Crater Corp v. Lucent Technologies

• Citation: 59 USPQ2d 1044,255 F.3d 1361
• Parties: (Fed. Cir. 2001) CRATER CORPORATION, Plaintiff-Appellant, v. LUCENT TECHNOLOGIES, INC. and AMERICAN TELEPHONE AND TELEGRAPH COMPANY, Defendants-Appellees, and UNITED STATES, Defendant-Appellee. 00-1125 DECIDED:
• Decision Date: 06 June 2001
• Court: U.S. Court of Appeals — Federal Circuit

Page 1361

255 F.3d 1361 (Fed. Cir. 2001)

CRATER CORPORATION, Plaintiff-Appellant, v. LUCENT TECHNOLOGIES, INC. and AMERICAN TELEPHONE AND TELEGRAPH COMPANY, Defendants-Appellees, and UNITED STATES, Defendant-Appellee.

00-1125

United States Court of Appeals for the Federal Circuit

DECIDED: June 6, 2001

Appealed from: U.S. District Court for the Eastern District of Missouri Judge E. Richard Webber

E. Robert Schultz, Shultz & Little, of St. Louis, Missouri, argued for plaintiff-appellant.

Louis F. Bonacorsi, Bryan Cave LLP, of St. Louis, Missouri, argued for defendants-appellees Lucent Technologies, Inc. and American Telephone and Telegraph Company.

Collette G. Matzzie, Attorney, Appellate Staff, Civil Division, Department of Justice

of Washington, DC, argued for defendant-appellee United States. With her on the brief were Mark B. Stern, Attorney, Appellate Staff; and John R. Tyler and Lisa A. Olson, Attorneys, Federal Programs Branch, Civil Division.

Before MAYER, Chief Judge, NEWMAN, and SCHALL, Circuit Judges.

SCHALL, Circuit Judge.

Crater Corporation ("Crater") sued Lucent Technologies, Inc. and American Telephone and Telegraph Company (collectively, "Lucent") in the United States District Court for the Eastern District of Missouri alleging that Lucent infringed Crater's U.S. Patent No. 5,286,129 (the " '129 patent"). The '129 patent is directed to an underwater coupling device (the "Crater coupler"). Crater also alleged state-law claims against Lucent for breach of contract and misappropriation of trade secrets. Lucent moved to dismiss Crater's complaint for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1) and, in the alternative, for failure to state a claim upon which relief could be granted under Fed. R. Civ. P. 12(b)(6). Citing 28 U.S.C. § 1498(a),¹ Lucent argued that it was not liable for patent infringement because any work it performed with respect to the Crater coupler was done under a government project and was authorized by the United States. Pursuant to § 1498(a), a private party cannot be held liable for infringement for any goods "used or manufactured by or for the United States." See Va. Panel Corp. v. MAC Panel Co., 133 F.3d 860, 869, 45 USPQ2d 1225, 1232 (Fed. Cir. 1997). Lucent argued that the state law claims should be dismissed because there was no diversity of citizenship between Crater and Lucent, and since the district court lacked jurisdiction over the patent claims, due to § 1498(a), it could not exercise supplemental jurisdiction over the state law claims. In due course, the district court concluded that Lucent's allegedly infringing activities were for the government and dismissed Crater's complaint for lack of jurisdiction. Crater Corp. v. Lucent Techs., No. 4: 98CV00913 ERW (E.D. Mo. Aug. 25, 1999) (memorandum and order) ("Crater II"). Crater appeals the district court's ruling.

Although we conclude that the district court erred in dismissing Crater's patent infringement claims for lack of jurisdiction, the dismissal of those claims nevertheless was proper. The reason is that Lucent established that it was entitled to summary judgment on its 28 U.S.C. § 1498(a) affirmative defense against the patent infringement charge. However, since the district court did have jurisdiction over Crater's patent claims, we vacate the court's dismissal of Crater's state claims for lack of supplemental jurisdiction and remand for further proceedings on those claims.

BACKGROUND

I.

Section 1498(a) provides, 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 use or manufacture of an invention described in and covered by a patent of the United States by a contractor, a subcontractor, or any person, firm, or corporation for the Government and with the authorization or consent of the Government, shall be construed as use or manufacture for the United States. . . .

28 U.S.C. § 1498(a). In addition to giving the United States Court of Federal Claims exclusive jurisdiction over patent infringement suits against the government, § 1498(a) also provides "an affirmative defense for applicable government contractors." Va. Panel Corp., 133 F.3d at 869, 45 USPQ2d at 1232. If a patented invention is used or manufactured for the government by a private party, that private party cannot be held liable for patent infringement. Trojan, Inc. v. Shat-R-Shield, Inc., 885 F.2d 854, 856, 12 USPQ2d 1132, 1134-35 (Fed. Cir. 1989); W.L. Gore & Assocs., Inc. v. Garlock, Inc., 842 F.2d 1275, 1282-83, 6 USPQ2d 1277, 1283-84 (Fed. Cir. 1988). In Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544, 16 USPQ2d 1587 (Fed. Cir. 1990), we noted that pursuant to the United States Supreme Court's decision in Sperry Gyroscope Co. v. Arma Engineering Co., 271 U.S. 232, 235-36 (1926), § 1498(a) "is to be applied, at least with respect to suits to which the United States is not a party, as a codification of a defense and not as a jurisdictional statute." Manville, 917 F.2d at 554, 16 USPQ2d at 1595. Therefore, dismissal of a lawsuit against a private party pursuant to § 1498(a) is a dismissal because of the successful assertion of an affirmative defense rather than a dismissal because of the district court's lack of subject matter jurisdiction over the patent infringement claim. Id. at 554-55, 16 USPQ2d at 1595-96.

II.

As noted above, after Crater filed suit, Lucent moved for dismissal pursuant to Fed. R. Civ. P. 12(b)(1) and (6). Lucent claimed that, under 28 U.S.C. § 1498(a), Crater could not properly assert its claims for patent infringement against Lucent because the accused devices were manufactured by or for the government with its authorization and consent. Lucent asserted that Crater's only remedy was against the United States in the Court of Federal Claims. Lucent also claimed that the district court did not have original jurisdiction over Crater's state claims because there was no diversity of citizenship between Crater and Lucent, both corporations residing in Delaware. It further claimed that, since the district court lacked jurisdiction over the infringement claims, the court could not exercise supplemental jurisdiction over the state law claims. Accompanying Lucent's motion was an affidavit from Paul M. Rominski, a Lucent employee, indicating that Lucent's work in connection with the allegedly infringing coupler was done for the government with its authorization.

On August 27, 1998, shortly after Lucent's motion was filed, Crater moved to strike Mr. Rominski's affidavit. In support of the motion to strike, Crater asserted that the affidavit was defective because it was not based upon Mr. Rominski's personal knowledge of the pertinent facts. Crater also requested an evidentiary hearing on Lucent's motion to dismiss, additional time to respond to Lucent's motion, and leave to conduct discovery in support of its motion to strike and in opposition to the motion to dismiss. In its papers, Crater alleged that Lucent had engaged in commercial use of the allegedly infringing coupler. It also alleged that Lucent had provided the couplers to private parties and that not all of Lucent's work on the coupler was done for the government. In response to Crater's request, the district court allowed discovery.

After discovery began, the United States intervened on March 12, 1999, to formally assert the state secrets privilege and to argue against any discovery by Crater regarding the manufacture or use of the allegedly infringing coupler by or on behalf of the United States. The state secrets privilege and the circumstances surrounding its assertion in this case are discussed infra in Part III of the DISCUSSION section of this opinion.

After over a year of discovery, Crater filed its opposition to Lucent's motion to dismiss on August 9, 1999. Crater supported its opposition with the deposition of Mr. Rominski. Lucent replied and supplemented its motion with the affidavit and deposition of Mr. Rominski, the deposition of Barry Lack, a former Lucent employee, and the deposition of Kenneth M. Nagengast, a current Lucent employee. Lucent also referenced, in its reply, its responses and the government's responses to Crater's interrogatories and the documents the government produced during discovery. Thereafter, on August 25, 1999, the district court granted Lucent's motion. Crater II, slip op. at 6. The court noted that Crater had failed to produce any evidence, over several months of discovery, indicating that Lucent performed any "work in regards to [Crater's] patent for any entity or individual other than the [g]overnment." Id. at 4. The court also noted that no evidence had been produced to indicate that Lucent performed any work on the coupler without the government's authorization or consent. Id. The court determined, based upon this lack of evidence, that "all the work performed by [Lucent] in this matter with regard to the [a]ccused [d]evice was performed for the United States Government with the authorization or consent of the United States Government. As a result, the Court of Federal Claims, not this district court, has the exclusive jurisdiction over this cause of action." Id. at 6. Therefore, the court granted Lucent's motion to dismiss and entered judgment against Crater. Id. at 6-7. The court also concluded that Crater's motion to strike Mr. Rominski's affidavit was irrelevant in light of the several months of discovery that had occurred after the affidavit was filed. Id. at 4-5. Consequently, the court did not rule on the motion. Id. at 4 n.2. The court noted,...