McDonnell Douglas Corp. v. United States

• Decision Date: 27 January 1982
• Docket Number: No. 278-77.,278-77.
• Parties: McDONNELL DOUGLAS CORPORATION v. The UNITED STATES.
• Court: U.S. Claims Court

670 F.2d 156

McDONNELL DOUGLAS CORPORATION v. The UNITED STATES.

No. 278-77.

United States Court of Claims.

January 27, 1982.

Paul M. Craig, Jr., Washington, D.C., attorney of record, for plaintiff. Melvin Kraus, Craig & Antonelli and John P. Scholl, Washington, D.C., of counsel.

William O. Geny, Washington, D.C., with whom was Asst. Atty. Gen. J. Paul McGrath, Washington, D.C., for defendant. Vito J. DiPietro, Washington, D.C., of counsel.

Before SKELTON, Senior Judge, and KASHIWA and DAVIS, Judges.

OPINION

DAVIS, Judge:

This patent case comes to us on the Government's exceptions to Trial Judge Browne's decision in favor of plaintiff McDonnell Douglas Corporation. Plaintiff seeks compensation under 28 U.S.C. § 1498(a) (1976) for the allegedly unauthorized purchase of an antitank missile system said to be covered by plaintiff's patent, and also under 35 U.S.C. § 183 (1976) for damages resulting from the imposition of a secrecy order on the missile design. We reverse the decision of the trial judge on the former issue and remand for further proceedings on the latter.

In 1959, McDonnell Douglas Corporation (McDonnell) began work on an anti-target missile system. By 1962, McDonnell had successfully developed, built, and tested the TOW SIDEKICK antitank missile. Soon thereafter, when the Army expressed the need for a Medium Antitank/Assault Weapon (MAW), McDonnell responded by proposing a scaled down version of the TOW SIDEKICK utilizing similar guidance logic. Subsequently, James M. Tucker, a McDonnell employee, conceived a new type of guidance system for the MAW missile. This new guidance system and the scaled down version of the TOW SIDEKICK missile were the subject of Patent Application Serial Number 346,165 (the Tucker Patent Application) which was filed on February 20, 1964, and eventually matured into U.S. Patent No. 3,868,883 (the Tucker or '883 patent). The patent had not yet been granted, however, when, on August 31, 1964, McDonnell entered into an experimental development contract, Contract No. DA-01-021-AMC-11350(Z) (the 11350(Z) contract), with the Army to develop such an MAW missile. At the time the 11350(Z) contract was made, the new, smaller McDonnell missile had not been constructed or flight tested, although the guidance system and other subsystems had been tested by computer simulation. McDonnell successfully completed the experimental development program under the 11350(Z) contract, but, in the end, the Army decided to buy its MAW missiles from McDonnell's competitors, Raytheon Corporation and Kollsman Instrument Company.¹

Plaintiff asserts that the defendant's procurement of missile systems (called Dragon) from these other companies infringed McDonnell's rights under the Tucker patent. Whether the purchase infringed the '883 patent depends on two questions: does the Government have rights to use the patent, and, if not, does the purchased missile infringe a claim of the '883 patent. We hold that the Government had rights in the '883 patent sufficient to allow it to make the purchases from the competitor firms, and therefore we need not decide infringement. See Leesona Corp. v. United States, 208 Ct.Cl. 871, 887 note 9, 894, 530 F.2d 896, 906 note 9, 910 (1976), Mine Safety Appliances Co. v. United States, 176 Ct.Cl. 777, 781, 364 F.2d 385, 387 (1966).

I.

The basic problem is whether the Government had a right to use or purchase the allegedly infringing articles. Defendant contends that that right came to it from the Subject Invention clause of the 11350(Z) contract because the invention was completed (by reduction to practice) under that agreement. Plaintiff answers, first, that the Tucker invention was wholly excluded by the parties from the Subject Invention clause, and, second, that the invention was reduced to practice before the consummation of the Government's 11350(Z) contract and accordingly was outside the scope of the Subject Invention clause. In this part of our opinion we consider plaintiff's first argument.

The Subject Invention provision reads: "Except as provided in (e) and (h) of this clause, the Contractor agrees to grant the Government all right, title and interest in and to each Subject Invention (made by the Contractor), subject to the reservation of a nonexclusive and royalty-free license to the Contractor." Pt. II, art. D, cl. 22 of the contract as amended by the May 11, 1965 modification incorporating 32 C.F.R. § 9.107-5 (1965) (adopted July 21, 1964).² The contract and the regulations then define a Subject Invention as "any invention or discovery, whether or not patentable, conceived or first actually reduced to practice in the course of or under this contract." Id.³

McDonnell's first position (which was accepted by the trial judge) is that the parties agreed wholly to exclude the Tucker invention from the Subject Invention clause. For us, the overriding factor resolving this contractual question is that, under the regulations in effect when the contract was made on August 31, 1964 (unlike the regulations they replaced), the contracting officer had no authority to give, by himself, contractual exemptions from the patent rights clause. Compare 32 C.F.R. § 9.107-2(a) (1961) with 32 C.F.R. § 9.107 (1965). (The July 21, 1964 amendments eliminated the possibility of such an exclusion for a particular invention from the patent rights clause.) Any attempt to do so would constitute a deviation from the regulations. 32 C.F.R. § 1.109-1 (1964) (definition of deviation). Deviations were allowed only if authorized in accordance with departmental procedures and if written notice of the deviation was furnished to the Assistant Secretary of Defense and the Assistant Secretary of the Army. 32 C.F.R. § 1.109-2 (1964).⁴ Plaintiff has produced nothing to indicate that such authorization was granted or that proper notice was furnished, and we can take it that they were not given. In this case, therefore, any deviation from the prescribed wording was a violation of the regulation and beyond the authority of the contracting officer. Actions taken by that officer beyond his authority are, of course, not binding on the Government. E.g., Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10 (1947). It is in the light of those cardinal rules that the plaintiff's contentions must be assessed.

The Subject Invention provision contains no exception for the Tucker invention, but McDonnell says that clause 23 of the contract, "Rights in Technical Data", modifies the unqualified patent rights clause (including the Subject Invention provision). That data rights article limits the Government's right to disclose much technical data submitted by McDonnell, including that in the Tucker patent application.⁵ Because the clause in this contract specifically mentions the '883 patent, plaintiff urges that the Tucker patent is thereby excluded from the coverage of the patent rights clause. The data rights clause itself, however, belies that conclusion. Paragraph (e), "Relation to Patents", of that clause states: "Nothing contained in this clause shall imply a license to the Government under any patent or be construed as affecting the scope of any license or other right otherwise granted to the Government under any patent." (Emphasis added). This paragraph shows that the data rights clause is intended to have no effect on patent rights, whether license or title, granted to the Government by the 11350(Z) (or any other) contract. In addition, rights to technical data (the sole subject covered by the technical data clause) normally differ from patent rights (cf. e.g., Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 94 S.Ct. 1879, 40 L.Ed.2d 315 (1974)), and it would have been illegal, as we have pointed out, for the contracting officer to use this separate means as a covert and unacknowledged effort to exclude the '883 patent from the Government's "subject invention" rights. The terms and policy of applicable procurement regulations are to be followed, not thwarted. See Chris Berg, Inc. v. United States, 192 Ct.Cl. 176, 182-83, 426 F.2d 314, 317 (1970); Firestone Tire & Rubber Co. v. United States, 195 Ct.Cl. 21, 34-35, 444 F.2d 547, 553-54 (1971); ITT Arctic Services, Inc. v. United States, 207 Ct.Cl. 743, 763, 524 F.2d 680, 690 (1975). A corollary is that contract provisions are to be read, if fairly possible, to accord with those principles.

McDonnell then refers to subsequent contracts. In three later agreements the following language, or similar wording, appears: "Nothing contained hereinabove or elsewhere in this contract shall imply a license to the Government under a patent issuing from the Tucker Patent Application or be construed as affecting the scope of any license or other right granted to the Government under this or any other Government Contract." Plaintiff, seizing upon the first half of this sentence, maintains that it proves that the Government had no right or interest in the '883 patent. The conclusion of the sentence indicates otherwise. As a whole, the sentence does not act as a waiver, as the trial judge found it did, of the Government's pre-existing claims or rights, but, rather, makes clear that the later contracts are to have no effect on any and all pre-existing rights. Here, too, it would have been inadmissible for the contracting officer to flout the regulation by seeking (without proper authorization and notification) to remove the '883 patent from the Subject Invention provision.

Another of plaintiff's points is that the list of Subject Inventions submitted by McDonnell, as required by the patent rights clause, did not include the '883 patent. From the defendant's failure to challenge the omission, it is argued that the Tucker patent could not be a "Subject Invention." Nothing in the contract supports that conclusion. The purpose of the reporting requirement is not to limit the Government's rights to inventions but to apprise the United States...