Robishaw Engineering, Inc. v. US

• Decision Date: 27 June 1995
• Docket Number: No. 1:95CV0214.,1:95CV0214.
• Citation: 891 F. Supp. 1134
• Parties: ROBISHAW ENGINEERING, INC., Plaintiff, v. UNITED STATES of America, et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

891 F. Supp. 1134

ROBISHAW ENGINEERING, INC., Plaintiff, v. UNITED STATES of America, et al., Defendants.

No. 1:95CV0214.

United States District Court, E.D. Virginia. Alexandria, Virginia.

June 27, 1995.

COPYRIGHT MATERIAL OMITTED

Thomas J. Scott, Jr., Kenneth M. Reiss, Howrey & Simon, Washington, DC, Margaret E. Anderson, Browning, Bushman, Anderson & Brookhart, Houston, TX, for plaintiff.

Helen F. Fahey, U.S. Atty., for the E.D. of Virginia, Jeri Kaylene Somers, Asst. U.S. Atty., Alexandria, VA, Frank W. Hunger, Asst. Atty. Gen., Vito J. DiPietro, Director, Gary L. Hausken, Atty., Commercial Litigation Branch, Civil Div., Dept. of Justice, Washington, DC, for defendants.

MEMORANDUM OPINION

ELLIS, District Judge.

This declaratory judgment action grows out of a dispute that arose in patent license negotiations between a patentee, Robishaw Engineering, Inc. ("Robishaw"), and the United States Army. In the course of these negotiations, the Army's representatives questioned whether the subject matter of Robishaw's patents was developed during Robishaw's performance of a previous government contract. If so, according to the Army, the government obtained a royalty-free license to practice the patents. Robishaw disagreed with this assertion, and sought resolution of the dispute by initiating this declaratory judgment action. The government defendants¹ responded by filing a threshold dismissal motion on grounds of lack of jurisdiction, standing, and ripeness. This opinion disposes of the motion.²

I.

In the 1950's, Robishaw invented and began manufacturing and selling its "Flexifloat" system of buoyant pontoon modules that can be locked together in various configurations to form structures such as bridges, barges, docks, and platforms. Although the modules have been used by oil companies and other civilian enterprises, their primary use is in military applications. In the early 1980's, another company, Aerojet Techsystems, engaged in work under contracts for the United States Army and Navy. In December 1983, as part of that work, Aerojet obtained some Flexifloat modules from Robishaw for evaluation and demonstration. At this time, Robishaw was working on a second generation of Flexifloat modules designed to be "container compatible," meaning the modules could be handled and transported on container ships in the same manner as standard freight containers. In August 1984, Robishaw filed for patents on this new generation of modules, known as "ISOLOG" modules, which patents eventually issued in September 1986 and September 1987.³

In June 1984, Robishaw showed the new ISOLOG modules to Aerojet, which in turn contracted with the Navy to demonstrate them for the Army and Navy ("the Navy Contract"). According to Robishaw, the purpose of the Navy Contract was solely to evaluate the concept of using the ISOLOG modules to construct a "lighterage causeway" or system for delivering goods to and from cargo ships. Robishaw claims that the Navy Contract did not involve any research and development concerning the modules themselves.

In connection with the Navy Contract, Robishaw agreed to lease twelve ISOLOG modules to Aerojet for the planned demonstration ("the Aerojet Lease"). In August 1984, Robishaw completed production and testing of the modules for the demonstration, and began supplying the modules to Aerojet pursuant to the Aerojet lease. Ultimately, Aerojet's demonstration of the modules was successful, and in June 1985, the Navy contracted to purchase ISOLOG units from Robishaw. Some four years later, the Army also purchased ISOLOG modules from Robishaw.

In early 1992, the Army issued a request for proposals seeking competitive bids to provide it with modules functionally identical to and interchangeable with Robishaw's ISOLOG modules. The bid request initially included a standard "patent indemnity clause," under which the successful bidding contractor would agree to indemnify the United States in the event the government was held liable for damages based on the contractor's unauthorized use of any patents. See 48 C.F.R. §§ 27.203-1, 52.227-3. At least one potential bidder told the Army that it feared the proposed work would necessarily infringe Robishaw's patents. As a result, the Army inserted a waiver in the patent indemnity clause, so that the successful bidder would not be required to indemnify the government for violating Robishaw's patents. See 48 C.F.R. §§ 27.203-6, 52.227-5. In effect, the Army assumed liability in the event the successful bidder, in performing the contract, was held to have made unauthorized use of Robishaw's patents.

In May 1992, Arthur Tischer, an Army intellectual property lawyer, contacted Robishaw and began negotiations for a license under the patents covering the ISOLOG modules. In aid of these negotiations, Tischer asked Robishaw to provide certain information about the patents, which information Robishaw claims required extensive effort and cost to produce. In May 1993, Robishaw completed gathering the information and provided it to Tischer. On April 20, 1994, Tischer wrote to Robishaw and indicated that his review of the information, although not yet complete, had produced several preliminary findings on which he sought Robishaw's comments and some additional information, as well. Specifically, Tischer indicated that further review was needed to determine whether the United States already had a royalty-free license in Robishaw's patents as a result of the 1984 Navy Contract. This was so, Tischer said, because federal procurement regulations provide that contracts for experimental, developmental, or research work shall include a standard patent rights clause giving the government a "nonexclusive, nontransferable, irrevocable, paid-up license" on inventions first conceived or reduced to practice by contractors during performance of the contract. See 48 C.F.R. §§ 27.303, 52.227-11. And while this clause was not included in either the Navy Contract or the Aerojet Lease, courts have held that such standard clauses are implicitly incorporated in all government contracts to which they are applicable. See G.L. Christian & Assocs. v. United States, 160 Ct.Cl. 1, 312 F.2d 418, 424, cert. denied, 375 U.S. 954, 84 S.Ct. 444, 11 L.Ed.2d 314 (1963). From this, Tischer asserted, the United States, by operation of law, may have obtained a royalty-free license to practice Robishaw's patented inventions. Not so, responded Robishaw, because (i) the Navy Contract and the Aerojet Lease did not involve experimental, developmental, or research work, and (ii) the patented innovations were neither conceived nor first put into practice during work under either the Navy Contract or the Aerojet Lease. Tischer, in turn, wrote back to Robishaw on October 12, 1994, to say that the known facts suggested that the Navy Contract was indeed for research and development, that it was still unclear whether the patented inventions had been completed and tested prior to commencement of the Navy Contract work, and that, in any event, certain prior art raised a substantial question concerning the validity of the ISOLOG module patents.

For a time thereafter, Robishaw and the government continued to discuss this dispute. Eventually, Robishaw became convinced that further negotiation was futile and filed this action for declaratory judgment pursuant to the Administrative Procedure Act (APA), 5 U.S.C. §§ 701-706, seeking a declaration that the Army's negotiation position is arbitrary, capricious, an abuse of discretion, and contrary to law.

Subsequently, the Army entered a contract with one of Robishaw's competitors, Lakeshore Engineering. As yet, nothing has been delivered to the Army under this contract, for it is still at a preliminary "first article"⁴ test stage in which Lakeshore Engineering must demonstrate its ability to manufacture the desired products. Thus, according to Robishaw, Lakeshore Engineering is currently engaged in manufacturing items for the government that infringe Robishaw's patents.

The government seeks threshold dismissal of Robishaw's declaratory judgment action on a number of grounds, arguing essentially that there is no occasion at this time for judicial intervention because the Army has simply taken a negotiating position with Robishaw. At the initial hearing on the motion, the government indicated that Tischer's preliminary conclusions did not necessarily represent the Army's position on the license issue. This led the Court to conclude that further negotiations might well bear fruit and thereby render this action moot. Thus, the Court directed the parties to continue their negotiations, and also directed the government to determine whether in fact the Army believed it had a royalty-free license on Robishaw's patents. In accordance with the Court's directions, negotiations continued, with the parties exchanging proposals and counterproposals. Ultimately, the royalty-free license issue could not be resolved. Because the further negotiations did not lead to agreement, the government's motion must now be resolved. Analysis of the many issues raised by the motion properly begins with a brief sketch of the intersection of the law of patents and government contracts.

II.

The United States government has the right to use all patented inventions. Courts have frequently suggested that this right emanates from the government's power of eminent domain; the government in effect "takes" a license in any patent it uses. See, e.g., Hughes Aircraft Co. v. United States, 29 Fed.Cl. 197, 208 (1993); Motorola, Inc. v. United States, 729 F.2d 765, 768 (Fed.Cir. 1984); Pitcairn v. United States, 212 Ct.Cl. 168, 547 F.2d 1106, 1114 (1976). More recently, at least one court has taken the view that the government need not exercise its power of eminent domain because the statutes that define patent rights simply do not provide patentees with the power to exclude government use. See De Graffenried v. United...