FilmTec Corp. v. Hydranautics
| Decision Date | 29 December 1992 |
| Docket Number | No. 92-1091,92-1091 |
| Citation | 25 USPQ2d 1283,982 F.2d 1546 |
| Parties | FILMTEC CORPORATION, Plaintiff-Appellee, v. HYDRANAUTICS, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Federal Circuit |
Douglas E. Whitney, Morris, Nichols, Arsht & Tunnell, Wilmington, DE, argued for plaintiff-appellee. Of counsel was Matthew B. Lehr. Also of counsel were Bernd W. Sandt and Philip D. Shepherd, Dow Chemical Co., Midland, MI.
Dale H. Hoscheit, Banner, Birch, McKie & Beckett, Washington, DC, argued for defendant-appellant. Of counsel was Lance G. Johnson. Also of counsel were J. Frank Osha and H. Sanders Gwin, Jr., Sughrue, Mion, Zinn, Macpeak & Seas, Washington, DC.
Before NIES, Chief Judge, SKELTON, Senior Circuit Judge, and LOURIE, Circuit Judge.
Hydranautics appeals from the August 30, 1991 judgment and order of the United States District Court for the Southern District of California which determined that FilmTec holds legal title to Cadotte U.S. Patent 4,277,344, the '344 patent is valid, and Hydranautics willfully infringed that patent. FilmTec Corp. v. Hydranautics, Case No. 90-563 GT (M) (S.D.Cal. Aug. 30, 1991). Because we conclude that the Saline Water Conversion Act of 1971 provides that the United States is entitled to ownership of the '344 patent, FilmTec cannot maintain the instant suit. We therefore reverse the district court's judgment and vacate its holdings that the '344 patent is valid and infringed.
This appeal involves a patent resulting from research performed under a government contract. In 1976, the Office of Water Research and Technology in the U.S. Department of the Interior entered into a research contract (the Contract) with the North Star Division of Midwest Research Institute (MRI), a not-for-profit research organization. The purpose of the Contract was "research and development on in-situ-formed condensation polymer membranes for seawater desalination by reverse osmosis." 1 When subjected to high pressure, reverse osmosis membranes retain salt and allow water to pass through. Their performance capabilities are measured in terms of their flux and their salt rejection. "Flux" refers to the rate at which purified water passes through the membrane and may be stated in terms of gallons of water per square foot of membrane per day (gfd). "Salt rejection" refers to the percentage of salt that a membrane removes from treated water.
The government entered into the Contract with MRI under authority of the Saline Water Conversion Act of 1971 (the Act), Pub.L. No. 92-60, 85 Stat. 159, which had the broad purpose of developing means for desalinizing salt water so as to make it suitable for municipal, industrial, and agricultural uses. Section 6(d) of the Act provided that all patents resulting from contracts made pursuant to it, such as the Contract, will "be available to the general public." 85 Stat. at 161. Furthermore, Congress provided that "title to ... inventions made or conceived in the course of or under any contract or grant pursuant to the ... Saline Water Conversion Act of 1971 ... shall be governed by ... section[ ] 9 ... of the Federal Non-nuclear Energy, Research, and Development Act of 1974 ERDA...." Pub.L. No. 94-316, 90 Stat. 694 (effective date June 22, 1976). Section 9 of the FNERDA provides in pertinent part:
(a) Whenever any invention is made or conceived in the course of or under any contract of the Administration ... and the Administrator [of the Energy Research and Development Administration] determines that--
(1) the person who made the invention was employed or assigned to perform research ... and the invention is related to the work he was employed or assigned to perform, or that it was within the scope of his employment duties ...
title to such invention shall vest in the United States, and if patents on such invention are issued they shall be issued to the United States, unless in particular circumstances the Administrator waives all or any part of the rights of the United States to such invention in conformity with the provisions of this section.
(b) Each contract entered into by the Administration with any person shall contain effective provisions under which such person shall furnish promptly to the Administration a written report containing full and complete technical information concerning any invention ... which may be made in the course of or under such contract.
Pub.L. No. 93-577, 88 Stat. 1878, 1887-88. Section 9(g) of the FNERDA further provides that the Administrator may grant exclusive or partially exclusive licenses in any invention to which title is vested in the United States. 88 Stat. at 1889.
In light of Congressional intent to ensure that the government receive title to all patents resulting from research contracts authorized by the Saline Water Conversion Act, the Contract explicitly provided that MRI
does hereby grant to the Government the full and entire domestic right, title and interest in [any invention ... [conceived or first actually reduced to practice] in the course of or under this contract or any subcontract].
In addition, the Contract required MRI to
submit ... written information concerning the conception or actual reduction to practice ... of every invention made by [MRI] pertaining to the work called for in this contract which was conceived or first actually reduced to practice ... during ... the term of this contract, which invention would be a Subject Invention if made under this contract, but which the Contractor believes was made outside the performance of work required under this contract.
The Contract further provided that
[f]ailure to furnish such information [ ] shall, in any subsequent proceeding, place on the Contractor the burden of going forward with the evidence to establish that such invention is not a Subject Invention. If such evidence is not then presented the invention shall be deemed to be a Subject Invention.
The Contract became effective on July 15, 1976 and extended through January 15, 1978. MRI hired John E. Cadotte to carry out the reverse osmosis membrane research contemplated by the Contract. On November 17, 1977, Cadotte reported in his MRI laboratory notebook the formation of three composite polyamide membranes, all made by the interfacial reaction of trimesoyl chloride (TMC), an aromatic acyl chloride having three acyl chloride groups, and metaphenylene diamine (MPD), an aromatic diamine, at 130? C. Cadotte tested two of these TMC/MPD membranes for their ability to desalinize seawater at 1500 psi. Cadotte found that these membranes exhibited fluxes of 12.7 gfd and 9.5 gfd with salt rejections of 95.0 and 88.5%, respectively. The record does not indicate that MRI reported this work to the government as required by the Contract.
In the summer of 1977, while he was still working at MRI, Cadotte and other MRI employees began to discuss forming a new company called FilmTec Corporation to develop new reverse osmosis membrane technologies. On December 20, 1977, E.E. Erickson, the president of FilmTec, sought a research contract for FilmTec with the Office of Water Research and Technology. In the research proposal that Cadotte helped to prepare, Erickson stated that former MRI staff members would carry out the proposed research program as a "follow-on" to the recent research at MRI under the Contract. Erickson further stated that "FilmTec was founded by [MRI] staff as a spin-off of MRI to conduct research and development and to manufacture products based on the polymer thin film technology that was developed at MRI."
Cadotte left MRI on December 31, 1977 and joined FilmTec as one of its four co-founders. On February 23, 1978, working in FilmTec's research laboratory, he reacted TMC and MPD and formed two composite reverse osmosis membranes. Cadotte's February experiments at FilmTec essentially duplicated his November experiments at MRI: he reacted the same proportions of TMC and MPD in the same manner for the same amount of time. The sole difference between the November and February experiments was that Cadotte reduced the membrane drying temperature from 130? C to 100? C. As a result, the TMC/MPD membranes that Cadotte produced in February exhibited fluxes of 13.1 and 11.0 gfd at a 98.0% salt rejection rate, better than those obtained the previous November.
Approximately one year later, on February 29, 1979, Cadotte filed a patent application relating to his interfacially polymerized reverse osmosis membranes. Cadotte assigned his rights in that application and any resulting patent to FilmTec, which duly recorded this assignment in the United States Patent and Trademark Office. Cadotte's patent application ultimately issued as the '344 patent, entitled "Interfacially Synthesized Reverse Osmosis Membrane." FilmTec currently has record title to the '344 patent. The government has not taken action to determine its rights to the '344 patent under the Contract.
Hydranautics manufactures two reverse osmosis membranes known as CPA-2 and HPM. HPM is formed by the interfacial condensation of, inter alia, TMC and MPD, while CPA-2 is also formed from TMC and MPD. Other reactants were also involved, but their presence is not material to the issue before us. Accordingly, FilmTec sued Hydranautics for infringement of claims 1 and 6 of the '344 patent. Hydranautics asserted in defense that under the Contract, the United States, not FilmTec, has legal title to the '344 patent and that FilmTec therefore lacks standing to maintain its infringement suit. The district court held that FilmTec has legal title to the '344 patent because Cadotte invented the claimed membrane after he commenced work at FilmTec, not while he was employed at MRI, and the '344 patent was not invalid and was infringed. 2
Hydranautics argues that Cadotte conceived the claimed invention during the term of the...
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