This March 14, 2012 opinion by the United States Court of Appeals for the Federal Circuit provides a discussion of some elements of the history of 28 USC 1498, beginning in 1894, through changes in the law in 1910, 1918, 1942, 1949, and 1960.
United States Court of Appeals for the Federal Circuit
ZOLTEK CORPORATION, Plaintiff-Appellee, v. UNITED STATES, Defendant, v. LOCKHEED MARTIN CORPORATION Defendant-Appellant.
Appeal from the United States Court of Federal Claims in case no. 96-CV-166, Judge Edward J. Damich.
Decided: March 14, 2012
. . .
Before analyzing Zoltek III’s interpretation of § 1498, we review the history of the adoption of that section. In Schillinger v. United States, the Supreme Court held that patent infringement was a tort for which the Government had not waived sovereign immunity. 155 U.S. 163, 167-69 (1894). Thus, absent conduct by the United States from which a contract to license the patent could be inferred, a patent holder lacked a remedy for infringement by the United States. Id. at 169-71.
In response to the perceived injustice of the Schillinger rule, Congress enacted the precursor to 28 U.S.C. § 1498, which 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.
Act of June 25, 1910, Pub. L. No. 61-305, 36 Stat. 851 (1910) (“1910 Act”); see also Crozier v. Fried. Krupp Aktiengesellschaft, 224 U.S. 290, 304 (1912) (describing the history of the 1910 Act).
In 1918, the Supreme Court applied the 1910 Act to the issue of patent infringement by government contractors in the course of producing warships during World War I. William Cramp & Sons Ship & Engine Bldg. Co. v. Int’l Curtis Marine Turbine Co., 246 U.S. 28 (1918). Despite the contractor’s construction of warships pursuant to “comprehensively detailed” specifications provided by the Navy, the Court found that the 1910 Act did not shield the contractor from infringement. Id. at 42-43.
Reaction to the Court’s March 4, 1918 decision was swift. On April 20, Acting Secretary of the Navy Franklin D. Roosevelt wrote a letter to the chairman of the Senate Committee of Naval Affairs, stating that the Navy was
confronted with a difficult situation as the result of [the] decision by the Supreme Court affecting the government’s rights as to the manufacture and use of patented inventions, and it seems necessary that amendment be made of the Act of June 25, 1910 . . . . [T]he decision is, in effect, . . . that a contractor for the manufacture of a patented article for the government is not exempt . . . from injunction and other interference through litigation by the patentee.
A prior decision of the Supreme Court, that in the case of Crozier v. Krupp [224 U.S. 290] had been interpreted as having the opposite meaning, and the department was able up to the time of the later decision, on March 4 last, to proceed satisfactorily with the procuring of such patented articles as it needed, leaving the matter of compensation to patentees for adjustment by direct agreement, or, if necessary, by resort to the Court of Claims under the above-mentioned act of 1910. Now, however, manufacturers are exposed to expensive litigation, involving the possibilities of prohibitive injunction payment of royalties, rendering of accounts, and payment of punitive damages, and they are reluctant to take contracts that may bring such severe consequences. The situation promised serious disadvantage to the public interests, and in order that vital activities of this department may not be restricted unduly at this time, and also with a view of enabling dissatisfied patentees to obtain just and adequate
compensation in all cases conformably to the declared purpose of said act, I have the honor to request that the act be amended by the insertion of a proper provision therefore in the pending naval appropriation bill.
Wood v. Atl. Gulf & Pac. Co., 296 F. 718, 720-21 (D. Ala. 1924) (quoting letter). In response to this letter, the 1910 Act was amended to provide
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 license of the owner thereof or lawful right to use or manufacture the same, such [strike: owner may recover] owner’s remedy shall be by suit against the United States in the Court of Claims
for the recovery of his reasonable and entire compensation for such use and manufacture [strike: by suit in the Court of Claims].
Act of July 1, 1918, Pub. L. No. 65-182, 40 Stat. 704, 705 (1918) (additions in italics; deletions struck through).
As a result of the amendment, the Government not only waived sovereign immunity for its own unlawful use or manufacture of a patented invention, but, in most cases, assumed liability when its contractors did so. See Richmond Screw, 275 U.S. at 343-44. Moreover, when applicable, the amendment made the specified remedy exclusive. Id. at 344. Indeed, the Supreme Court said:
The purpose of the amendment was to relieve the contractor entirely from liability of every kind for the infringement of patents in manufacturing anything for the government, and to limit the owner of the patent and his assigns . . . to suit against the United States in the Court of Claims for the recovery of his reasonable and entire compensation for such use and manufacture. The word ‘entire’ emphasizes the exclusive and comprehensive character of the remedy provided.
Id. at 343. See also Identification Devices v. United States, 121 F.2d 895, 896 (D.C. Cir. 1941); Pollen v. Ford Instrument Co., 108 F.2d 762, 763 (2d Cir. 1940).
To the degree that any doubt existed, Congress further clarified the scope of the 1918 amendment by enacting what is now the second paragraph of 28 U.S.C. § 1498(a), which reads:
[T]he use or manufacture of an invention described in and covered by a patent of the United States by a contractor, a subcontractor, or any person, firm, or corporation for the Government and with the authorization or consent of the Government, shall be construed as use or manufacture for the United States.
Act of Oct. 31, 1942, Pub. L. No. 77-768, § 6, 56 Stat. 1013, 1014; see also S. Rep. No. 77-1640 (1942) at 1 (stating that the purpose of the second paragraph of § 1498 is “[t]o clarify existing legislation . . . with respect to contractors and subcontractors manufacturing and using inventions for the Government”).
These provisions were codified in their modern form in 1949:
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 use or manufacture of an invention described in and covered by a patent of the United States by a contractor, a subcontractor, or any person, firm, or corporation for the Government and with the authorization or consent of the Government, shall be construed as use or manufacture for the United States.
Act of May 24, 1949, Pub. L. No. 81-72, § 87, 63 Stat. 89, 102 (“1949 Act”); see also 28 U.S.C. § 1498(a).2
As enacted, this could be read to permit suit against the United States for the unlawful use or manufacture of patented inventions abroad, e.g., under foreign patent law. See H.R. Rep. No. 86-624, at 6-7 (1959) (letter from William Macomber, Jr., Assistant Secretary of State). Indeed, at least one plaintiff brought suit in the Court of Claims seeking compensation for such activities. See Yassin v. United States, 76 F. Supp. 509, 511, 513-14 (Ct. Cl. 1948). To clarify the scope of § 1498, Congress introduced a geographic limitation, which is now codified at 28 U.S.C. § 1498(c): “The provisions of this section shall
not apply to any claim arising in a foreign country.” Act of Sept. 8, 1960, Pub. L. No. 86-726, § 1, 74 Stat. 855, 855; see also H.R. Rep. No. 86-624, at 1. Within that historical framework, we turn to the terms of the statute and their application to this case.
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Footnote 2. The statute was first codified as 35 U.S.C. § 68 (1926). The re-codification at 28 U.S.C. § 1498 substantially altered the text. See Act of June 25, 1948, Pub. L. No. 80-773, 62 Stat. 869, 941 (1948) (enacting into positive law as 28 U.S.C. § 1498). The codified text was revised shortly thereafter to “restate its first paragraph to conform more closely with the original law.” H.R. Rep. No. 81-352, at 11 (1949); see also 1949 Act § 87. The 1949 Act is identical to the current text of the first sentence of 28 U.S.C. § 1498(a), with the exception of the name of the Court of Federal Claims.