patent for land. The

right rests on the same foundation and is surrounded and pro-

tected by the same sanctions.”); Cammeyer Vv. Newton, 94

U.S. (4 Otto) 225, 234-35 (1876) (rejecting sovereign immu-

nity defense because “an invention [secured by a valid letter-

patent] is property in the holder of the patent, and * * * is as

much entitled to protection as any other property oe? Fl

Public employment is no defense [sic] to the employee for

having converted the private property of another to the public

use without his consent and without just compensation.”) (ci-

tations omitted); James v. Campbell, 104 U.S. 356, 357-58

(1882) (rejecting sovereign immunity defense; “That the

Government of the United States when it grants letters-patent

* * * confers upon the patentee an exclusive property in the

patented invention which cannot be appropriated or used by

the Government itself, without just compensation, any more

than it can appropriate or use land which has been patented to

a private purchaser, we have no doubt.”).!°

'4 Patents aré assigned, licensed, mortgaged, and otherwise hypothecated.

Transfers and encumbrances on patents are recorded. 35 U.S.C. § 261 9/4.

Bankruptcy statutes treat patents as property. 11 U.S.C. § 101 (35A); 11

U.S.C. § 365(m). They are also subject to federal taxation. Eg., 26 U.S.C.

§ 1235 (u).

'S Cf. Festo Corp. v. Soketsu Kinzoqu Kogyokabusiki Co., 535 U.S. 722,

730-31, 739 (2002) (“The [temporary patent] monopoly is a property

right; like any property right”) (citations omitted); Monsanto, 467 U.S. at

1002, 1003-04 (“Trade secrets have many of the characteristics of more

tangible forms of property. A trade secret Is assignable. * * * A trade

secret can form the res of a trust, * * *, and it passes to a trustee in bank-

ruptcy.”, trade secrets are property rights “protected by the Takings

Clause of the Fifth Amendment.) (citations omitted); id. at 1002-03

The per curiam opinion also conflicts with prior holdings

of the Federal Circuit itself, and its predecessor court, the

United States Court of Claims. See Hughes Aircraft Co. v.

United States, 86 F. 3d 1566, 1571 (CA Fed. 1996) (govern-

ment’s “unlicensed use of a patented invention is properly

viewed as a taking of property under the Fifth Amendment *

* *_ and the patent holder’s remedy for such use is prescribed

by 28 U.S.C. § 1498(a).”); Leesona Corporation v. United

States, 599 F. 2d 958, 964 (Ct. Cl. 1979) (“When the govern-

ment has infringed, it is deemed to have ‘taken the patent li-

cense under an eminent domain theory, and compensation is

the just compensation required by the Fifth Amendment.’”’)

(citation omitted); Pitcairn v. United States, 547 F.2d 1106,

1114 (Ct. Cl. 1976) (“The use or manufacture by or for the

Government of a device or machine embodying any invention

by a United States patent, is a taking of property by the Gov-

ernment under its power of eminent domain.”); see also, App.

C17-21 (second CFC opinion) (reviewing the case law in the

Federal Circuit, its predecessor, and the Court of Federal

Claims).'°

(viewing “trade secrets as property is consonant with the notion of ‘prop-

erty’ that extends beyond land in tangible goods and includes the products

of an individual’s ‘labour and invention’”’) (citations omitted).

'© The legislative history of the 1910 Patent Act also supports the exis-

tence of Fifth Amendment rights in patents. See App. D4-D5 (Newman,

J., dissenting from denial of rehearing en banc) (quoting Representative

Curner, Chairman of the House Committee on Patents: “The status of a

patent as private property, which even the Government is prohibited from

taking for public use without compensation (Amendment to Constitution,

Article V) has been declared and redeclared in many opinions by the Su-

preme Court of the United States.) (45 Cong. Rec. 8755, 8769 (June 22,

1910)); id. at D7 (quoting Rep. Dalzell: “And every time that the United

States government assumes to take forcibly, without the consent of the

owner, a patented process, it violates the Constitutional provision which

says that no man’s property shall be taken without compensation and

without due process of law.”) (45 Cong. Rec. at 8780)).

In the face of such authority, the court below relied on this

Court’s 1894 decision in Schillinger v. United States for the

proposition that a claim against the government for patent in-

fringement sounds in tort, rather than under the Fifth

Amendment. The court further argued that if Congress had

viewed patents as “property interests under the Fifth Amend-

ment, there would have been no need for the new and limited

sovereign immunity waiver” provided in the 1910 precursor

to § 1498. App. Al0-A11.

Both the court’s understanding of Schillinger and the im-

plication it drew from Congress’ passage of a statutory com-

pensation remedy are far off the mark.

In Schillinger, this Court held that the patentee could not

bring a claim for damages in the Court of Claims because the

patent infringement therein was a tort, and the Court of

Claims had no jurisdiction over tort claims. But the claim in

Schillinger did not involve the government-authorized use of

a patent by the contractor. Rather, it involved use by the con-

tractor for which the government specifically disclaimed re-

sponsibility, 155 U.S. at 165, 170, and hence it is hardly sur-

prising that this Court viewed the conduct as a private tort

(for which the contractor itself was liable) as opposed to a

government taking.

Since the 1918 amendments to the 1910 Act, however, the

government is only substituted as a defendant for conduct by

its contractors taken with “the authorization of consent of the

Government.” 28 U.S.C. § 1498(a). Insofar as the govern-

ment accepted its substitution as defendant in this case, it

cannot dispute that Lockheed’s infringing conduct was au-

thorized by the government and the government has never

sought to disavow Lockheed’s immunity under § 1498. Even

under the rationale in Schillinger, such authorization would

remove this case from the realm of tort and create an implied

contract (under the Fifth Amendment) for compensation for

such authorized infringement.

Furthermore, even aside from Schillinger’s inapplicability

to this case, Judge Plager correctly noted that Schillinger was

decided nearly 40 years before this Court in Jacobs v. United

States, 290 U.S. 13 (1933), recognized “the identity of a sepa-

rate, nov1-statutory, constitutional basis for takings remedies

under the Fifth Amendment.” App. A52.

Indeed, in Jacobs, this Court rejected the same argument

relied upon below that limited statutory remedies somehow

negate any independent claim for just compensation:

The suits were based on the right to recover just com-

pensation for property taken by the United States for

public use in the exercise of its power of eminent do-

main. * * * The form of the remedy does not qualify

the right. It rested upon the Fifth Amendment. Statu-

tory recognition was not necessary. A promise to pay

was not necessary. Such a promise was implied because

of the duty to pay imposed by the amendment. The suits

were thus founded upon the Constitution of the United

States.

290 U.S. at 16; see App A52-A53 (Plager, J., dissenting)

(discussing Jacobs). Thus, at least since 1933 this Court

has recognized that takings claims under the Fifth

Amendment sound neither in tort nor contract, but are in-

dependent claims “founded on the Constitution.” See also

First English Evangelical Lutheran Church of Glendale v.

County of Los Angeles, 482 U.S. 304, 315-16 (1987)

(“Government action that works a taking of property rights

necessarily implicates ‘the constitutional obligation to pay

just compensation.’”; recognizing “‘“the self-executing

character of the Constitutional provision with respect to

compensation.”””’) (citations omitted).

Schillinger thus can hardly stand for the proposition that

patent infringement authorized by the government sounds ex-

clusively in tort in that this Court had no occasion to consider

it as a constitutional claim. The correct answer after Jacobs,

of course, is that such infringement gives rise to both statu-

tory claims insofar as a statute provides compensation and, if

uncompensated by statutory means, an independent constitu-

tional claim.

Additionally, as the CFC and both Judges Plager and

Newman correctly recognized, Schillinger was effectively

superceded by this Court’s decision in Crozier, which ex-

pressly characterized patent use by and for the government as

the exercise of the government’s power of eminent domain.

224 US. at 305 (wrongful conduct of an officer, if adopted by

the government, becomes rightful appropriation in exercise of

power of eminent domain).

In any event, insofar as Schillinger has the meaning im-

puted to it below and indeed remains technically controlling

law, that is simply a further reason why the issue must be ad-

dressed by this Court. Schillinger is either inapplicable or

should be overruled, and given the Federal Circuit’s view of

that decision, only this Court has the power to sort things out.

B. The Identical Activity in this Case, If Conducted

by a Wholly Private Party, Would Constitute In-

fringement.

In determining the scope of particular “property” under

the Fifth Amendment, this Court necessarily should look to

the owner’s rights as against other private parties, rather than

as against the government. In this case, there is no question

that the accused activity — the importation and use in the

United States of products made by a patented process pet-

formed partially or entirely abroad — constitutes actionable

infringement of Zoltck’s patent.

As relevant to this case, the scope of Zoltek’s patent rights

begins with 35 U.S.C. § 154(a)(1), which provides that every

patent for an invented “process” shall contain

a grant to the patentee, his heirs or assigns * * * of

the right to exclude others from using, offering for

sale, or selling throughout the United States, or im-

porting into the United States, products made by

that process * * *,

In addition, 35 U.S.C. § 271(g) defines the complementary

cause of action for infringement:

Whoever without authority imports into the United

States or offers to sell, sells, or uses within the United

States a product which is made by a process patented in

the United States shall be liable as an infringer, if the

importation, offer to sell, sale, or use of the product oc-

curs during the term of such process patent.

Regardless whether the “use” of the patented process oc-

curs abroad, or whether such use of the process infringes un-

der § 271(a), petitioner has the independent right to exclude

the products of such foreign processes from importation into

or use in the United States, and a claim for infringement un-

der § 271(g) arises from the domestic importation or use of

those products. Biotechnology General Corp. v. Genentech,

Inc., 80 F.3d 1553, 1560 (CA Fed. 1996); Ajinomoto Co. v.

Archer-Daniels-Midland Co., 228 F.3d 1338, 1348 (CA Fed.

2000); Biotec Biologische Naturverpackungen GmbH & Co.

v. Biocorp, Inc., 249 F.3d 1341, 1351 (CA Fed. 2001); see

also App. C38 (CFC recognizing §§ 154 and 271(g) as the

source of Zoltek’s property rights).

Under the facts of this case, there is no question that,

aside from § 1498(a) substituting the Untied States as a de-

fendant under certain circumstances, Zoltek would have a

cause of action against Lockheed or any other private party

for the importation and/or domestic use of the Nicalon® and

Tyrano® products made by its patented process, regardless

whether some or all steps of the patented process itself were

performed abroad.

By authorizing Lockheed to infringe Zoltek’s patent and

precluding a suit against Lockheed by substituting the United

States as the defendant, the government thus has taken

Zoltek’s property.

lil. THE DECISION BELOW ERRONEOUSLY DENIES

PATENT-HOLDERS ANY RECOURSE FOR GOVERNMENT

TAKINGS OF THEIR PROPERTY.

Once it is established that Zoltek’s patent rights are prop-

erty under the Fifth Amendment, and that the conduct of the

government or its authorized agents infringed upon, and

hence took, that property, all that remains is to determine

what remedies are available. The Fifth Amendment, of

course, provides a “self-executing” constitutional remedy by

imposing a duty on the government to pay just compensation

for its taking of property. An adequate statutory or legal rem-

edy, of course, will provide the required “just compensation”

and avoid the perfection of a Fifth Amendment claim. Absent

adequate statutory compensation, however, the Fifth Amend-

ment itself provides a constitutional claim for compensation.

In this case, the initial issue thus is whether § 1498 pro-

vides compensation for the taking here and, if it does not, the

issue of the constitutional remedy arises. The essential point,

however, is that some remedy must exist, either by statute or

under the Constitution, because to deny any remedy whatso-

ever, as did the court below, would violate the Fifth Amend-

ment.

A. Statutory Compensation for the Infringement in

this Case Is Available under 28 U.S.C. § 1498.

The court below held that Zoltek lacked a claim for com-

pensation under § 1498 because some or all of the steps of the

accused processes were performed outsides the United States.

While the court was deeply conflicted as to the source of such

geographic limitation — whether through incorporation of

§ 271(a) directly into § 1498(a) or through the exclusion set.

out in § 1498(c) — the net result was the same. But, under a

proper construction of § 1498 in light of constitutional con-

cerns, neither of the court’s rationales supports excluding a

claim for compensation for the 271(g)-based infringement at

issue here.

Section 1498(a) applies “[w]henever an invention de-

scribed 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 * * *.” Unlike § 271(a), § 1498(a) contains no intrinsic

territorial limitation. Furthermore, the language used therein

is broad enough to include any infringement under any sub-

section of § 271, not merely infringement under § 271(a).

Regardless where the conduct occurred, the only conditions

for the initial applicability of § 1498(a) is the “use or manu-

facture” of a patented invention “by or for the United States”

without “lawful right to use or manufacture the same.”

Furthermore, as Judge Dyk curiously noted, and as this

Court has held, the precursors to § 1948 were intended “‘to

relieve the contractor entirely from liability of every kind for

the infringement of patents in manufacturing anything for the

government,’” and “‘to secure to the owner of the patent the

exact equivalent of what it was taking away from him.’”

App. A40-A41 (quoting Richmond Screw Anchor, 275 US. at

343, 345. There thus is ample room to conclude that, at least

where the United States accepts substitution as a defendant,

establishing “authorization or consent,” § 1498(a) covers in-

fringement by importation and use of in the United States of

products by patented processes conducted abroad. Such

claims for domestic importation and use of products plainly

“arise” in the United States, rather than abroad under

§ 1498(c). That more sensible interpretation would make it

unnecessary to reach the constitutional issue.

The Federal Circuit is painfully conflicted as to the scope

of § 1498, and has unnecessarily restricted it in a manner that

defeats Congress’ purpose of providing a statutory mecha-

nism to insulate its authorized contractors from “every kind”

of liability for infringement and to give patent-holders exactly

what had been taken away. This Court should grant certiorari

and adopt a broader construction that would be consonant

with Congress’ statutory purpose and constitutional duty, and

that would avoid the forced resolution of a constitutional

question that Congress has displayed no desire to force.

B. In the Alternative, the Tucker Act Allows a Con-

stitutional Claim for Just Compensation under the

Fifth Amendment to Be Brought in the CFC.

Alternatively, if this Court should agree that § 1498 does

not provide a statutory remedy for the infringement at issue

here, then such a remedy is plainly available through a direct

constitutional claim for just compensation under the Fifth

Amendment, cognizable in the CFC pursuant to the Tucker

Act.

The Tucker Act covers “all claims founded upon the Con-

stitution of the United States,” and grants the Court of Federal

Claims jurisdiction over petitioner’s claim for compensation.

28 U.S.C. § 1491(a). Claims for just compensation under the

Fifth Amendment are unquestionably within the purview of

the Tucker Act. See, e.g., United States v. Causby, 328 US.

256, 267 (1946) (“If there is a taking, the claim is ‘founded

upon the Constitution’ and within the jurisdiction of the Court

of Claims to hear and determine.”); Phelps v. United States,

274 U.S. 341, 343 (1927) (“Under the Fifth Amendment

plaintiffs were entitled to just compensation, and * * * the

claim is one founded on the Constitution.”).

Insofar as the Fifth Amendment itself provides a self-

executing remedy in the form of a claim for just compensa-

tion, and the Tucker Act on its face provides a forum for such

remedy, the decision below was extravagantly wrong. In-

deed, where the underlying infringement by Lockheed was,

by definition, “authorized” by the government, there exists an

implied promise by the government to pay just compensation,

thus satisfying even the test in Schillinger.

As correctly recognized by the CFC in its second opinion:

Thus, regarding rights created by the Patent Act other

than use or manufacture, the Tucker Act can provide ju-

risdiction to this Court without conflicting with $1498.

For example, although the Court does not have jurisdic-

tion over the Plaintiff's cause of action against the U.S.

for infringement of its patented process, this Court

would have jurisdiction over infringement of the Plain-

tiffs exclusive right over use in the U.S. or importation

of product made abroad by the patented process, since

these rights are not found in §1498 but are found as

rights in §154 of the Patent Act, enforced through

§271(g) of the Act.

App. C32.

Any suggestion that § 1498 implicitly restricts jurisdiction

under the Tucker Act is definitively disposed of by this

Court’s ruling in Monsanto that such implied repeals are dis-

favored and are not shown by the mere existence of or limits

on a Statutory remedy:

In determining whether a Tucker Act remedy is avail-

able for claims arising out of a taking pursuant to a Fed-

eral statute, the proper inquiry is not whether the statute

“expresses an affirmative showing of Congressional in-

tent to permit recourse to a Tucker Act remedy,” but

“whether Congress has in the [statute] withdrawn the

Tucker Act grant of jurisdiction to the Court of Claims

to hear a suit involving the [statute] ‘founded * * * upon

the Constitution.’”” Regional Rail Reorganization Act

Cases, 419 U.S. 102 (1974) (emphasis, original).

467 U.S. at 1017. Inferring the withdrawal of Tucker Act

jurisdiction over constitutional claims from the mere provi-

sion of a statutory remedy for governmental patent in-

fringement “would amount to a partial repeal of the Tucker

Act. This Court has recognized, however, that ‘repeals by

implication are disfavored.” /d. (citation omitted); see

also, App. C32-34 (demonstrating no conflict between

§ 1498 and Tucker Act jurisdiction for otherwise un-

provided-for takings). Having failed to demonstrate such a

disfavored partial repeal of the Tucker Act, the decision

below is simply and dangerously wrong and should be re-

versed.

In the end, the decision below is both of extreme national

importance and spectacularly wrong. As Judge Plager con-

cluded in dissent below:

“This is a remarkable view of the Constitution. Can it

be that Congress, by a stroke of the legislative pen, may

withhold the remedies and revoke the protections given

to the citizenry by the Fifth Amendment, not to mention

the other articles of the Bill of Rights to the Constitu-

tion? Fortunately, no authority exists for such a radical

departure for legislative preemption over Constitutional

right. Wisely, Congress has never attempted to establish

one, and in fact, Congress in the Tucker Act expressly

provides for the Court’s jurisdiction over these takings

claims. To argue that Congress in enacting § 1498 suc-

cessfully cabined the Constitution is the reverse of the

understanding that the Constitution trumps legislation

x **

App. A55 (Plager, J., dissenting).

CONCLUSION

For the foregoing reasons, the petition for a writ of certio-

rari should be granted.

Dated: February 20, 2007

Respectfully submitted,

DEAN A. MONCO

Counsel of Record

JOHN S. MORTIMER

BRAD R. BERTOGLIO

Woop | PHILLIPS

500 W. Madison Street,

Suite 3800

Chicago, IL 60661

(312) 876-1800

GARRY S. GROSSMAN

SCHIFF HARDIN LLP

1666 K Street, N.W.

Washington, D.C. 20006

(202) 778-6400

ERIK S. JAFFE

ERIK S. JAFFE, P.C.

5101 34” Street, N.W.

Washington, D.C. 20008

(202) 237-8165

Counsel for Petitioner

APPENDICES

App. Al

APPENDIX A

442 F.3d 1345 (C.A.Fed.)

United States Court of Appeals, Federal Circuit.

ZOLTEK CORPORATION, Plaintiff-Cross Appellant,

UNITED STATES, Defendant-Appellant.

Nos. 04-5100, 04-5102.

March 31, 2006.

Before GAJARSA, Circuit Judge, PLAGER, Senior Cir-

cuit Judge, and DYK, Circuit Judge.

Concurring opinion filed by Circuit Judge GAJARSA.

Separate concurring opinion filed by Circuit Judge DYK.

Dissenting opinion filed by Senior Circuit Judge PLAGER.

PER CURIAM.

The United States appeals the order of the Court of Fed-

eral Claims holding that it could assert jurisdiction over

Zoltek Corporation's (“Zoltek”)' s patent infringement allega-

tions by treating the action as a Fifth Amendment taking un-

der the Tucker Act. Zoltek cross-appeals the trial court's rul-

ing that 28 U.S.C. § 1498(c) bars this action as arising in a

foreign country. The Court of Federal Claims certified the

rulings under 28 U.S.C. § 1292(d)(2), and this court accepted

jurisdiction. See Zoltek Corp. v. United States, No. 96-166 C

(Fed.Cl. Feb. 20, 2004) (certification); see generally Zoltek

Corp. v. United States, 58 Fed.Cl. 688 (2003), Zoltek Corp. v.

United States, 51 Fed.Cl. 829 (2002).

App. A2

We conclude that under § 1498, the United States is li-

able for the use of a method patent only when it practices

every step of the claimed method in the United States. The

court therefore affirms the trial court's conclusion that § 1498

bars Zoltek's claims. However, we reverse the trial court's

determination that it had jurisdiction under the Tucker Act

based on a violation of the Fifth Amendment.

Zoltek Corporation (“Zoltek”) is the assignee of United

States Reissue Patent No. 34,162 (reissued Jan. 19, 1993) to a

“Controlled Surface Electrical Resistance Carbon Fiber Sheet

Product” (“the Re '162 patent”). The Re'l62 patent claims

certain methods of manufacturing carbon fiber sheets with

controlled surface electrical resistivity.’

Independent claim 1 is representative. After reissue, it

reads:

1. A method of manufacturing a plurality of different

value controlled resistivity*1348 carbon fiber sheet

products employing a carbonizable fiber starting mate-

rial; said method comprising

selectively partially carbonizing previously oxi-

dized and stabilized fiber starting material

for a predetermined time period in an oxygen free

atmosphere within a furnace at selected temperature

values within a temperature range from 370 degrees

Centigrade to about 1300 degrees Centigrade

' Although the Re '162 patent also includes various product-by-process

and product claims, only the method claims are at issue here. In a March

5, 2001 motion for leave to file a first amended complaint, Zoltek aban-

doned its allegations that the government had infringed the product

claims. See Zoltek, 58 Fed.Cl. at 689 n. 3.

App. A3

by soaking the stabilized fiber starting material at

the selected temperature for the predetermined period

of time

to provide a preselected known volume electrical

resistivity to the partially carbonized fibers corre-

~~-sponding to that volume electrical resistivity value

required to provide the preselected desired surface re-

sistance value for the finished sheet products,

and thereafter processing the partially carbonized

fibers into homogeneous carbon fiber sheet products

having the preselected desired surface electrical resis-

tances.

Re '162 patent, col. 8, Il. 42-66.

The method thus takes a “carbonizable fiber starting mate-

rial” and requires “partially carbonizing” it. “Carbonization”

as used in the Re '162 patent means “a process which involves

heat treatment in an inert atmosphere which eliminates or re-

moves all elements other than carbon.” Zoltek, 48 Fed.Cl.

290, 293 (2000). “Partial carbonization” refers to carboniza-

tion sufficient to achieve a desired surface resistance in a

sheet woven from the resulting fibers. /d. at 295.

Independent claim 11 describes a representative method

for making such fibers and weaving them into a fiber sheet.

After reissue, it reads:

11. A method of manufacturing a plurality of differ-

ent value controlled resistivity carbon fiber sheet prod-

ucts employing carbonizable, previously oxidized and

stabilized fiber starting material; said method compris-

ing

forming an oxidized and stabilized tow, stretching

and breaking the stabilized tow,

forming the stabilized stretched and broken fiber

filaments into sliver comprised of,

App. A4

large bundles of discontinuous filaments in an un-

twisted condition, |

converting the sliver into roving, spinning the rov-

ing into a spun yarn, plying or twisting the spun yarn,

weaving or knitting the plied and twisted spun yarn

into fabric,

and selectively partially carbonizing the fabric thus

formed at preselected elevated temperature values for

a predetermined time period in an oxygen free atmos-

phere within a furnace having a continuously increas-

ing temperature profile within the range from about

370 degrees Centigrade to about 1300 degrees Centi-

grade to provide a known preselected electrical vol-

ume resistivity to the partially carbonized fiber fila-

ment in the fabric corresponding to that value of elec-

trical volume resistivity required to provide the prese-

lected desired surface resistance for the finished fab-

ric.

Re '162 patent, col. 9, 1. 65-col. 10, 1. 24.

Independent claim 15 describes a method for making and

processing the fibers into paper-like sheet products. /d. at col.

10, 1. 35-col. 11, 1. 8. In short, the steps of the claimed meth-

ods are directed to “partially* 1349 carbonizing” fibers, and

weaving or processing them into controlled resistivity carbon

fiber mats or sheets.

The relevant facts are undisputed. The United States

contracted with Lockheed Martin Corporation (“Lockheed”)

to design and build the F-22 fighter. Zoltek, 51 Fed.Cl. at

831. Lockheed subcontracted for two types of silicide fiber

products that it uses in the aircraft. The first is a pre-

impregnated material made from Nicalon silicon carbide fi-

bers. These fibers are partially carbonized and manufactured

into sheets in Japan, which are then imported into the United

States. The second is a silicide fiber mat made from Tyranno

fibers. The Tyranno fibers are manufactured exclusively in

App. A5

Japan, but they are processed into mats in the United States.

Zoltek, 58 Fed.Cl. at 690.

Zoltek brought suit in the Court of Federal Claims under §

1498(a), alleging that the United States and Lockheed used

the methods claimed in the Re '162 patent when Lockheed's

subcontractors made the two silicide fiber products used in

the F-22. Zoltek alleges that the mats and sheets were made,

for the United States, using the claimed methods.

The government moved for partial summary judgment

that Zoltek's § 1498(a) claims were barred by § 1498(c) be-

cause they arose in Japan. The trial court denied the motion.

Although it agreed that § 1498(c) barred Zoltek's claims un-

der § 1498(a), the trial court directed Zoltek to amend its

complaint to allege a taking under the Fifth Amendment. /d.

at 707. The trial court concluded that Zoltek could assert the

infringement claims under 28 U.S.C. § 1491(a)(1) as a taking

in violation of the Fifth Amendment. /d. at 690-91 & 695-

706. The trial court certified its § 1498 analysis and its

holding that Zoltek's patent infringement claims sounded in

the Fifth Amendment, under § 1292(d)(2). Both parties

timely sought permission to appeal. This court accepted the

interlocutory appeals and has jurisdiction under 28 U.S.C. § §

1292(c)(1) and 1295(a)(3).

The issues before the court are purely questions of law.

This court reviews the trial court's statutory and constitutional

analysis without deference. See Shoshone Indian Tribe of

Wind River Reservation v. United States, 364 F.3d 1339, 1345

(Fed.Cir.2004).

II.

The federal government is immune from any legal action

by its sovereign immunity. See United States v. Sherwood,

312 U.S. 584, 586, 61 S.Ct. 767, 85 L.Ed. 1058 (1941) (stat-

ing that “[t}he United States, as sovereign, is immune from

Suit save as it consents to be sued”). The waiver of immunity

App. A6é

can be limited and conditioned by the Congress. See United

States v. Nordic Village Inc., 503 U.S. 30, 34, 112 S.Ct. 1011,

117 L.Ed.2d 181 (1992) (stating that the government's con-

sent to be sued must be strictly construed in favor of the sov-

ereign and not enlarged beyond what the language requires).

A patentee's judicial recourse against the federal government,

or its contractors, for patent infringement, is set forth and lim-

ited by the terms of 28 U.S.C. § 1498.’ Section 1498(a) pro-

vides, in pertinent part:

*1350 Whenever an invention described in and cov-

ered by a patent of the United States is used ... by or for

the United States without license of the owner thereof or

lawful right to use or manufacture the same, the owner's

remedy shall be by action against the United States in

the United States Court of Federal Claims for the recov-

ery of his reasonable and entire compensation for such

use and manufacture.

Id. (emphasis added).

This court has held that “direct infringement under section

271(a) is a necessary predicate for government liability under

section 1498.” NTP, Inc. v. Research in Motion, Ltd., 418

F.3d 1282, 1316 (Fed.Cir.2005) (citing Motorola, Inc. v.

United States, 729 F.2d 765, 768 n. 3 (Fed.Cir.1984)). We

have further held that “a process cannot be used ‘within’ the

United States as required by section 271 (a) unless each of the

steps is performed within this country.” Id. at 1318. Conse-

2 As the Supreme Court recognized at least as long ago as 1881, the pat-

entee's recourse for infringement by the government is limited by the

scope of the waiver of sovereign immunity established by the Congres-

sional consent to be sued. “If the jurisdiction of the Court of Claims

should not be finally sustained [to hear an infringement action against the

government], the only remedy against the United States, unless Congress

enlarges the jurisdiction of that court, would be to apply to Congress it-

self.” James v. Campbell, 104 U.S. 356, 359, 26 L.Ed. 786 (1881). In

short, the power to limit a Congressional abuse of sovereign immunity lies

in the political process rather than the judicial branch.

App. A7

quently, where, as here, not all steps of a patented process

have been performed in the United States, government liabil-

ity does not exist pursuant to section 1498(a). We affirm the

trial court's conclusion that § 1498(a) bars Zoltek's claims.

Il.

We turn to the trial court's takings analysis. The Court of

Federal Claims held that Zoltek could bring its action against

the government under the Tucker Act, by alleging that the

infringement was a taking of private property for public use

under the Fifth Amendment. See Zoltek, 58 Fed.Cl. at 707.

We reverse.

In Schillinger v. United States, 155 U.S. 163, 30 Ct.Cl.

480, 15 S.Ct. 85, 39 L.Ed. 108 (1894), the Supreme Court re-

jected an argument that a patentee could sue the government

for patent infringement as a Fifth Amendment taking under

the Tucker Act. /d. at 169, 15 S.Ct. 85. Schillinger remains

the law.

The trial court determined that the Supreme Court “effec-

tively overruled Schillinger sub silentio ” in Crozier v. Fried.

Krupp Aktiengesellschaft, 224 U.S. 290, 32 S.Ct. 488, 56

L.Ed. 771 (1912). Zoltek, S58 Fed.Cl. at 702. We disagree.

The Court of Federal Claims, like this court, is bound by

Schillinger, and the trial court rulings to the contrary are not

viable.

Crozier involved Army weapons manufacture. Fried.

Krupp was a German corporation holding patents relating to

improvements in guns and gun carriages. William Crozier

was the Army Chief of Ordnance and directed the manufac-

ture of field guns and carriages for the Army. In 1907, Fried.

Krupp sued Crozier in the supreme court of the District of

Columbia. The company alleged that the Army's weapons

manufacture was infringing Fried. Krupp patents. Although

the complaint originally sought preliminary and permanent

injunction, and an accounting, the company later dropped the

App. A8

prayer for preliminary injunction and waived the prayer for

accounting. Crozier, 224 U.S. at 297-99, 32 S.Ct. 488.

Crozier demurred, arguing that the real party in interest was

the United States, and that *1351 the trial court lacked juris-

diction. Jd. at 300, 32 S.Ct. 488. The trial court sustained

the demurrer and dismissed. Jd. In 1908, the Court of Ap-

peals reversed. Jd.

Before the Supreme Court heard argument, Congress en-

acted the Patent Act of 1910. See Pub.L. No. 61-305, 36

Stat. 851 (1910) (later codified as amended at § 1498).

When it eventually heard the case, the Supreme Court re-

versed and remanded with instructions to dismiss so that the

company could refile and proceed in the Court of Claims un-

der the 1910 Act. Crozier, 224 U.S. at 309, 32 S.Ct. 488.

The contention that Crozier somehow overruled Schillin-

ger, and recognized patent infringement as a Fifth Amend-

ment taking, is flawed. The only question before the Su-

preme Court was whether the trial court had jurisdiction to

enjoin the government from alleged patent infringement.

Because Congress, in adopting the 1910 Act, precluded in-

junctive relief against the government for patent infringement,

the Crozier court concluded that the trial court lacked the

power to grant Fried. Krupp the injunctive relief it was seek-

ing. Id. at 308, 32 S.Ct. 488. None of the relevant Schillin-

ger issues were joined: Crozier was not filed in the Court of

Claims, had nothing to do with the Tucker Act, did not allege

a taking, and was solely in equity. Moreover, discussing the

state of the law before the 1910 Act, the Crozier court ex-

pressly noted that no patent infringement action could be

brought against the government unless in the Court of Claims

under a contract or implied contract theory. See id. at 304,

32 S.Ct. 488. Far from “overruling” Schillinger, this ac-

knowledges and endorses the rule that Schillinger established.

The Court thus recognized that by enacting the 1910 Act,

Congress “add{ed] the right to sue the United States in the

court of claims” for patent infringement. /d. If the right al-

App. A9

ready existed under the Fifth Amendment, as the trial court

here suggests, then this analysis in Crozier would be flawed.

Indeed, the Supreme Court repeated this characterization

of the 1910 Act just eight years later. See William Cramp &

Sons Ship & Engine Bldg. Co. v. Int'l Curtis Marine Turbine

Co., 246 U.S. 28, 41, 38 S.Ct. 271, 62 L.Ed. 560 (1918) (cit-

ing Schillinger and explaining that the 1910 Act “was in-

tended alone to provide for the discrepancy resulting from the

right in one case to sue on the implied contract and the non-

existence of a right to sue” for infringement). In Crozier and

Cramp, the Supreme Court therefore acknowledged Congres-

sional recognition that the Court of Claims lacked Tucker Act

jurisdiction over infringement under a takings theory. The

legislative history of the 1910 Act confirms that the statute

augmented the Court of Claims' Tucker Act jurisdiction by

providing jurisdiction over the tort of patent infringement.

See H.R.Rep. No. 61-1288 at 3 (1910).

The Court of Federal Claims reasoned that because

Crozier discussed the 1910 Act in terms of eminent domain,

the Supreme Court must have reconsidered its analysis in

Schillinger. This reasoning is misplaced. It is true that

Crozier, and several cases applying the 1910 Act (in its origi-

nal form and as amended and recodified at § 1498), analyze

the statute in terms of takings and protecting property rights.

Under this case law, patent infringement by the government is

analogized to “taking” a “compulsory license.” The view is

consistent with the text of the 1910 Act, which provided for

reasonable compensation for patent infringement, 36 *1352

Stat. 851, and with the legislative history, which provided that

the purpose of the bill was “to enlarge the jurisdiction of the

Court of Claims so that said court may entertain suits against

the United States for the infringement or unauthorized use of

a patented invention, in certain cases, and award reasonable

compensation to the owner of the patent.” H.R.Rep. No. 61-

1288, at 1 (1910).

App. A10

But when interpreting the Constitution “[i]t is emphati-

cally the province and duty of the judicial department to say

what the law is.” Marbury v. Madison, 1 Cranch 137, 5 U.S.

137, 177, 2 L.Ed. 60 (1803). That Congress may adopt a

limited waiver of sovereign immunity and confer rights on

patentees for money damages against the government, what-

ever the rationale, cannot disturb the Supreme Court's.analy-

sis of the Fifth Amendment in Schillinger. Neither the word-

ing nor rationale of the 1910 Act, nor the Supreme Court's

discussion of it in Crozier, affects the rule in Schillinger. Of

course, the 1910 Act was not even before the Crozier court,

as the action was filed three years before the Act was enacted.

Even the plain language of the 1910 Act-entitled “An Act To

Provide Additional Protection For Owners of Patents of the

United States”-belies the trial court's analysis here, as it legis-

lates against the background of the Schillinger legal frame-

work.

In sum, the trial court's conclusion that Crozier “effec-

tively overruled Schillinger sub silentio” has no merit. The

trial court's remaining conjectures on takings jurisprudence do

not require consideration. We simply note that to reach its

conclusion the Court of Federal Claims had to read an entire

statute, § 1498, out of existence-a result that betrays the error

in the trial court's analysis. As the Supreme Court has clearly

recognized when considering Fifth Amendment taking allega-

tions, “property interests ... are not created by the Constitu-

tion. Rather, they are created and their dimensions are de-

fined by existing rules or understandings that stem from an

independent source such as state law.” Ruckelshaus v. Mon-

santo Co., 467 U.S. 986, 1001, 104 S.Ct. 2862, 81 L.Ed.2d

815 (1984) (citations omitted).? Here, the patent rights are a

* In Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003-04, 104 S.Ct. 2862,

81 L.Ed.2d 815 (1984), the Court concluded that government interference

with interests “cognizable as trade-secret property right[s}” could consti-

tute a taking depending on the circumstances. But Monsanto did not

overrule Schillinger, and we must follow Schillinger until it is overruled

App. All

creature of federal law. In response to Schillinger, Congress

provided a specific sovereign immunity waiver for a patentee

to recover for infringement by the government. Had Con-

gress intended to clarify the dimensions of the patent rights as

property interests under the Fifth Amendment, there would

have been no need for the new and limited sovereign immu-

nity waiver. The manner in which Congress responded to

Schillinger is significant. “The life of the law has not been

logic; it has been experience.” * Neither the Court of Federal

Claims nor this court can ignore the path of the patent law as

it has evolved under § 1498.

The dissent argues that we are wrong to conclude that

Schillinger remains good *1353 law. Both inverse condem-

nation claims and regulatory takings claims, it asserts, are

currently viewed as claims founded upon the Fifth Amend-

ment of the Constitution for purposes of the Tucker Act, and

these claims are not barred for having arisen in tort. If, as the

dissent argues is suggested by Crozier, a patent is a type of

property that comes within the ambit of Fifth Amendment

Takings Clause protection, why should we not likewise per-

mit claims for patent infringement to arise under the Tucker

Act?

The answer is simple. Unlike regulatory takings and the

inverse condemnation of real property, the “taking” of a li-

cense to use a patent creates a cause of action under § 1498.

The dissent fails to appreciate that this destroys whatever

force its argument by analogy may otherwise have had. In-

deed, if we were to interpret § 1491 as the dissent would

have us, it would render superfluous § 1498-the remedy that

Congress fashioned specifically to compensate patentees for

by the Supreme Court, whether or not Schillinger is viewed as inconsistent

with Monsanto. See Indep. Ink, Inc. v. Ill. Tool Works, Inc., 396 F.3d

1342, 1351 (Fed.Cir.2005), cert. granted, --- U.S. ----, 125 $.Ct 2937, 162

L..Ed.2d 865 (2005).

* Oliver W. Holmes, The Common Law 5 (M. Howe ed.1963) (1881).

App. Al2

the use of their patents by the federal government. More-

over, even if we shared the dissent's belief that the Supreme

Court would overrule Schillinger, we are nevertheless bound

by its holding. It is not our place to overrule sub silentio the

Supreme Court. See Rodriguez de Quijas v. Shear-

son/American Express, Inc., 490 U.S. 477, 484, 109 S.Ct.

1917, 104 L.Ed.2d 526 (1989) (“If a precedent of this Court

has direct application in a case, yet appears to rest on reasons

rejected in some other line of decisions, the Court of Appeals

should follow the case which directly controls, leaving to this

Court the prerogative of overruling its own decisions.”). In

sum, the trial court erred in finding that Zoltek could allege

patent infringement as a Fifth Amendment taking under the

Tucker Act, and we reverse.

IV.

For the reasons set forth herein, we affirm the trial court's

conclusion that the infringement allegations at bar are pre-

cluded by § 1498(a). We reverse the trial court's ruling that

Zoltek can allege patent infringement as a Fifth Amendment

taking under the Tucker Act. We remand for further proceed-

ings consistent with this opinion.

AFFIRMED IN PART, REVERSED IN PART, and

REMANDED.

Each side will bear its own costs.

GAJARSA, Circuit Judge, concurring.

I agree that we are bound by our panel decision in N7P,

Inc. v. Research in Motion, Lid., in which we held that “direct

infringement under section 271(a) is a necessary predicate for

government liability under section 1498.” 418 F.3d 1282,

1316 (Fed.Cir.2005) (citing Motorola, Inc. v. United States,

729 F.2d 765, 768 n. 3 (Fed.Cir.1984)). However, the N7P

proposition is, in my view, the result of an unchecked propa-

gation of error in our case law, and its viability may eventu-

App. Ai3

ally be challenged. Consequently, I write separately to em-

phasize that our decision today does not depend for its valid-

ity on N7P, as it is also supported by an independent line of

reasoning.

Before discussing this additional basis for today's deci-

sion, I shall briefly address the ignoble history of the N7P

proposition. An examination of the case law reveals that the

proposition has its roots in Decca v. United States, in which

we held that the United States could be liable under *1354 28

U.S.C. § 1498 only for direct infringement and not for indi-

rect infringement:

Section 1498 expressly waives the Government's sov-

ereign immunity only with respect to governmental di-

rect infringement of a patent. Nowhere in the section is

active inducement of infringement or contributory in-

fringement mentioned, either directly or by cross-

reference to 35 U.S.C. § § 271(b) and (c). A waiver of

sovereign immunity must be strictly construed. Stated

differently, the Government is not to be regarded as hav-

ing waived its sovereign immunity by implication.

225 Ct.Cl. 326, 340, 640 F.2d 1156 (Ct.Cl.1980). Thus, after

Decca, a patentee who sought to establish a § 1498(a) claim

had to prove “direct” infringement by the United States. I

have no problem with this formulation of the rule, as it was

the product of the Decca court's thoughtful analysis.

It is important to note, however, the relationship between

the phrases “direct infringement,” as used in Decca, id., and

the phrase “direct infringement under § 271(a)” as used in

NTP, 418 F.3d at 1316. That relationship is one of set to

subset: infringement under 35 U.S.C. § 271(a) is a specific

kind of “direct infringement.” Thus, while “direct infringe-

ment” is one of the requirements of an action against a private

party under § 271(a), it is not the only requirement, with

App. Al4

§ 271(a) also requiring, inter alia, that the infringing activity

occur “within the United States.”

Decca, of course, did not require that a § 1498(a) plaintiff

satisfy all of the requirements of § 271(a). Indeed, Decca

did not even mention § 271(a). Instead, it required only that

the accused use constitute a direct, rather than an indirect, in-

fringement. N7P, in contrast, states as a blanket proposition

that all of the requirements of 35 U.S.C. § 271(a) must be

satisfied in order to prove a 28 U.S.C. § 1498 claim against

the government. See NTP, 418 F.3d at 1316.

How did such a sweeping generalization evolve from

Decca? The answer, unfortunately, is that its evolution owes

to this court's imprecise recharacterization of the Decca hold-

ing in our decision in Motorola. See 729 F.2d 765, 768 n. 3.

In Motorola, this court cited Decca at the end of a footnote as

one of a number of cases supporting the very general proposi-

tion that the patent statutes are often inapplicable to actions

arising under section 1498. Jd. It stated that “the Government

can only be sued for any direct infringement of a patent (35

U.S.C. § 271(a)), and not for inducing infringement by an-

other (section 271(b)) or for contributory infringement (sec-

tion 271(c)).” Jd. (emphasis added) (citing Decca, 640 F.2d

at 1167).

By equating the specific statutory provision “35 U.S.C. §

271(a)” with the more general concept of “direct infringe-

ment,” the Motorola court carelessly extended the Decca

holding, thus laying the groundwork for the NV TP proposition.

There is distinct irony in the Motorola court's being responsi-

ble for the creation of an inadvertent link between 35 U.S.C.

§ 271(a) and 28 U.S.C. § 1498(a), given that the entire point

of the Motorola footnote was to support the proposition that it

is erroneous to simply assume the existence of relationships

between these two statutory sections. See id. at 768 (explain-

ing that “{a]lthough a section 1498 action may be similar to a

App. Al5

Title 35 action, it is nonetheless only parallel and not identi-

cal”).

Although in Motorola the relationship between sections

271(a) and 1498(a) constituted*1355 mere dicta, in N7P the

relationship, as slightly recast, became the binding precedent

of this court. In my view, such a sweeping rule of binding

precedent ought not to be created by mere inadvertence. In

turn, the resolution of the important issue before this court

today-the scope of the government's waiver of sovereign im-

munity as embodied in § 1498-ought not to be based solely

on the basis of N7P.

In his concurring opinion, Judge Dyk attempts to find

support for the N7P proposition. Citing certain legislative

materials which state that the sole purpose of enacting §

1498(a) was to create jurisdiction (rather than additional li-

ability), he argues that § 1498(a), even when viewed apart

from 1498(c), cannot result in “the government's liability [be-

ing] broader than that of private parties.” Jd. In other words,

according to his concurrence the limits of government liabil-

ity under § 1498(a) are circumscribed by the hypothetical

liability of a private actor under § 271(a), and we can entirely

ignore § 1498(c) in the analysis.

His reliance on legislative history is misplaced, however,

given that the plain language of the text demands a contrary

and unambiguous interpretation. As is explained below, the

plain language of the statute reveals that 28 U.S.C. § 1498 is

not a mere waiver of sovereign immunity with respect to the

previously-existing remedy, which was provided by 35 U.S.C.

§ 281 for transgressions denominated by § 271 as “infring-

ing” the exclusionary rights granted by § 154(a).

There can be little doubt that § 1498 is more than a mere

waiver of sovereign immunity. The plain language of the

statute speaks of the provision of a “remedy,” and the fourth

paragraph of subsection (a) indicates that “remedy” means

“right of action.” See id. (“[This section shall not convey a

App. Al6

right of action on any patentee ... with respect to any iniven-

tion discovered ... while in the employment ... of the United

States ....”]) (emphasis added). Section 1498 is by no means a

mere jurisdictional statute, and to the extent that materials in

the legislative history may appear to suggest otherwise, they

serve principally to illustrate why courts should often view

legislative history with skepticism and rely on it only when

the statute itself is ambiguous. If the N7P proposition can be

sustained, it cannot be sustained on this ground.

Granted, in creating a new remedy, § 1498(a) inherently

creates new rights. However, there is nothing about the text

of § 1498(a) that either suggests or requires the existence of

any substantive or conceptual link between these rights and

remedies and those provided by the patent laws (pursuant to

35 U.S.C. § § 154(a) and 281, respectively). The independ-

ence of these two sets of rights and remedies results from

§ 1498(a) conditioning the availability of a remedy (and the

inherent creation of a corresponding right) only on the “in-

vention [being] described in and covered by a patent” (em-

phasis added) and the invention's being “used or manufac-

tured by or for the United States without license of the owner

thereof or lawful right ....” (emphasis added). The “cover-

age” provided by a patent is, of course, defined by the scope

of its claims. See, e.g., Johnson & Johnston Assocs. v. R.E.

Serv. Co., 285 F.3d 1046, 1052 (Fed.Cir.2002) (expounding

on the “fundamental principle that claims define the scope of

patent protection”); see also SRI Int'l v. Matsushita Elec.

Corp., 775 F.2d 1107, 1121 (Fed.Cir.1985) (“It is the claims

that measure the invention.” (citing *1356 Aro Mfg. Co., Inc.

v. Convertible Top Replacement Co., Inc., 365 U.S. 336, 339,

81 S.Ct. 599, 5 L.Ed.2d 592 (1961))). Accordingly, a § 1498

right and remedy exist whenever an accused embodiment,

used or manufactured by or for the government, falls within

the scope of the patent claims as properly construed.’ The

'In a § 1498 case, determining the scope of the claims proceeds via the

same two-step analysis that occurs in a § 271(a) action, namely claim

App. Al7

“coverage” inquiry is independent of the nature and identity

of the Title 35 rights that might have been available against a

private infringer under the same circumstances.

Indeed, prior to the passage of § 1498(c), the remedy cre-

ated by § 1498(a) was broader than that available against pri-

vate parties in some instances. Again, the plain text of sub-

section (a) makes this clear. Whereas § 271(a) contains a

territoriality restriction, § 1498(a) contains none. Indeed, if

§ 1498(a) had not created a cause of action against the gov-

ernment that was broader, with respect to overseas infringe-

ment, than that available against a private infringer, then it is

difficult to understand the purpose of § 1498(c)-a subsection

specifically barring § 1498 claims that “aris[e] in a foreign

country.”

In summary, patentees have the following rights and

remedies: (1) a35 U.S.C. § 281/271 remedy (for which nei-

ther 28 U.S.C. § 1498(a) nor any other statute provides a

waiver of sovereign immunity) for transgression of rights

granted by 35 U.S.C. § 154, and (2) a28 U.S.C. § 1498 rem-

edy (assertable against the federal government) for transgres-

sions of an inherently-defined right to be compensated for

government manufacture or use of inventions covered by pat-

ents. Because § 1498(a) created new and independent rights

and remedies, rather than merely waiving sovereign immunity

with respect to an old remedy (i.e. § 281), one cannot argue

that § 1498(a) a priori requires § 271(a) as an underlying

and predicate cause of action.

construction, followed by a determination of whether the claims-as con-

strued-read on the accused device. See Lemelson v. United States, 752

F.2d 1538, 1548 (Fed.Cir.1985) (“Although this court has noted that a

section 1498 action and a title 35 action are only parallel and not identical,

the principles of claim construction and reading claims on accused devices

and methods are the same for either type of action.”) (citations omitted).

Of course, the rights triggered when embodiments fall within the claims

may differ under § 1498 and § 271.

App. A18

In fact, not even N7P posited a relationship specifically

between § 271(a) and § 1498, subsection (a). Rather the

articulated relationship-the so-called “NTP proposition”-is

between § 271(a) and § 1498 asa whole. See NTP, 418

F.3d at 1316 (holding that “direct infringement under section

271(a) is a necessary predicate for government liability under

section 1498”). Not even N7P requires us to ignore the im-

portance of § 1498, subsection (c), as Judge Dyk urges us to

do in his concurrence.

I should explain that the per curiam opinion-which I join-

does indeed state that the government's “liability does not ex-

ist pursuant to § 1498(a )” and that “1498(a ) bars Zoltek's

claims.” (emphasis added). However, this usage simply re-

flects the fact that subsection (a) creates the cause of action.

Consequently, liability-if not precluded by subsection (c)-

must arise pursuant to subsection (a). The court's opinion

today in no way endorses the view that subsection (c) is ir-

relevant, although we clearly do acknowledge the preceden-

tial effect of the N7P proposition, as articulated by the NZ. P

court.

*1357 Judge Dyk's concurrence advances a second argu-

ment in support of the N7P proposition, namely that

§ 1498(a) was intended to be the “exact equivalent” of

§ 271 (a), citing for support Richmond Screw Anchor Co. v.

United States, 275 U.S. 331, 343, 48 S.Ct. 194, 72 L.Ed. 303

(1927). A careful reading of that case reveals, however, that

the Court made no such pronouncement. Richmond Screw

was a case about the assignability of patent claims. The

backdrop was Rev. Stat. § 3477, which forbade inter alia the

assignment of patent infringement claims against the United

States that had not been reduced to judgment. Thus, under §

1498(a), as it existed prior to amendment in 1918, when a

government contractor infringed a patent, the patent owner

had both an assignable right of action against the contractor

under § 271(a) and a claim against the government pursuant

App. Al9

to § 1498(a), with the latter being non-assignable pursuant to

Rev. Stat. § 3477.

The 1918 amendments to § 1498 eliminated the remedy

against the contractor pursuant to § 271(a), confining the pat-

entee to a suit against the government for his entire compen-

sation. See Pub.L. No. 65-182, 40 Stat. 704, 705 (1918).

The salient question was what would become of assigned

claims against the contractor. Did Rev. Stat. § 3477, which

barred the assignment of claims against the United States,

prevent the assignee of a § 271(a) claim against a govern-

ment contractor from pursuing a 1498(a) claim against the

government pursuant to the 1918 Amendment? Troubled by

the possibility of the 1918 Act effecting an uncompensated

taking under the Fifth Amendment, the Court held that §

3477 did not apply “to the assignment of a claim against the

United States which is created by the Act of 1918 in so far as

the Act deprives the owner of the patent of a remedy against

the infringing private contractor for infringements thereof and

makes the Government indemnitor for its ... infringements.”

Richmond Screw, 275 U.S. at 346, 48 S.Ct. 194.

Contrary to Judge Dyk's reading, the Court did not assert

a blanket proposition that § 1498(a) must be viewed as being

coextensive in all respects with § 271(a). It is true that the

Court said, as quoted in his concurrence, that “[w]e must pre-

sume that Congress in the passage of the Act of 1918 in-

tended to secure to the owner of the patent the exact equiva-

lent of what it was taking away from him.” (emphasis added).

The concurring opinion appears to assume-incorrectly-that

“what it is taking away” refers to § 271(a) as a whole, lead-

ing Judge Dyk to conclude that the Act of 1918 (constituting

§ 1498, as amended) is “the exact equivalent” of § 271(a).

However, the Court tells us what it was referring to by the

words “what it was taking away,” and it was not referring to §

271(a) rights globally. Rather, it was referring-narrowly-to

the assignability of rights pursuant to § 271(a). The next

App. A20

two sentences of the quoted passage, which the concurrence

omits, make this point clear.

We must presume that Congress in the passage of the

Act of 1918 intended to secure to the owner of the patent

the exact equivalent of what it was taking away from

him. Jt was taking away his assignable claims against

the contractor for the latter's infringement of his patent.

The assignability of such claims was an important ele-

ment in their value and a matter to be taken into account

in providing for their just equivalent.

Id. at 345, 48 S.Ct. 194 (emphasis added). In its careful-and

restrictive-analysis the Supreme Court actually declined the

*1358 opportunity to articulate a broad, sweeping relation

between § 271(a) and § 1498.

The N7P court should not have articulated such a rela-

tionship, especially not through reliance on logically flawed

dicta, and I can see neither the need nor the clear basis for us-

at least in this case-to attempt to support through logic, post

hoc, what the N7P court has wrought through folly. Perhaps

the N7P proposition will in the future gain recognition as a

useful expedient against the backdrop of a more thoroughly

interpreted § 1498. For now, however, I view the proposi-

tion as being no more than an inadvertent leap of faith from

the specific to the general. Accordingly, while I join the

court's opinion-recognizing that N7P binds us-my confidence

that we are reaching the just and logical outcome stems not

from it, but from the following analysis.

II.

I believe that this case poses two substantial questions of

statutory interpretation. First, when is a patented method

“used” under § 1498(a)? Second, does an infringement ac-

tion “arise[ ] in a foreign country” under § 1498(c) if some

steps of a claimed method are practiced abroad?

App. A21

I conclude that a party “uses” a method claim within

§1498(a) only when it practices every step of the claimed

method. Furthermore, an action for an infringing use of a

patented method “arises in a foreign country” under § 1498(c)

whenever any claimed step is practiced abroad. I would

therefore have affirmed the trial court's conclusion that

§ 1498 bars Zoltek's claims, even if we were not compelled to

recognize N7P as precedent.

Section 1498 provides, in relevant part:

Whenever an invention described in and covered by a

patent of the United States is used ... by or for the

United States without license of the owner thereof or

lawful right to use or manufacture the same, the owner's

remedy shall be by action against the United States in

the United States Court of Federal Claims for the recov-

ery of his reasonable and entire compensation for such

use and manufacture.... For the purposes of this section,

the use ... of an invention described in and covered by a

patent of the United States by a contractor, a subcon-

tractor, or any person, firm, or corporation for the Gov-

ernment and with the authorization or consent of the

Government, shall be construed as use ... for the United

States.

28 U.S.C. § 1498(a) (2000) (emphases added). At

§ 1498(c), Congress further limited the scope of claims under

§ 1498(a) with a foreign country exception. That limitation

provides:

The provisions of this section shal! not apply to any

claim arising in a foreign country.

28 U.S.C. § 1498(c) (2000).

Both sections require interpretation. First, the court must

determine the meaning of a “use,” as applied to a method

claim, in § 1498(a). Second, the court must determine when

App. A22

a claim “arises” in a foreign country under § 1498(c). The

trial court complicated this analysis by collapsing the two

steps together.” Although the two sections must be construed

in harmony to preserve the integrity of the statutory scheme,

in the first instance the questions of “use” and “arising” are

separable. I address each issue in turn.

*1359 A.

The court's statutory analysis must give effect to Con-

gress's intent when enacting the statute. See Nat'l Labor Re-

lations Bd. v. Lion Oil Co., 352 U.S. 282, 297, 77 S.Ct. 330, 1

L.Ed.2d 331 (1957) (observing that the court bears “a judicial

responsibility to find that interpretation which can most fairly

be said to be embedded in the statute, in the sense of being

most harmonious with its scheme and with the general pur-

poses that Congress manifested”); Doyon, Ltd. v. United

States, 214 F.3d 1309, 1314 (Fed.Cir.2000). The analysis

begins with the text of the statute. Robinson v. Shell Oil Co.,

519 US. 337, 340, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997);

White v. Dep't of Justice, 328 F.3d 1361, 1374

(Fed.Cir.2003). To fully understand the meaning of a statute,

however, the court looks “not only to the particular statutory

language, but to the design of the statute as a whole and to its

object and policy.” Crandon v. United States, 494 U.S. 152,

158, 110 S.Ct. 997, 108 L.Ed.2d 132 (1990); accord Dunn v.

Commodity Futures Trading Comm'n, 519 U.S. 465, 478, 117

S.Ct. 913, 137 L.Ed.2d 93 (1997).

In this case the text of § 1498(a) is silent on the test for

“use” of a patented method. The specific problem is a ques-

tion of degree. In particular, one must decide whether “use”

means practicing some steps of a claimed method, or instead

requires practicing every claimed step.

? The Court of Federal Claims ultimately concluded that § 1498(c) pre-

cluded any claim for a “use” of a patented process unless every step of the

claimed process took place “within the United States.” Zoltek, 51 Fed.Cl.

at 836.

App. A23

At the outset I note that it is well-settled, as a matter of

patent law, that an infringing use of a patented method re-

quires practicing every step claimed in the method.’ See

Smith & Nephew, Inc. v. Ethicon, Inc., 276 F.3d 1304, 1311

(Fed.Cir.2001) (“Infringement arises when all of the steps of

a claimed method are performed[.]”); see also NTP, 418 F.3d

at 1318 (“[A] process cannot be used ‘within’ the United

States as required by section 271(a) unless each of the steps is

performed within this country. *)- 4 accord Deepsouth Pack-

ing Co., Inc. v. Laitram Corp., 406 U.S. 518, 528, 92 S.Ct.

1700, 32 L.Ed.2d 273 (1972) (“{A] combination patent [as-

serted under § 271(a) | protects only against the operable as-

sembly of the whole and not the manufacture of its parts.”).

The rule applies the long-settled principle, more commonly

phrased in terms of products and the elements of device

claims, that infringement requires practicing each and every

limitation of the asserted patent claim. See V-Formation,

Inc. v. Benetton Group SpA, 401 F.3d 1307, 1312

(Fed.Cir.2005) (recognizing the black-letter law that an ac-

cused product infringes a patent claim only if each and every

limitation in the claim appears in the accused product); Bec-

ton Dickinson & Co. v. C.R. Bard, Inc., 922 F.2d 792, 796

(Fed.Cir.1990) (“To establish infringement of a patent, every

limitation set forth in a claim must be found in an accused

product or process exactly or by a substantial equivalent.”).

“(All [specified elements in a patent claim] must be regarded

as material, leaving open only the question whether an omit-

> See 35 U.S.C. § 271(a)(2000) (“Except as otherwise provided in this

title, whoever without authority makes, uses, offers to sell, or sells any

patented invention, within the United States or imports into the United

States any patented invention during the term of the patent therefor, in-

fringes the patent.”).

* Although N7P merges the question of conduct (the use) and location

(within the United States) in this explanation of § 271(a), the court plainly

adopts the proposition that an infringing use requires practicing every step

of a claimed method.

App. A24

ted part is supplied by an equivalent *1360 device or instru-

mentality.” Hubbell v. United States, 179 U.S. 77, 82, 21

S.Ct. 24, 45 L.Ed. 95 (1900). Nothing in the text of § 1498

warrants a contrary interpretation of an infringing use here.

Indeed, the result is consistent with the narrow reading that a

court must assign § 1498.

Because § 1498(a) waives sovereign immunity for in-

fringement actions against the government, a court must give

the statute a strict construction. See Lane v. Pena, 518 U.S.

187, 192, 116 S.Ct. 2092, 135 L.Ed.2d 486 (1996); United

States v. Sherwood, 312 U.S. 584, 590, 61 S.Ct. 767, 85 L.Ed.

1058 (1941) (citing Schillinger v. United States, 155 U.S.

163, 30 Ct.Cl. 480, 15 S.Ct. 85, 39 L.Ed. 108 (1894)); Sho-

shone Indian Tribe v. United States, 364 F.3d 1339, 1346

(Fed.Cir.2004); RHI Holdings, Inc. v. United States, 142 F.3d

1459, 1461 (Fed.Cir.1998). The waiver “must be unequivo-

cally expressed in statutory text” and the courts will not imply

exceptions. Lane, 518 U.S. at 192, 116 S.Ct. 2092 (citing

United States v. Nordic Village, Inc., 503 U.S. 30, 33-34, 37,

112 S.Ct. 1011, 117 L.Ed.2d 181 (1992) and /rwin v. Dep't of

Veterans Affairs, 498 U.S. 89, 95, 111 S.Ct. 453, 112 L.Ed.2d

435 (1990)). Consistent with these principles a court must

resolve any ambiguity in the statute “in favor of immunity.”

See United States v. Williams, 514 U.S. 527, 531, 115 S.Ct.

1611, 131 L.Ed.2d 608 (1995). Applying these principles to

§ 1498(a) makes the narrowest interpretation of an infringing

“use” presumptively correct. Because I must narrowly con-

strue the breadth of the statutory language, the sovereign im-

munity analysis confirms that the “use” of a claimed method

under § 1498(a) requires practicing every step in the claim.

Assuming Zoltek alleges an infringing use, the question

becomes where the § 1498(a) claim arises. Under § 1498(c),

Congress curtailed its sovereign immunity waiver to preclude

§ 1498(a) claims “arising in a foreign country.” The question

App. A25

here is the extent of this curtailment when the government

practices a patented process having multiple steps.

In addressing this question, it is useful to imagine four

factual scenarios. The first and easiest scenario is where all

of the steps of the process were performed in this country-a

situation in which there is no question that a claim, if any,

must arise in the United States. The second scenario is

where all of the steps were performed abroad, as is true in this

case with the alleged infringement of the Nicalon fiber

claims. (I address these claims in the next section.) Later in

the opinion, I will address the meaning of 1498(c) in the con-

text of the third and fourth scenarios, in which some, but not

all steps were performed abroad; in the third scenario, the last

step of the process is practiced abroad, and in the fourth sce-

nario (as with the Tyranno fiber claims), the last step is prac-

ticed in the United States.

I shall start with the Nicalon fiber claims, in which all of

the infringing steps were performed abroad. Clearly the in-

fringing activity is entirely outside the United States from a

geographical perspective. Therefore, it does not occur

“within” the United States as required by § 271(a), as the law

has long recognized that patent infringement claims arise

where the infringing activity is consummated. See, e.g.,

Deepsouth, 406 U.S. at 527, 92 S.Ct. 1700 (holding that final

assembly abroad of a patented device cannot be an infringing

manufacture within the meaning of § 271(a)). But this is not

a *1361 § 271(a) action, and there is therefore no a priori

reason why this court must interpret the “arising in a foreign

country” language of § 1498(c) as being antonymous with

the phrase “within the United States,” as used in § 271(a).

However, based on a review of the legislative history and a

broad construction of § 1498(c)-a construction necessary to

limit the scope of Congress' waiver of sovereign immunity

under § 1498(a)-I would hold that § 1498(c) precludes at a

App. A26

minimum those actions premised on infringing activity in

which all steps of the infringing process are performed

abroad.

Congress enacted § 1498(c) in 1960 as part of its

amendments providing an action against the government for

(1960). While Congress considered various drafts, the State

Department suggested the language eventually codified at §

1498(c).° The discussion accompanying the suggestion indi-

cates that the Department specifically intended the language

of subsection (c) to remedy concerns that the proposed bill

would allow suit for actions abroad, by the United States,

which infringed copyrights. See H. Rep. No. 86-624, at 6-7

(1959) (reprinting June 5, 1958 letter from William B.

Macomber, Jr., Assistant Secretary of State, to James O. East-

land, Chairman of the Senate Judiciary Committee). Recog-

nizing that the patent provisions of § 1498(a) had the same

ambiguity “with respect to infringements occurring abroad,”

the State Department suggested making the foreign country

exception applicable to both patent and copyright infringe-

ment. Jd. at 7. The Commerce Department agreed that there

was ambiguity concerning “an act of infringement in a for-

eign country,” and endorsed the State Department suggestion.

See id. at 5-6 (reprinting Feb. 27, 1959 letter from Frederick

H. Mueller, Under Secretary of Commerce, to Emanuel Cel-

ler, Chairman of the House Judiciary Committee). The for-

eign country exception at § 1498(c) adopts the State Depart-

ment suggestion without change. See Pub.L. No. 86-726, 74

Stat. 855 (1960) (codified in relevant part at § 1498(c)). In

short, the legislative history confirms that Congress intended

§ 1498(c) to foreclose actions on § 1498(a) violations taking

place in, or arising in, a foreign country.

‘ The State Department comments were directed to H.R. 8419, a predeces-

sor bill to H.R. 4059. H.R. 4059 was enacted on September 8, 1960. See

Pub.L. No. 86-726, 74 Stat. $55 (1960) (codified at 28 U.S.C. § 1498).

App. A27

In construing statutory language, it is prudent to be cogni-

zant of constructions that courts have accorded to identical

language, where it occurs in other statutes. Here I recognize

that Congress took the language of § 1498(c) from identical

language found at 28 U.S.C. § 2680(k), adopted twelve years

earlier.” Normally, where Congress borrows language from

one statute in enacting another, the meaning accorded terms

in the source statute can be taken as probative of the meaning

in the borrowing statute. See Lorillard v. Pons, 434 U.S.

575, 580-81, 98 S.Ct. 866, 55 L.Ed.2d 40 (1978); *1362 id.

at 581, 98 S.Ct. 866 (“[W]here ... Congress adopts a new law

incorporating sections of a prior law, Congress normally can

be presumed to have had knowledge of the interpretation

given to the incorporated law, at least insofar as it affects the

new statute[.]’’).

Plainly, many determinants of the borrowed statute canon

are satisfied here. The statutes serve similar purposes. Both

provisions limit the potential government liability occurring

abroad by curtailing Congress's sovereign immunity waiver

for tort liability. Moreover, during Senate sub-committee

hearings, the testimony made clear that § 1498(c) was in-

tended to provide an exclusion analogous to § 2680(k).’ In

° The Federal Tort Claims Act (“FTCA”) waives sovereign immunity for

certain tort claims against the United States. See 28 U.S.C. § 1346(b).

The statute contains a foreign country exception that precludes § 1346(b)

liability for “[aJny claim arising in a foreign country.” 28 U\S.C.

§ 2680(k). Congress enacted this provision in 1948. See 62 Stat. 984,

985 (1948). Twelve years later, Congress used the same language when

enacting § 1498(c). See Pub.L. No. 86-726, 74 Stat. 855 (1960) (codified

at § 1498(c)).

” See Infringement of Copyrights: Hearings on H.R. 4059 Before the Sen-

ate Subcommittee On Patents, Trademarks, and Copyrights of the Senate

Committee on the Judiciary, 86th Cong. 12-13 (1960) (statement of Arthur

Fisher, U.S. Registrant of Copyrights) (“[I]t was originally felt that

[§ 1498(c) ] was unnecessary, that a tort committed abroad would not be

subject to suit under the act.... [I]t is quite clear that whatever is the situa-

tion with respect to infringements committed abroad, this act leaves the

App. A28

this case, however, the meaning of § 2680(k) has limited

value for interpreting § 1498(c). This is true because the bor-

rowed statute canon is not absolute, and it does not justify re-

sults either inconsistent with the statutory scheme at bar, or

leading to functional absurdity in application. Consequently,

for the reasons given below, I conclude that the borrowed

statute canon does not compel us to interpret § 1498(c) in

light of § 2680(k).

In Sosa v. Alvarez-Machain, 542 U.S. 692, 124 S.Ct.

2739, 159 L.Ed.2d 718 (2004), the Supreme Court held that a

“claim arising in a foreign country,” under § 2680(k), re-

ferred to where tortious injury is suffered. “[T]he FTCA's

foreign country exception bars all claims based on any injury

suffered in a foreign country, regardless of where the tortious

act or omission occurred.” Jd. at 2754. A patent infringe-

ment claim, however, is different in kind from the tortious

injuries contemplated by § 2680(k).

Though patent infringement claims may be viewed as

species of tort claims, they are subject to a territoriality re-

striction unknown in general tort law. Determining the li-

abilities of the United States for patent infringement under 28

U.S.C. § 1498(a) requires the application of only United

States law, because section 1498 conditions the government's

liability on the existence of patent rights granted by the

United States. In contrast, the FTCA requires application of

local law to determine the liability of the United States, and

under governing choice of law principles, the local law to be

applied is typically the law of the place where the injury oc-

curred. 28 U.S.C. § 1346(b)(1) (2000).

situation in status quo; it does not affect it. [§ 1498(c) ] simply says that

this [section] shall not apply to torts committed abroad [.]_ ... [O}ther

agencies have not felt safe in operating under the Government Tort Claims

Act, and ... we should simply follow along with a substantially parallel

position to the patent law.”).

App. A29

Allowing recovery for foreign injury where the causative

acts occurred in the United States thus raised the specter that

the liability of the United States would be governed by for-

eign law. No similar problem exists under the patent laws

because United States law will apply to the infringing acts

occurring in the United States. Under thcse circumstances,

construing the “arising in” language of section 1498(c) to

look to the place of the infringing act rather than the place of

the injury is perfectly*1363 consistent with the Congres-

sional objectives.*

Although Zoltek urges the court to read § 1498(c) as lim-

ited to claims arising under foreign patent laws, neither

Zoltek's suggestion nor the Supreme Court's rationale in Sosa

sensibly applies here. First, § 1498(a) plainly provides for

actions concerning “invention{s] described in and covered by

a patent of the United States[.]” 28 U.S.C. § 1498(a).

Zoltek's analysis would read this provision, in view of

§ 1498(c), as waiving sovereign immunity to allow infringe-

ment actions under a foreign patent if the asserted claim coin-

cided with protections under an issued U.S. patent. | find

that reading stylized and unpersuasive. If Congress intended

to allow suit against the government for infringing a foreign

patent, it would have so stated, and not limited the possible

actions by reference to parallel U.S. patents. Moreover,

Zoltek's suggestion is inconsistent with the plain language of

§ 1498(c) and the structure of § 1498. It would make little

* Our cases concerning personal jurisdiction in patent cases, which look to

“the location ... at which the infringing activity directly impacts on the

interests of the patentee,” Beverly Hills Fan Co. v. Sovereign Corp., 21

F.3d 1558, 1571 (Fed.Cir.1994), address where suit may be brought to

enforce an existing substantive claim, but those cases do not define the

substantive claim itself. The question of whether a patent infringement

claim can be maintained at all (controlled by sections 1498(a) and 1498(c)

where the alleged infringer is the government) is analytically distinct from

the personal jurisdiction issue. Any uncertainty as to the scope of the

patent law must be determined before addressing personal jurisdiction

over the claim.

App. A30

sense for Congress to curtail the sovereign immunity waiver

at § 1498(c) if the underlying action in § 1498(a) allowed

suit “under foreign law.” In short, § 1498 is consistent with

a provision to vindicate a U.S. patent right, not a foreign pat-

ent right. Second, for similar reasons, unlike § 2680(k),

§ 1498(a) does not require a choice of law analysis and the

Sosa consideration of place of injury is simply inapplicable

here. In sum, the § 1498(a) claim arises where the infring-

ing activity is consummated.

This analysis precludes Zoltek's Nicalon fiber allegations.

Where all the steps of a process patent are performed abroad,

the claim “arises in a foreign country,” and the action is

barred by § 1498(c). The record evidences that the accused

Nicalon fiber products were made entirely in Japan. Zoltek's

contention that the government violated § 1498(a) when

Lockheed's Japanese subcontractors “used” Zoltek's method

claims to make the Nicalon products, therefore, fits squarely

within our interpretation of § 1498(c). The same holds for

the Tyranno fiber allegations, insofar as the fibers were made

in Japan. The Court of Federal Claims correctly determined

that it lacked jurisdiction to decide those allegations.

The infringement allegations concerning the Tyranno fi-

ber products, however, cannot be tethered to any single loca-

tion. This presents the difficult question. Although the fi-

bers were made overseas, the record shows that the final

products were made in the United States. According to

Zoltek's infringement allegations, some of the claimed

method steps were practiced in Japan, and some in the United

States. The allegedly infringing conduct, in short, was not

confined within national boundaries.

Does such conduct “arise in a foreign country” within the

meaning of § 1498(c)? As explained herein I conclude that it

*1364 does, with the effect of barring Zoltek's Tyranno fiber

product allegations. Put differently, | read “claims arising

App. A31

abroad” expansively, as capturing any claim that does not

arise entirely through domestic infringing conduct. In doing

so, I reject any contention that the analysis depends on where

any individual step of the claimed method was practiced.

Two longstanding interpretative principles support the

conclusion that the language at § 1498(c), limiting the sover-

eign immunity waiver at § 1498(a), includes within its pro-

scription the conduct disputed in this action. First, the courts

generally disfavor extraterritorial application of United States

law. See EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 248,

111 S.Ct. 1227, 113 L.Ed.2d 274 (1991) (“It is a long-

standing principle of American law that legislation of Con-

gress, unless a contrary intent appears, is meant to apply only

within the territorial jurisdiction of the United States.”). The

principle rests on sound policy, including a concern to avoid

conflict with other national laws, regard for international

comity, choice of law analysis, and separation of powers.

Thus, in Deepsouth, the Supreme Court expressly refused to

extend the scope of § 271(a) to capture an extra-territorial

manufacture of an infringing device absent express guidance

from Congress. “Our patent system makes no claim to extra-

territorial effect ... and we correspondingly reject the claims

of others to such control over our markets.” 406 U.S. at 531,

92 S.Ct. 1700 (citing Brown v. Duchesne, 60 U.S. (19 How.)

183, 195, 15 L.Ed. 595 (1856) and Boesch v. Graff, 133 U.S.

697, 703, 10 S.Ct. 378, 33 L.Ed. 787 (1890)). In narrowing

the reach of actions under § 1498(a), § 1498(c) manifests a

Congressional intent to limit infringement actions where con-

duct by or for the government sounded abroad. Reading §

1498(c) to foreclose the action at bar is consistent with a strict

view of the extra-territoriality principle.’

Second, this view comports with the narrow construction

that a court must afford sovereign immunity waivers. A

” The dissent suggests that we have ignored the Fifth Amendment in de-

termining the proper jurisdictional scope provided by § 1498.

App. A32

court must resolve textual ambiguity in a statutory waiver in

favor of immunity. As noted above, the waiver must be

clear, and ambiguities resolved in favor of immunity. Since

the waiver must be construed narrowly, the § 1498(c) exclu-

sion-serving to narrow the waiver at § 1498(a)-must be con-

strued broadly. Cf Shoshone Indian, 364 F.3d at 1346.

Given an expansive reading, these principles indicate that a

claim “arises in a foreign country” under § 1498(c) if, as with

the Tyranno product allegations, some steps of a claimed

method are practiced abroad.’

Although this court has never decided how § 1498(c) ap-

plies to transnational conduct in practicing a patented method,

on one occasion our predecessor court was confronted with

allegations of infringing use of a transnational device. In

Decca Ltd. v. United States, 210 Ct.Cl. 546, 544 F.2d 1070

(1976), as in this case, the government argued that § 1498(c)

was a dispositive bar to jurisdiction. The Court of *1365

Claims, however, neither expressly interpreted nor applied the

statute.'' Instead, as explained below, it crafted a test for de-

termining an effective “location” of the accused, internation-

ally disposed, device. The Decca court then determined that

if such a device could be said to be located “within the United

States,” the § 1498(a) claim for infringing use would arise

where the device was “located.” For several reasons I con-

10 While not a basis for my interpretation of § 1498, I note that any rule

that allowed sovereign immunity, and liability, to tum on where a defen-

dant practiced any given step of a claimed method would simply invite

strategic manipulation and prove unworkable. Potential infringers would

simply move their conduct offshore-if only for the last step of the process-

in order to avoid the specter of § 1498(a) liability.

'! Indeed, although the United States briefed the issue in conjunction with

a motion to dismiss, the trial division of the Court of Claims specifically

noted in its pretrial order that “[jJurisdiction is not disputed and is hereby

determined to be present.” Decca, No. 299-70, Pre-Trial Order J |

(Ct.Cl. Mar. 20, 1975).

App. A33

clude that no comparable test should apply to the facts in this

case.

To understand why, it bears reviewing the case in detail.

Decca involved the Omega long range radio navigation sys-

tem. Certain components of the system-broadcast stations-

were located overseas. The plaintiff, Decca, owned U.S.

Patent No. 2,844,816, which claimed radio navigation sys-

tems.” It alleged that the Omega system infringed certain

device claims in the '816 patent and that the government vio-

lated § 1498(a) by using the Omega system. The govern-

ment sought dismissal, arguing that because some broadcast

towers were located in Norway and other overseas locations,

the action arose in a foreign country and was barred by §

1498(c).

The court disagreed. The Court of Claims defined the

“location” of the Omega system to be “in United States terri-

tory,” implicitly reasoning that an infringing use “within the

United States,” a fortiori, does not give rise to an infringe-

ment claim “arising in a foreign country” under § 1498(c).

In sum, Decca stands for the narrow, and collateral, proposi-

tion that under § 1498(a) the infringing use of a claimed de-

vice “arises” where an accused device is “located.”

There are, however, no “use of device” claims at issue in

this action, and Decca is therefore inapposite. In Decca, the

elements of a patented device were assembled, one by one

and in different countries, and the device was therefore made.

Likewise, in this case, the steps of a patented process were

practiced, one by one and in different countries, and the proc-

ess was therefore performed. However, these cases are not

analogous, because the concept of the “use” of a device is

* The trial court found the government liable for an infringing use of

claim 11, which claimed a hyperbolic radio navigation system. See '816

patent, col. 12, 1. 63-col. 13, 1. 34 (claim 11); Decca, 544 F.2d at 1083.

With minor changes in the factual findings, the three judge panel adopted

the trial court's analysis. Decca, 544 F.2d at 1072.

App. A34

fundamentally different from the use of a process. Whereas

utility can be extracted from a device only after it has been

“made,” utility is extracted from a process concurrent with its

being “practiced.” See NTP, 418 F.3d at 1318 (“Because a

process is nothing more than the sequence of actions of which

it is comprised, the use of a process necessarily involves do-

ing or performing each of the steps recited. This is unlike

use of a system as a whole, in which the components are used

collectively, not individually.”). As a consequence of this

failure in the analogy, Decca is neither on point nor particu-

larly instructive.

Consequently, I would decline any invitation to extend

Decca's rationale beyond its intended context of device claims

to practicing the steps of a claimed method. In particular, the

Decca rationale for characterizing the accused Omega radio

navigation* 1366 system as “located ... within the United

States” threatens to swallow the § 1498(c) limitation if ap-

plied to the process claim at bar. Decca's infringement analy-

sis placed “particular emphasis on the ownership of the

equipment by the United States, the control of the equipment

from the United States and on the actual beneficial use of the

system within the United States.” 544 F.2d at 1083. Relying

on these observations, both the trial court and the appellate

panel concluded that the “location of the infringement is

within United States territory.” Jd. at 1074. The panel relied,

in particular, on the fact that the infringing broadcast equip-

ment “is designed and built by the United States Govern-

ment,” and that the “location of the whole ... is where the

‘master’ station or stations are, which is in the United States

of America, and where all the stations are monitored, pres-

ently in Washington, D.C.” /d.

Were a court to extend Decca's reasoning here, it could

conclude that where the government, or a contractor acting at

the government's direction, commissions or directs the con-

duct later accused of infringing a method patent, the resulting

claim for infringing use under § 1498(a) “arises” within the

App. A35

United States, and not abroad, under § 1498(c). Applying the

Decca reasoning out of its intended context of device claims,

however, would effectively read the plain language of

§ 1498(c) out of existence. The statute concerns allegations

of infringement against the government, and it is difficult to

imagine circumstances where such conduct would not be

traceable back to the federal government, thus completely

avoiding the narrowing effect of § 1498(c) on Congress's

waiver of sovereign immunity. In short, if the accused con-

duct is always traceable to decision making in the United

States, proximately causing otherwise “infringing” conduct

abroad, then such claims will never be restricted by the prohi-

bition at § 1498(c).

IIT.

In sum, the infringing use of a patented method under

§ 1498(a) consists of practicing all steps in the claimed

method, Because the injury from infringement is intangible

and not amenable to geographical reference, the cause of ac-

tion cannot be said to arise where injury is suffered, and the

§ 2680(k) cases are of limited value in interpreting § 1498(c).

I would thus look to where the infringing conduct occurred to

ascertain where the claim arises. In the first analysis, no par-

ticular step has primacy. But since a court must give the

sovereign immunity waiver at § 1498 narrow construction, I

must view the exclusion at § 1498(c) broadly and resolve am-

biguity in favor of immunity. For that reason, § 1498(c) pre-

cludes an action premised on infringing use of a method claim

if some steps of the method are practiced abroad. Since

Zoltek's Tyranno product claims falls within this construction,

they are barred. Thus, the trial court properly concluded that

it lacked jurisdiction over those infringement allegations.

The dissent argues that I must be careful to construe §

1498 in a manner that does not somehow run afoul of the

Fifth Amendment. Its concern is fundamentally misguided,

however, even if one assumes, for sake of argument, that a

App. A36

patent is a type of property to which Fifth Amendment protec-

tions apply. Section 1498 is a waiver of sovereign immunity,

the scope of which is completely within the discretion of

*1367 Congress.” In fact, there is no Fifth Amendment re-

quirement that § 1498 exist at all; it is the responsibility of

Congress, and of Congress alone to decide whether, and to

what extent, it will permit the courts to help it fulfill its Con-

stitutional obligations under the Takings Clause.'* A court

'3 See Lynch v. United States, 292 U.S. 571, 582, 54 S.Ct. 840, 78 L.Ed.

1434 (1934) (“The sovereign's immunity from suit exists whatever the

character of the proceeding or the source of the right sought to be en-

forced... [including] those arising from some violation of rights conferred

upon the citizen by the Constitution .” (citing Schillinger v. United

States, 155 US. at 166, 168, 15 S.Ct. 85, 39 L.Ed 108 (“The United

States cannot be sued in their courts without their consent, and in granting

such consent Congress has an absolute discretion to specify the cases and

contingencies in which the liability of the Government is submitted to the

courts for judicial determination. Beyond the letter of such consent the

courts may not go, no matter how beneficial they may deem, or in fact

might be, their possession of a larger jurisdiction over the liabilities of the

Government.”))).

4 Indeed, before the passage of the Tucker Act, ch. 359, § 1, 24 Stat. 505

(1887) (codified as amended at 28 U.S.C. § 1491), Congress had sole re-

sponsibility for paying takings claims. No judicial relief was available.

See, e.g., Langford v. United States, 101 U.S. 341, 343, 25 L.Ed. 1010

(1879) (holding that notwithstanding the obligation of the United States to

pay just compensation, there existed no remedy in the courts because

“Congress has made no provision by any general law for ascertaining and

paying this just compensation”). In Lynch v. United States, the Supreme

Court reaffirmed the discretion of Congress to reserve to itself the pay-

ment of just compensation for Fifth Amendment takings. 292 U.S. 571,

54 S.Ct. 840, 78 L.Ed. 1434. In that case, the Court started by recogniz-

ing that “{rJights against the United States arising out of a contract with it

are protected by the Fifth Amendment.” Id: at 579, 54 S.Ct. 840. It held,

however, that Congress may elect to retain the sole power to remediate

alleged “takings” of these contractual rights. See id. at 582, 54 S.Ct. 840

(“When the United States creates rights in individuals against itself, it is

under no obligation to provide a remedy through the courts. It may limit

the individual to administrative remedies. And withdrawal of all remedy,

administrative as well as legal, would not necessarily imply repudiation.

So long as the contractual obligation is recognized, Congress may direct

App. A37

need not concern itself with whether § 1498, construed nar-

rowly in recognition of Congress’ sole power to waive sover-

eign immunity, provides a compensation scheme that is com-

pliant with the requirements of the Takings Clause. It is not

our place to interpret sovereign immunity waivers with an eye

toward their Takings Clause sufficiency vel non, because the

Constitution does not require Congress to create remedies in

the courts at all. If Congress did not create a statutory

scheme for compensation as provided under § 1498, it would

follow that without such a provision, compensation would

need to be obtained through legislative action.

IV.

For the aforegoing reasons, | believe that there exists an

additional, and independent, basis for reaching the decision of

the court today that § 1498(a) liability for the use of process

claims requires all the steps to have been practiced in the

United States. In my view, therefore, our decision today

could have been reached without relying on N7P.

DYK, Circuit Judge, concurring.

its fulfillment without the interposition of either a court or an administra-

tive tribunal.” (emphasis added) (citing United States v. Babcock, 250

U.S. 328, 331, 39 S.Ct. 464, 63 L.Ed. 1011 (1919) and Tutun v. United

States, 270 U.S. 568, 576, 46 S.Ct. 425, 70 L.Ed. 738 (1926))).

App. A38

I join the court's per curiam opinion but write separately

to express my view that *1368 the court correctly held in

NTP. Inc. v. Research in Motion, Lid., 418 F.3d 1282, 1316

(Fed.Cir.2005), that the government can only be liable for in-

fringement under section 1498(a) if the same conduct would

render a private party liable for infringement under section

271(a).'

Section 1498(a) provides, in pertinent part:

Whenever 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,

the owner's remedy shall be by action against the United

States in the United States Court of Federal Claims for

the recovery of his reasonable and entire compensation

for such use and manufacture.

In my view, the purpose of section 1498(a) was to make the

United States and its contractors liable for “use” of a patented

invention that would in similar circumstances constitute direct

infringement by a private party.

Patent rights are nothing more than the rights to exclude

others. See 35 U.S.C. § 154(a) (2000) (defining the patent

grant in terms of its exclusionary powers). In the case of pri-

vate parties that right is cabined to infringement occurring

within the United States. Congress could not have intended

to confer broader rights against the United States than against

private parties.

' Under 28 U.S.C. § 1292(d)(2), “the nature and scope of our review are

not limited to the certified question but [rather] we are free to consider all

questions material to the trial court's order ....” United States v. Connolly,

716 F.2d 882, 885 (Fed.Cir. 1983).

App. A39

The omission of the “within the United States” language

(appearing in section 271(a)) from section 1498(a) does not

suggest that the government's liability for infringement is

broader than that of private parties. Section 271(a) broadly

defines the rights of patent holders against all persons who

utilize the patented invention; the language of the section is

broad enough to cover the United States. Section 271(a) does

not, however, waive the government's sovereign immunity.

That was the purpose of the original section 1498, which was

designed to provide a remedy against the government for the

infringement described in section 271(a). In other words,

unlike section 271(a), section 1498(a) was not designed to

define what constitutes infringement (terminology that does

not appear in section 1498(a)). Rather, it was intended to

define the “owner's remedy” against the United States, when

the United States did not have a license or the “lawful right to

use” the patented invention. The question whether the

United States had a lawful right to use the invention turned on

whether a private party would have had such a right, as the

history of section 1498 confirms. The additional purpose of

section 1498, as amended in 1918, was to substitute a remedy

against the United States for a remedy against private parties

working for the government.

Legislation in 1910 first conferred the right to sue the

United States for infringement. Pub.L. No. 61-305, 36 Stat.

851 (1910). That legislation was simply designed to waive

the sovereign immunity of the United States for preexisting

causes of action conferred by the patent statute *1369 (what is

now section 271(a)).? As the House committee explained,

“Our only purpose is to extend the jurisdiction of [the Court

of Claims] so that it may entertain suits and award compensa-

* The 1910 enactment provided: “That whenever an invention described

in and covered by a patent of the United States shall hereafter be used by

the United States without license of the owner thereof or lawful right to

use the same, such owner may recover reasonable compensation for such

use by suit in the Court of Claims.” Pub.L. No. 61-305, 36 Stat. 851.

App. A40

tion to the owners of patents in cases where the use of the in-

vention by the United States is unauthorized and unlawful ....”

H.R.Rep. No. 61-1288, at 3 (1910). In considering the 1910

legislation, Congressman Crumpacker stated that the bill

“simply gives consent of the Government to these parties to

sue in the Court of Claims for this class of liabilities that it

would be liable to suit for if it were not for its sovereignty.”

Congressman Currier, who introduced the bill, agreed, ex-

plaining that the bill “does not create any liability; it simply

gives a remedy upon an existing liability.” 45 Cong. Rec.

8755, 8756 (1910).

The 1918 amendments, Pub.L. No. 65-182, 40 Stat. 704,

705 (1918), similarly confirm that the purpose of the statute

was simply to obligate the United States to the same extent as

private parties. Congress was concerned that when patented

inventions were used or manufactured by others for the

United States, suit was being brought against government

employees or contractors individually. Thus in 1918, Con-

gress changed the language of the 191 0 statute to read:

That whenever an invention described in and covered

by a patent of the United States shall hereafter be used

or manufactured by or for the United States without li-

cense of the owner thereof or lawful right to use or

manufacture the same, such owner's remedy shall be by

suit against the United States in the C ‘ourt of Claims for

the recovery of his reasonable and entire compensation

for such use and manufacture.

Id. (emphasis added).

Congress intended the 1918 amendment “to relieve the

contractor entirely from liability of every kind for the in-

fringement of patents in manufacturing anything for the gov-

ernment, and to limit the owner of the patent ... to suit against

the United States in the Court of Claims for the recovery of

App. A41

his reasonable and entire compensation ....”? Richmond

Screw Anchor Co. v. United States, 275 U.S. 331, 343, 48

S.Ct. 194, 72 L.Ed. 303 (1928). Congress in taking this ac-

tion could hardly have intended that the substituted rights

against the United States would be broader than the original

rights against the employee or contractor. Indeed, in constru-

ing the 1910 legislation (as amended in 1918) to resolve the

question whether infringement claims against the government

were assignable, the Supreme Court expressly held that the

Statute

is an attempt to take away from a private citizen his

lawful claim for damage to his property by another pri-

vate person which but for this act he would have against

the private wrongdoer.... We must presume that Con-

gress in the passage*1370 of the act of 1918 intended to

secure to the owner of the patent the exact equivalent of

what it was taking away from him.

Id. at 345, 48 S.Ct. 194 (emphasis added). See also Coakwell

v. United States, 178 Ct.Cl. 654, 372 F.2d 508, 511 (1967)

(“[Section 1498] was not intended to change the basic inci-

dents to which liability would attach for the purposes of seek-

ing comprehensive compensation for the unlicensed use of a

patented invention.”).

The “exact equivalent” of section 271(a) limits liability to

infringement occurring “within the United States.” * Accord-

ingly, the government cannot be responsible for an infringing

* What is now the second paragraph of section 1498(a), originally part of

35 U.S.C. § 94, was added in 1942 to further clarify that actions against

United States employees or contractors were barred and replaced by an

action against the United States. See Pub.L. No. 77-768, § 6, 56 Stat.

1013, 1014 (1942); S.Rep. No. 77-1640, at 5 (1942).

* There is no occasion here to determine whether claims for infringement

liability under 271(f) and 271(g) may be brought in suits against the gov-

ernment.

App. A42

“use” under section 1498(a) unless the act constitutes a di-

rectly infringing “use within the United States” under section

271(a), as Research in Motion correctly held. There is no

need to decide the scope of section 1498(c) in this case.

Finally, I note that Judge Plager's interesting discourse on

takings jurisprudence completely fails to explain how taking

of a property right could possibly have occurred here. Patent

the abstract. If, as I urge, the patent holder's right to sue the

government for infringement under 1498(a) is no broader than

the rights of the patent holder against private parties under

section 271(a), then there can be no taking resulting from the

refusal to recognize a greater right against the government.

And if, on the other hand, section 1498 is construed to give

the patent holder greater rights against the government than

against private parties, that right is necessarily defined by

both sections 1498(a) and 1498(c) taken together. It makes

no sense to say that section 1498(a) confers rights that are

“taken” by section 1498(c). Under these circumstances there

can be no taking by the government under any interpretation

of section 1498, quite apart from the barrier posed by the Su-

preme Court's decision in Schillinger v. United States, 155

U.S. 163, 30 Ct.Cl. 480, 15 S.Ct. 85, 39 L.Ed. 108 (1894).

There is thus no basis for a Fifth Amendment takings claim in

this case even if Schillinger were overruled.

PLAGER, Senior Circuit Judge, dissenting.

There are two separate though related issues in this case,

both matters of first impression. One is of major significance

to our understanding of the constitutional obligations of the

* Unlike the situation in Ruckelshaus v. Monsanto Co., 467 U.S. 986, 104

0g, 2862, 81 L.Ed.2d 815 (1984), we deal here with a property right

erepted by federal law.

App. A43

United States (“United States” or “Government”); both relate

as well to important rights of patent owners.° The first issue

is, may an owner of a United States patent bring a cause of

action under the Fifth Amendment to the Constitution ’

against the United States for a ‘taking’ as all other owners of

property*1371 rights may; or is a patent right somehow less

of a property interest, not worthy of such constitutional pro-

tection? Until this case, this issue has never been addressed

directly by this or any other court.

The second issue, dealing with a cause of action for in-

fringement of a United States patent, is raised in the context

of a method or process patent claim involving multiple steps.

When an owner of such a patent sues the United States for

infringement under the provisions of 28 U.S.C. § 1498, the

statute that authorizes such suits against the Government,

does the fact that some or all of the steps are performed in a

foreign country preclude recovery? If so, is this because of

some inherent limitation in § 1498(a), or is it because of the

express statutory exception in § 1498(c) for a claim “arising

ina foreign country”? (The relevant statutory language is set

out in the footnote below.*) This is not only a new question

of statutory interpretation, but because of the way the Su-

® The term “patent owner” as used throughout this opinion includes as-

signees of a patent.

” “[NJor shall private property be taken for public use, without just com-

pensation.” U.S. Const. amend. V.

* The relevant portion of 28 U.S.C. § 1498(a) reads:

Whenever 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, the

owner's remedy shall be by action against the United States in the United

States Court of Federal Claims for the recovery of his reasonable and en-

tire compensation for such use and manufacture.

Section 1498(c) reads in its entirety: “The provisions of this section shall

not apply to any claim arising in a foreign country.”

App. A44

preme Court and this court have understood § 1498, there are

significant constitutional overtones as well.

I. Introduction

Plaintiff invented and patented a process for manufactur-

ing a carbon fiber sheet product, a product that is used in

making military aircraft with a low radar signature, the so-

called ‘stealth’ aircraft. Defendant, the United States, so

plaintiff alleges, caused the use of plaintiff's patented inven-

tion in the course of having a new fighter plane, the F22,

built, and, according to plaintiff, did it without permission and

in violation of plaintiff's rights. For this plaintiff seeks dam-

ages.

In the trial court, the United States argued that, on the un-

disputed facts, plaintiff did not have a cause of action against

the Government under either the statutes of the United States

or under the Constitution. The argument before the trial

court, and again on appeal, largely focused on 28 U.S.C.

§ 1498. That statute grants an owner of a United States pat-

ent the right to damages if the patented invention is used or

manufactured by or for the United States without license or

lawful right, and, if it applies, it is understood that the statute

both waives the sovereign's immunity and gives the Court of

Federal Claims jurisdiction to hear the cause.

The trial court concluded that, because of the limitations

imposed by § 1498(c), plaintiff on the facts of this case could

not state a claim for relief for patent infringement, and so

granted the Government partial summary judgment on that

issue. On the other hand, the trial court concluded that plain-

tiff does have a cause of action under the Fifth Amendment to

the Constitution for a ‘taking’ of its patent rights by the Gov-

ernment, a cause of action separate and distinct from the in-

fringement claim.” The trial court denied the Government

° The trial court and the majority opinion both treat the problem of the

taking claim as one of establishing jurisdiction in the Court of Federal

App. A45

*1372 summary judgment on that issue. We accepted inter-

locutory appeal on both rulings.

Although my panel colleagues cannot agree why, they do

agree that (1) an owner of a United States patent can be de-

nied the basic protections of the Constitution, and that (2) if

any one step of a multi-step patented process occurs outside

the United States, the Government is immune from liability

under § 1498 for its infringement of the patent. They are

wrong on both propositions. I would uphold the trial court's

conclusion that the taking claim states a cause of action enti-

tling plaintiff to a full trial of the issue, and reverse the trial

court's erroneous conclusion regarding § 1498. Since this is

the exact opposite of what my colleagues are ruling, I respect-

fully dissent.

Il. Overview

As there are three other ovinions in this case, I begin by

summarizing the problems I have with my colleagues’ collec-

tive and separate views. First, in their per curiam opinion,

my colleagues’ analysis of the § 1498 liability issue consists

of one brief paragraph that concludes, “where, as here, not all

steps of a patented process have been performed in the United

States, government liability does not exist pursuant to section

Claims. This is incorrect, since a well-pleaded complaint establishes ju-

risdiction; the legal issue is whether plaintiff has stated a claim for which

relief can be granted. Further, with regard to the infringement issue, as

the trial court explained, the Government's defense under § 1498(c) is an

affirmative defense, and the pleadings clearly establish a well-pleaded

complaint. Again, a more accurate description of the issue is whether

plaintiff has stated a claim for which relief can be granted. See Palmer v.

United States, 168 F.3d 1310, 1313 (Fed.Cir.1999) (“[A] court's general

power to adjudicate in specific areas of substantive law ... is a question of

a court's subject matter jurisdiction,” whereas “the question of whether in

a specific case a court is able to exercise its general power with regard to

the facts peculiar to the specific claim ... is properly addressed as a ques-

tion of whether the plaintiff has stated a claim upon which relief can be

granted,”’),

App. A46

1498(a).” Per curiam op. at 1350. They base this conclu-

sion on the erroneous assumption that a cause of action for

infringement of a patent by the United States under § 1498 is

governed by the limitations of 35 U.S.C. § 271(a), the statute

that defines infringement among private litigants, and not by

the express terms of 28 U.S.C. § 1498(a), the exclusive statute

that defines the Government's liability in similar circum-

stances.

In his concurring opinion, Judge Gajarsa acknowledges

the problem with trying to incorporate the terms of § 271(a)

into § 1498(a), but he has been persuaded that we are bound

by brief language on the subject found in this court's N7P

opinion, decided last year, suggesting that incorporation is

established law. Though he believes N7P is wrong on this

point, Judge Gajarsa nevertheless feels bound. Judge Dyk,

on the other hand, in his concurring opinion argues that the

comment in N7P is or should be controlling law.

Because of the way the majority in their per curiam opin-

ion resolve the issues in this case, applying the magical incor-

poration doctrine to § 1498(a), the trial court's decision that

plaintiff's infringement claim is barred by the express terms of

subsection (c) dealing with causes that “arise in a foreign

country”-the issue that was certified to us-is not addressed at

all in the per curiam opinion, nor by J udge Dyk in his concur-

rence. Judge Gajarsa, however, does address it in his concur-

ring opinion, see Gajarsa concurring op. at *1373 1360 -

1366, even though, on his view of the statute as stated in the

per curiam opinion, subsection (c) has no bearing on the out-

come.

Since I do not dispose of plaintiff's infringement claim by

rewriting § 1498(a) as the majority chooses to do, I must ad-

dress the subsection (c) exception. In part IV of this opinion

I will explain both why the majority's incorporation assump-

tion has no basis in law, and why the assumed ‘binding effect’

of the N7P precedent is neither binding nor precedent. I will

App. A47

then explain that, at least with regard to the Tyranno process,

the subsection (c) exception does not apply here. And finally

I will comment on why the majority's view of the limitations

imposed by § 1498 raises significant constitutional concerns.

Second, regarding the takings issue, the per curiam opin-

ion does provide somewhat more analysis, but the analysis is

on the wrong subject. According to the per curiam opinion,

the takings issue in this case turns on the meaning of an 1894

Supreme Court case, Schillinger v. United States, 155 U.S.

163, 30 Ct.Cl. 480, 15 S.Ct. 85, 39 L.Ed. 108 (1894). The

meaning of Schillinger is then stated in the opinion in one

summary sentence, without reference to the facts of the case

or the Supreme Court's actual holding. The remainder of the

per curiam takings discussion goes off into a lengthy dis-

course about why other cases decided some years later did not

sub silentio overrule Schillinger. Interesting, but irrelevant.

The key is Schillinger. As I shall explain next, Schillinger

does not stand for what the per curiam opinion tells us it does,

and thus the majority's conclusion based on their reading of it

is wrong. (The concurrences add little to the takings discus-

sion, but where relevant will be addressed below.)

IH. The Fifth Amendment Taking Issue

The Fifth Amendment to the Constitution provides a se-

ries of protections for the individual against governmental

abuses, and concludes: “nor shall private property be taken

for public use, without just compensation.” This provision

has a long and noble history of protecting and preserving

property rights against unfettered Governmental seizure, and

in so doing of protecting individual freedom and personal in-

tegrity from undue government authority.'°

[T]he only dependable foundation of personal liberty is the personal eco-

nomic security of private property... There is no surer way to give men

the courage to be free than to insure them a competence upon which they

App. A48

It is well understood that this constitutional provision does

not preclude the Government from taking private property for

public use. Rather, the Constitution guarantees that the citi-

zen will be fully compensated for such a taking. By requir-

ing just compensation the Constitution makes the property

owner whole, and it also places a constraint on government

action by imposing the cost of such action on the Govern-

ment’s fisc, thus subjecting administrative action to the disci-

pline of public decision-making and legislative authorization.

In recent years the Supreme Court has extended the salutary

protection of the Fifth Amendment to excessive governmen-

tal*1374 regulation-the ‘regulatory taking’ issue’! -in addi-

tion to the traditional takings area in which the government

actually acquires private property interests for its own use-the

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