Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_13-cv-04910/USCOURTS-cand-3_13-cv-04910-28/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

OPEN TEXT S.A.,

Plaintiff,

v.

BOX, INC., et al.,

Defendants.

Case No. 13-cv-04910-JD 

ORDER GRANTING IN PART AND 

DENYING IN PART SUMMARY 

JUDGMENT ON GOVERNMENT 

CONTRACTOR AND FAILURE TO 

STATE CLAIM DEFENSES

Re: Dkt. No. 297

Plaintiff Open Text has moved for summary judgment on two affirmative defenses 

asserted by defendants Box and Carahsoft (hereafter referred to collectively as “Box,” except 

where otherwise stated): (1) a government contractor defense under 28 U.S.C. § 1498(a); and (2) 

failure to state a claim. For the reasons stated below, the Court grants the motion in part and 

denies it in part.

LEGAL STANDARD

Summary judgment is appropriate when no genuine issue exists as to any material fact, and 

the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). A genuine 

issue exists if the evidence is such that a reasonable jury could find for the nonmoving party. 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A disputed fact is material if it might 

affect the outcome of the suit such that a finding of that fact is necessary and relevant to the 

proceeding. Anderson, 477 U.S. at 248.

DISCUSSION

I. GOVERNMENT CONTRACTOR DEFENSE

Box contends that Open Text cannot recover for certain allegedly infringing sales because 

of the government contractor defense provided for in 28 U.S.C. § 1498(a). That statute 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 

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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.

Congress enacted section 1498(a) in 1910 and expanded it in 1918 to meet national 

defense procurement needs during World War I. Advanced Software Design Corp. v. Federal 

Reserve Bank of St. Louis, 583 F.3d 1371, 1375 (Fed. Cir. 2009). The intent was to “stimulate 

contractors to furnish what was needed for the war, without fear of becoming liable themselves for 

infringements to inventors or the owners or assignees of patents.” Id. As the Federal Circuit has 

emphasized, the essential purpose of section 1498(a) is “to allow the Government to procure 

whatever it wished regardless of possible patent infringement.” TVI Energy Corp. v. Blane., 806 

F.2d 1057, 1060 (Fed. Cir. 1986). To that end, section 1498(a) has two consequences when it 

applies: “It relieves a third party from patent infringement liability, and it acts as a waiver of 

sovereign immunity and consent to liability by the United States.” Madey v. Duke Univ., 307 F.3d 

1351, 1359 (Fed. Cir. 2002). It achieves that goal by insulating private non-government entities 

from infringement claims and transferring liability to the United States when the accused activity 

is conducted “for the Government and with the authorization or consent of the Government.” 28 

U.S.C. § 1498(a).

“When raised between private parties, reliance on § 1498(a) is deemed an affirmative 

defense.” Advanced Software Design, 583 F.3d at 1375. When “a manufacturer sells a product to 

both the government and a third party, the normal course of events is parallel patent infringement 

proceedings in the Court of Federal Claims for sales to the government in accordance with 28 

U.S.C. § 1498 and in the district court for the nongovernmental sales.” Nasatka v. Delta Scientific 

Corp., 58 F.3d 1578, 1580 n.1 (Fed. Cir. 1995).

Against this background, one may wonder how section 1498(a) even arguably applies here. 

The accused activity involves the commercial practices of Box, a publicly traded for-profit entity 

in the business of supplying cloud-based applications to other business and enterprises. It may be 

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hard to believe that Box does anything substantive “for the Government” and with its 

authorization and consent, or is otherwise meaningfully involved in national procurement matters. 

But the dispute here is significantly narrower than a blanket claim of immunity by Box. As Box 

indicated in the Joint Pretrial Statement and its opposition brief, it asserts section 1498(a) only as 

an alleged basis for excluding its sales involving the federal government from the royalty base for 

use in calculating Open Text’s damages. See Dkt. No. 390 at 4; Dkt. No. 349 at 6:18-7:6 & n.7. 

This issue raises genuine disputes of material fact that preclude summary judgment. 

Courts have found that sales can be “for the Government” when the sale is to the federal 

government and the government uses the product. See Nasatka v. Delta Scientific Corp., No. C.A. 

93-1420-A, 1994 WL 16781686, at *3 (E.D. Va. Feb. 4, 1994) (collecting cases). In addition,

authorization and consent can be either express or implied. TVI Energy Corp., 806 F.2d 1057 at 

1060. Courts have found authorization and consent to be implied “by the delivery of the allegedly 

infringing product to the government and acceptance and use by the government.” Nasatka, 1994 

WL 16781686, at *3 (citing Bereslavsky v. Esso Oil Co., 175 F.2d 148, 150 (4th Cir. 1989), and 

Croydon Co. v. Unique Furnishings, Ltd., 831 F. Supp. 480, 484-85 (E.D.N.C. 1993)). Thus, in 

Finjan, Inc. v. Secure Computing Corp., the Federal Circuit endorsed a jury instruction stating that 

“sales ‘to the United States government should not be included in any damages calculation you 

perform.’” 626 F.3d 1197, 1208 (Fed. Cir. 2010).

Here, Box and its distributor, Carahsoft, have submitted declarations attaching 

spreadsheets produced by defendants that purport to show sales by defendants to the government, 

or to contractors who purchased the product for the government. See Decl. of Matthew Rattigan 

¶¶ 4, 6, Dkt. No. 349-5; Decl. of Jeff Mannie ¶¶ 3, 5, 7, Dkt. No. 349-9. The data produced by 

defendants was apparently sufficient for Open Text’s damages expert to identify most of the sales 

that were to go ultimately to the government and exclude them from her damages base, though 

Rattigan and Mannie dispute her classification of some of the sales. See Rattigan Decl. ¶¶ 5-6; 

Mannie Decl. ¶¶ 3-7. That distinguishes this case from Systron-Donner Corp. v. Palomar 

Scientific Corp., cited by Open Text, which held that defendant’s sales of accused accelerometers 

to an intermediary, who eventually provided some of them to the government, were not made with 

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the authorization and consent of the government. See 239 F. Supp. 148, 150 (N.D. Cal. 1965). 

There the court emphasized that “as far as defendant was concerned, [intermediary] Micro Gee 

might well have used the accelerometer for a non-government use,” id., but here, there appears to 

be at least some evidence that defendants and Open Text’s expert were able to identify sales that 

were destined for the government and actually accepted by the government -- implying 

authorization and consent. That is sufficient to preclude summary judgment in Open Text’s favor.

Although the Court will deny summary judgment on the current record, it expects Box to 

adduce at trial facts sufficient to warrant exclusion of its sales involving the federal government

under section 1498(a) for royalty base and damages purposes. Open Text may renew its motion if 

appropriate during trial. 

II. FAILURE TO STATE A CLAIM

Defendants’ respective answers make the conclusory allegation that Open Text’s complaint 

fails to state a claim upon which relief can be granted -- an obvious quotation of the motion to 

dismiss standard in FRCP 12(b)(6). See Box Answer at 18, Dkt. No. 163; Carahsoft Answer at 18, 

Dkt. No. 164. This purported defense is not an affirmative defense at all, but merely a statement 

by defendants that plaintiff’s allegations are not sufficient to make out a case. Judge Koh in this 

district carefully analyzed this issue and concluded that the failure to state a claim allegation is not 

a proper affirmative defense and should be stricken from an answer. Perez v. Gordon & Wong 

Law Group, P.C., No. 11-CV-03323-LHK, 2012 WL 1029425, at *11 (N.D. Cal. Mar. 26, 2012); 

see also Barnes v. AT&T Pension Ben. Plan-Nonbargained Program, 718 F. Supp. 2d 1167, 1174 

(N.D. Cal. 2010); Aguilar v. Zep, Inc., 13-cv-00563-WHO, 2014 WL 4245988, at *18 (N.D. Cal. 

Aug. 27, 2014). This Court agrees and strikes the statement from defendants’ answers. 

IT IS SO ORDERED.

Dated: January 30, 2015

______________________________________

JAMES DONATO

United States District Judge

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