## United States Court of Appeals for the Federal Circuit

04-5100,-5102

ZOLTEK CORPORATION, Plaintiff-Cross Appellant,

v. UNITED STATES, Defendant-Appellant.

Dean A. Monco , Wood, Phillips, Katz, Clark & Mo rtimer, of Chicago, Illinois, argued for plaintiff-cross appellan t. With him on the brief was John S. Mortimer . Of counsel on the brief were James F. Davis and Pamela S. Kane , Howrey, Simon, Arnold & White, of Washington, DC. Anne Murphy , Attorney, Appellate Staff, Civil Di vision, United States Department of Justice, of Wash ington, DC. With her on the brief were Peter D. Keisler , Assistant Attorney General, Scott R. McIntosh , Attorney, and Gary L. Hausken , Attorney. Appealed from: United States Court of Federal Claims Chief Judge Edward J. Damich

## United States Court of Appeals for the Federal Circuit

04-5100, -5102

ZOLTEK CORPORATION, Plaintiff-Cross Appellant,

v. UNITED STATES, Defendant-Appellant.

_______________________

DECIDED: March 31 , 2006

_______________________

Before GAJARSA, Circuit Judge , PLAGER, Senior Circuit Judge , and DYK, Circuit Judge

. PER CURIAM. Concurring opin ion filed by Circuit Judge GAJARSA. Separate concurring opinion filed by Circuit Judge DYK. Dissenting opinion filed by Senior Circuit Judge PLAGER. The United States appeals the or der of the Court of Federal Claims holding that it could assert jurisdiction over Zoltek Cor poration’s (“Zoltek”)’s patent infringement allegations by treating the ac tion as a Fifth Amendment ta king under the Tucker Act. Zoltek cross-appeals the trial court’s ruling t hat 28 U.S.C. § 1498(c) bars this action as arising in a foreign country. The Court of Federal Claims certifie d the rulings under 28 U.S.C. § 1292(d)(2), and this c ourt accepted jurisdiction. See Zoltek Corp v. UnitedStates , No. 96-166 C (Fed. Cl. Feb. 20, 2004) (certification); see generally Z o ltek Corp. v. United States , 58 Fed. Cl. 688 (2003), Zolt ek Corp. v. United States , 51 Fed. Cl. 829 (2002). We conclude that under § 1498, the United States is liable for the use of a method patent only when it pr ac tices every step of the cl aimed method in the United States. The court therefore affirms the tria l court’s conclusion that § 1498 bars Zoltek ’s claims. Ho wever, we reverse the trial co urt’ s determination that it had jurisdiction un der the Tucker Act based on a violat ion of the Fifth Amendment.
I. Zoltek Corporation (“Zoltek”) is the assigne e of United States Re issue Paten t No. 34,162 (reissued Jan. 19, 1993) to a “Controlled Surface Electrical Resistance Carbon Fiber Sheet Product” (“the Re ’162 patent”). The Re ’162 pat ent claims certain method s of manufacturing carbon fiber sheets with c ontrolled s u rface electrical resistivity. 1 Independent claim 1 is representativ e. After reissue, it reads: 1. A method of manufacturing a plur ality of different value c ontrolled resistivity carbon fiber sheet produc ts employing a carboniz able fiber starting material; said method comprising selectively partially carbonizing pr eviously oxidized and stabilized fiber starting material for a predetermined time period in an oxy gen free atmosphere within a furnace at selected temper ature values within a temperature range from 370 degrees Centigrade to about 1300 degrees Centigrade by soaking the stabiliz ed fiber starting material at the s e lected temperature for the predetermined period of time

1 Although the Re ’162 patent also includes v a rious product-by-process and product claims, only the method c l aims are at i ssue here. In a March 5, 200 1 motion for leave to file a first amended complaint, Zo ltek abandoned it s al legations that the government had infringed the product claims. See Zoltek , 58 Fed. Cl. at 689 n.3. 04-5100, -5102 - 2 -to provide a preselected known volume el ectrical resistivity to the partially carbonized fibers corresponding to that volume electrical resistivity value required to provide the preselected desired surface resistance value for the finished sheet products, and thereafter processing the par tially carbonized fibers into homogeneous carbon fiber sheet products having the preselected desired surface electrical resistances. Re ’162 pat ent, col. 8, ll. 42-66. The method thus takes a “carbonizable fiber starting material” and requires “partially carbonizing” it. “Carbonization” as used in the Re ’162 patent means “a process which inv o lv es heat treatment in an inert atmosphere which eliminates or removes all elements other than carbon.” Zoltek , 48 Fed. Cl. 290, 293 (2000). “Partia l carbonization” refers to carboniz a tion suffici ent to achieve a desired surface resistanc e in a sheet woven from t he resulting fibers. Id. at 295. Independent claim 11 describes a represent ative method for making such fibers and weav ing them into a fiber sh eet. After reissue, it reads: 11. A method of manufacturing a plur ality of different value c ontrolled resistivity carbon fiber sheet products employing carbonizable, previously oxidiz ed an d stabilize d fiber starting material; said method comprising forming an oxidized and stabilized tow, stretching and breaking the stabiliz ed tow, forming the stabilized stretched and br oken fiber f ilaments into sliver comprised of, large bundles of discontinuous fila ments in an untwisted condition, converting the sliver into roving, spinning the roving into a spun yarn, plying or twisting the spun yarn, weav ing or knitting the plied an d twisted spun yarn into fabric, and selectively partially carbonizing the fabric thus formed at preselect ed elevated temperature values for a pr edetermined time period in an oxygen
04-5100, -5102 - 3 -free atmosphere within a furnace hav ing a continuously in creasing temperature profile within the range fr om about 370 degrees Ce ntigrade to about 1300 degrees Centigrade to provi de a known preselected electrical volume resistivity to the partially ca rbonized fiber filam ent in the fabric corresponding to that valu e of electrical v o lume resistivity required to provide the preselected desired surfac e resistance for the finished fabric. Re ’162 pat ent, col. 9, l. 65 – col. 10, l. 24. Independent claim 15 describes a method f o r making and proces sing the fibers into paper-like sheet products. Id. at col. 10, l. 35 – col. 11, l. 8. In short, the steps of the claimed methods are directed to “parti ally carbonizing” fibers, and weaving o r processing them into controlled resist ivity carbon fiber mats or sheets. The relev a nt facts are undis puted. The United States contra cted with Lock heed Martin Corporation (“Lockheed”) to desig n and build the F-22 fight er. Zoltek , 51 Fed. Cl. at 831. Lockheed subcontracted fo r two types of silicide fibe r products that it uses in the aircraft. The first is a pre-impregnated material made from Nicalon silicon carbide fibers. These fibers are partially carboni z ed and manufactured into sheets in Japan, which are then imported into t he United States. The second is a silicide fiber mat made from Tyranno fibers. The Tyranno fibers ar e manufactured exclusively in Japan, but they are processed int o mats in the United States. Zol t ek , 58 Fed. Cl. at 690. Zoltek brought suit in the Court of F ederal Claims under § 1498(a), alleg i ng that the United States and Lockheed used the methods claimed in the Re ’162 patent when Lockheed’s subcontractors made the two silicide fiber p r oducts used in the F-22. Zoltek alleges that the mats and sheets were made , for the United States, using t he claimed methods. The gov ernment moved for partial summary judgment that Zoltek’s § 1498(a) claims were barred by § 1498(c) because they arose in Japan. The trial court denied
04-5100, -5102 - 4 -the motion. Although it agreed that § 1498(c) barred Zoltek’s claims under § 1498(a), the trial court directed Zoltek to amend its complaint t o al lege a taking under the Fifth Amendment. Id. at 707. The trial court conclude d that Zolt ek could assert the infringement claims under 28 U.S.C. § 1491(a)(1) as a taking in violation of the Fifth Amendment. Id. at 690-91 & 695-706. The trial c ourt certified its § 1498 analysis and its holding that Zoltek’s patent infringemen t claims sounded in the Fifth A m endment, under § 1292(d)(2). Both parties timely sought permission to appeal. This court accepted the interloc utory appeals and has jurisdiction under 28 U.S.C. §§ 1292(c)(1) and 1295(a)(3). The issues before the court are purely quest ions of law. This court reviews the trial court’s statutory and constit u ti onal analysis without deference. See Shoshone Indian Tribe of Wind River Re servation v. United States , 364 F.3d 1339, 1345 (Fed. Cir. 2004).
II. The federal government is immune from any legal action by its sovereign immunity. See United States v. Sherwood , 312 U.S. 584, 586 (1941) (stating that “[t]he United Stat es, as sovereign, is immune from su it save as it consents to be sued”). The waiver of immunity can be limited and conditione d by the Congr ess. See United States v. Nordic Village Inc ., 503 U.S. 30, 34 (1992) (stating that the government’s consent to be sued m u st be stric t ly construed in favor of the sov e reign and not enlarged bey ond what the language requires). A patentee’s judic i al rec ourse against the federal

04-5100, -5102 - 5 -government, or its contractors, for patent infringement, is set forth and limited by the terms of 28 U.S.C. § 1498. 2 Section 1498(a) provides, in pertinent part: Whenever an invention describ ed in and covered by a patent of the United States is used . . . by or for the United States without license of the owner thereof or lawful right to use or m anufacture the same, the owner's remedy shall be by action against the United St ates in the United States Court of Federal Claims for the rec o very of his reasonable and entire compensation for such use and manufacture. Id. (emphasis added). This court has held that “direct infri ngement under section 271( a) is a nec e ss ary predicate for government liability under section 1498.” NTP, Inc. v. Research in Motion, Ltd. , 418 F.3d 1282, 1316 (Fed. Cir. 2005) (citi ng Motorola, Inc. v. United States , 729 F.2d 765, 768 n.3 (Fed. Cir. 1984)). We have further held that “a process cannot be used ‘within’ the United States as required by section 271(a) unles s each of the steps is performed within this country.” Id. at 1318. Consequently, wher e, as here, not all steps of a patented process have been performed in the United States, government liability does not exist pursuant to section 1498(a). We affirm the trial court’s conclusion that § 1498(a) bars Zoltek’s claims.

2 As the Supreme Court recognized at least as long ago as 1881, the patentee’s recourse for infringe ment by the governm ent is limited by the scope of the waiver of sovereign immunity established by the Congressional consent to be sued. “If the jurisdiction of the Court of Claims should not be fina lly s u stained [to hear an infringement action against t he government], the only remedy against the United States, unless Congress enlar ges the jurisdiction of that court, would be t o apply to Congress itself.” James v. Campbell , 104 U.S. 356, 359 (1881). In sho r t, the power to limit a Congressional abuse of sovere ign immunity lies in the polit ic al pr ocess rather than the judicial branch. 04-5100, -5102 - 6 -III. We turn to the trial court’s takings anal ys is . The Court of Federal Claims held that Zoltek could bring its action again st the government under the Tuck er Act, by alleging that the infr ingement was a tak i ng of private property for public us e under the Fifth Amendment. See Zoltek , 58 Fed. Cl. at 707. We reverse. In Schilling e r v. United States , 155 U.S. 163 (1894), the Supreme Court rejected an argument that a patentee co uld sue the governm ent for patent infringement as a Fifth Amendment taking under the Tucker Act. Id. at 169. Schillin ger remains the law. The trial court determined that the S upreme Court “effectively overruled Schillinger sub silent io ” in Croz ier v. Fried. Krupp Aktienges ellschaft , 224 U.S. 290 (1912). Zoltek , 58 Fed. Cl. at 702. We disagree. The Court of Federal Claim s , like this court, is bound by Schillinger , and the trial court rulings to the contrary are not viable. Crozier inv o lved Army weapons manufactu re. Fried. Krupp was a German corporation holding patents relating to improvements in guns and gun carriages. William Crozier was the Army Chief of Or dnance and directed the manufacture of field guns and carriages for the Army. In 1907, Fr ied. Krupp sued Crozier in the suprem e court of the District of Columbia. The c o mpany alleged that the Army’s weapons manufacture was infringing Fr ied. Krupp patents. Although the complaint originally sought preliminary and permane nt injunction, and an accounting, the company later dropped the prayer for prelimin ary injunction and waived the prayer for accounting. Crozier , 224 U.S. at 297-99. Croz ier demurred, arguing that t he real party in interest was the United States, and that the tr ial c ourt lacked jurisdiction. Id. at 300. The tria l

04-5100, -5102 - 7 -court sustained the demu rrer and dismis sed. Id. In 1908, the Court of Appeals reversed. Id. Before the Supreme Cour t heard argument, Congress enac ted the Patent Act of 1910. See Pub. L. No. 61-305, 36 Stat. 851 (191 0) (later c odified as amended at § 1498). When it eventually heard the ca se, the Supreme Court reversed and remanded with instructions to dis m iss so that the company could refile and proceed in the Court of Claims under the 1910 Act. Crozier , 224 U.S. at 309. The contention that Crozier somehow ov erruled Sc hillinger , and recognized patent infringement as a Fifth Amendment taki ng, is flawed. Th e only question befor e the Supreme Court was whether the trial court had jurisdiction to enjoin the governm ent from alleged patent infringement. Bec ause Congress, in adopting t he 1910 Act, precluded injunctive relief aga inst the government for patent infringement, the Crozier court concluded that the trial court lacked the power to grant Fried. Krupp the injunctive relief it was seeking. Id. at 308. None of the relevant Schillinger issues we re joined: Crozier was not filed in the Court of Claims, had nothing to do with the Tuck er Act, did not allege a taking, and was solely in equity. Moreover, discussing the state of the law before the 1910 Act, the Crozier court expressly noted t hat no patent infringement action could be brought against the government unles s in the Court of Claims under a contract or implied co ntract theory. See id. at 304. Far from “overruling” Schillinger , this acknowledges and endorse s the rule t hat Schillinger established. T h e Court thus recognized that by enacting the 1910 Act, Congr ess “add[ed] the right to sue the United States in t he court of claims” for patent inf r ingement. Id. If the right already existed

04-5100, -5102 - 8 -under the Fifth Amendment, as the trial c ourt here sugges ts, then this analysis in Crozier would be flawed. Indeed, the Supreme Court repeated this c haracterization of the 191 0 Act just eight years later. See Cramp & Sons Ship & Engine Bl d g . Co . v. Int’l Curtis Marine Turbine Co. , 246 U.S. 28, 41 (1918) (citing Schillinger and explaining that the 1910 Act “was intended alone to provide for the discr epancy res u lting from the right in one c a s e to sue on the implied contract and the non-existence of a right to sue” for infringement). In Crozier and Cramp , the Supreme Court therefore acknowledged Congressional recognition that the Court of Claims lack ed Tucker Act jurisdiction over infringement under a takings theory

. The legis l ative histor y of the 1910 Act confirms that the statute augmented the Court of Claims’ Tucker Act jurisdiction by providing jurisdiction over the tort of patent infringement. See H.R. Rep. No. 61-1288 at 3 (1910). The Court of Feder al Claims reasoned t hat because Crozier disc ussed the 1910 Act in terms of eminent domain, the Suprem e Court must have reconsider ed its analy sis in Schillinger . This r easoning is misplace d. It is true that Crozier , and several cases apply i ng the 1910 Act (in its original form and as amended and r e codified at § 1498), analyze the statute in terms of takings and pr otecting property rights. Under this case law, patent infringement by the government is analogized to “taking” a “compulsory licens e.” The view is consistent with the text of the 1910 Ac t, which pr ovided for reasonable compensation for patent infringem ent, 36 Stat. 851, and with the legislative history, which provided that the purpose of the bill was “to enlarge the jurisdiction of the Court of Claims so that said court may enter tain suits against the United St ates for the infringement or unaut horized us e of a patented inv ention, in certain c a ses, and award

04-5100, -5102 - 9 -reasonable compensation to the owner of the patent.” H.R. Rep. No. 61- 1288, at 1 (1910). But when interpreting the Co nstitution “[i]t is emphatic ally the province and duty of the judicial depar tment to say what the law is.” Marbury v. Madison , 5 U.S. 137,
177 (1803). That Congress may adopt a limit ed waiver of sovereign im munity and confer rights on patentees for money dam ages against the government, whatever the rationale, cannot dis t urb t he Supreme Court’s analysis of the Fifth Amendment in Schillinger . Neither the wording nor rationale of the 1910 Act, nor the Supreme Court’s discussion of it in Cro z ier , affects the rule in Schillinger . Of course, the 1910 Act was not even before the Crozier court, as the act i on was filed three years before the Act was enacted. Even the plain language of t he 1910 Ac t—entitled “An Act To Provide Additional Protection For Ow ners of Patents of the Unit ed States”—belie s the trial court’s analysis here, as it legis l ates against the backgr ound of the Schillinger lega l framework. In sum, the trial c our t’s conclusion that Cr ozier “effectively ov erruled Schillinger sub silentio ” has no merit. The trial court’ s remaining c onjectures on takings jurisprudence do not require consideration. We simply note that to reach its conclus i on the Court of Federal Claims had t o read an entire statute, § 1498, out of exis tence—a result that betrays the error in the trial court’s analy s is. As the Supreme Court has clearly rec ognized when cons idering F i fth Amendment taking allegations, “property interests . . . are not created by the Consti tution. Rather, they are created and their dimensions are defined by existing rule s or under standings that stem from an independent source such as state law.” Ruckelshaus v. Monsanto Co. , 467 U.S. 986,

04-5100, -5102 - 10 -1001 (1984) (citations omitted). 3 Here, the patent rights are a creature of f ederal law. In response to Schillinger , Congress provided a specific so vereign immunity waiver for a patentee to recover for infringement by the governm ent. Had Congress intended to clarify the dimensions of the patent rights as property interests under the Fifth Amendment, there would hav e been no need for the new and limited sovereign immunity waiver. The manner in wh ich Congress responded to Schillinger is significant. “The life of the law has not been logic; it has been experience.” 4 Neither the Court of Federal Claims nor this court can ignore t he path of the patent law as it h a s evolved under § 1498. The dissent argues that we are wr ong to c onclude that Schillinger remains good law. Both inverse condemnatio n claims and regulat ory takings claims, it asserts, are currently viewed as c l aims founded upon t he Fifth Amendment of the Constitution for purposes of the Tucker Act, and these claim s are not barred for having arisen in tort. If, as the diss ent argues is suggested by Crozier , a patent is a type of property that comes within the ambit of Fifth Am endment Takings Claus e protec tion, why should we not likewise permit claims for patent i n fringem ent to arise under the Tucker Act? The ans wer is simple. Unlike regulatory takings and the inverse c ondemnation of real property, the “taki ng” of a license to use a patent creat es a cause of action under § 1498. The dissent f a ils to appreciate that this destroys whatever force its argument by

3 In Ruckels haus v. Monsanto Co

. , 467 U.S. 986, 1003- 04 (1984), the Court concluded that government interference wit h interests “cognizable as trade-secret property right[s]” could constitute a ta king depending on the circumstances. But Monsanto did not overrule Schillinger , and we must fol l ow Schillinger until it is overruled by the Supreme Court, w hether or not Schillinger is viewe d as incon s istent with Monsanto . See Indep. Ink, Inc. v

. Ill. Tool Works, Inc ., 396 F.3d 1342, 1351 (Fed. Cir. 2005), cert. granted , 1215 S. Ct 2937 (2005). 4 Oliver W. H o lmes, The Common Law 5 (M. Howe ed. 1963) (1881). 04-5100, -5102 - 11 -analogy may otherwis e have had. Indeed, if we were to interpret § 1491 as t h e dissent would hav e us, it would r ender superfluous § 1498—the remedy that Congress fashioned specifically to co mpensate patentees for the use of their patents by the federal gov ernment. Moreover, even if we shared the dissent ’s belief that the Supreme Court would overrule Schillinger , we are nevertheless bound by it s hold i ng. It is not our place to overrule sub silentio the Supreme Court. See Ro driguez d e Quijas v. Shearson/ American Express, Inc. , 490 U.S. 477, 484 (1989) (“If a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeal s should follow the case which directly controls, leaving to this Court the prerogativ e of overruling its own dec isions.”). In sum, the trial court erred i n finding t hat Zoltek could allege patent infringement as a Fifth Amendment taking under the Tucker Act, and we reverse.
IV. For the reasons set forth herein, we affi rm the trial court’s conclusion that the infringement allegations at bar are precluded by § 1498(a). We reverse the trial court’s ruling that Zoltek can alle ge patent infringement as a Fifth Amendment taking under t h e Tucker Act. We remand for further proceedings consist ent with this opinion. AFFIRMED IN PART, REVERSED IN PART , and REMANDED

. Each side will bear its own costs.

04-5100, -5102 - 12 -

## United States Court of Appeals for the Federal Circuit

04-5100, -5102

ZOLTEK CORPORATION, Plaintiff-Cross Appellant,

v. UNITED STATES, Defendant-Appellant.

GAJARSA, Circuit Judge , concurring. I agree that we are bound by our panel decision in NTP, Inc. v. Research in Motion, Ltd. , in which we held that “direct in fringement under se ction 271(a) is a necessary predicate for gover nment liability under section 1498.” 418 F.3d 1282, 1316 (Fed. Cir. 2005) (citing Motorola, Inc. v. United States , 729 F.2d 765, 768 n.3 (Fed. Cir. 1984)). However, the NTP proposition is, in my view, the result of an unchecked propagation of error in our case law, and its viability may eventually be challenged. Consequently, I write separately to emphasize that our decision today does not depend for its validity on NTP , as it is also supported by an independent line of reasoning.
I. Before discussing this additional basis fo r today’s decision, I shall briefly address the ignoble history of the NTP proposition. An ex amination of the case law reveals that the proposition has its roots in Decca v. United States , in which we held that the UnitedStates could be liable under 28 U.S.C. § 1498 onl y for direct infringement and not for indirect infringement: Section 1498 express l y waives t he Gove rn ment’s sov e reign immunity only with respect to governmental direct infr ingement of a pat ent. Nowhere in the section is active induc ement of infringement or contributory infringement mentioned, either directly or by cross-reference to 35 U.S.C. §§ 271(b) and (c). A wa iv er of sovereign immuni ty must be strictly construed. Stated different ly, the Government is not to be regarded as having waived its sovereign immunity by implication. 225 Ct. Cl. 326, 340 (Ct. Cl. 1980). Thus, after Decca , a patentee who sought to establish a § 1498(a) claim had to prove “direc t” infri ngement by t he United States. I have no problem with this formulation of the ru le, as it was the product of the Decc a court’s thoughtful analysis. It is important to note, however, the relati onship bet ween the phrases “direct infringement,” as used in Decc a , id. , and the phrase “direct infringement under § 271(a)” as used in NTP , 418 F.3d at 1316. That relations hip is one of set to subset: infringement under 35 U.S.C. § 271(a) is a spec ific kind of “direct infringement.” Thus, while “direct infringement” is one of the requi rements of an action a gainst a private party under § 271(a), it is not the only requirement, with § 27 1(a) also requiring, int e r alia , that the infringing activity occur “ within the United States.” Decca , of course, did not require that a § 1498(a) plaintiff satisfy all of the requirements of § 271(a). Indeed, Decca did not even mention § 271(a). Instead, it required only that t he accus e d use consti tute a direct, rather than an indirect , infringement. NTP , in contrast, states as a blank et proposition t hat all of the requirements of 35 U.S.C. § 271(a) must be satisfied in order to prove a 28 U.S.C. § 1498 claim against the government. See NTP , 418 F

. 3d at 1316.

04-5100, -5102 - 2 -How did s u ch a sweeping generalization evolve from Decca ? The answer, unfortunately, is t hat its evolution owes to this court’ s imprecise recharaterization of the Decca holding in our decision in Motorola . See 729 F.2d 765, 768 n.3. In Motorola , this court cited Decca at the end of a foot note as one of a number of cases supporting the very general proposition that t he patent statutes ar e often inapplic able to actions arising under section 1498. I d

. It stated that “the Government can only be sued for any direct infringement of a patent (35 U.S.C. § 271(a)), and not fo r inducing infringement by another (section 271(b)) or for contributor y infringement (section 271(c)).” Id. (emphasis added) (citing Decca , 640 F.2d at 1167). By equating the specific st atutory provision “35 U.S. C. § 271(a)” with the more general concept of “direct infringement,” the Motorola court carelessly extended the Decca holding, thus laying t he groundwor k for the NTP proposition. There is distinc t irony in the Motorola court’s being responsible for t he creation of an inadvertent link between 35 U.S.C. § 271(a) and 28 U.S.C. § 1498(a), given t hat the entire point of the Motorola footnote was to support the proposition that it is err oneous to sim p ly assum e the existence of relationships between thes e two statutory sections. See id. at 768 (explaining that “[a]lthough a sec t ion 1498 action may be similar to a Title 35 action, it is nonetheles s only parallel and not identical”). Although in Motorola the relationship bet ween sections 271(a) and 1498(a) constituted mere dict a, in NTP the relationship, as slightly recast, became the binding precedent of this cour t. In my view, such a sweeping rule of bi nding precedent ought not to be created by mere inadv ertence. In turn, the resolution of the important issue

04-5100, -5102 - 3 -before this court today—the scope of the governm ent’s waiver of s o vereign immunity as embodied in § 1498—ought not to be based solely on the basis of NTP

. In his concurring opinion, Judge Dyk attempts to find suppor t for the NT P proposition. Citing c e rtain legis l ative mate rials which state that the sole purpose of enacting § 1498(a) wa s to create jurisdiction (rather than add itiona l liab ility), h e argue s that § 1498(a), even w hen viewed apart from 1498(c), cannot result in “the government’s liability [being] broader than that of privat e parties.” Id. In oth e r words, according to his concurrence the limits o f government liab ility under § 1498(a) are circumscribed by the hypothetical liability of a private actor under § 271(a), and we can entirely ignore § 1498(c) in the analysis. His relianc e on legis l ative history is mi splaced, however, given that the plain language of the text demands a contrary and unambiguous interpretation. As is explained below, the plain langu age of the statute reveals t hat 28 U.S.C. § 1498 is not a mere waiv er of sovereign immunity with respect to the previously-existing remedy , which was provided by 35 U.S.C.§ 281 for transgressions denominated by § 271 as “infringing” the exclusionary rights granted by § 154(a). There can be little doubt that § 1498 is m o re than a mere waiv er of sovereign immunity. The plain language of the statute speaks of the provision of a “remedy,” and the fourth paragraph of subsecti on (a) indicates that “remedy” means “right of action.” See id. (“[This section shall not convey a right of action on any pat entee . . . with respec t to any invention discovered

. . . while in the em ployment . . . of the Un ited States . . . .”) (emphasis added). Section 1498 is by no m eans a mere jurisdictional statute, and to the extent that materials in the legislativ e history may appear to suggest otherwise, they

04-5100, -5102 - 4 -serve principally to illustrate why courts should often view l egislative history with skepticism and rely on it only when the stat ute itself is am biguous. If the NT P proposition can be sustained, it cannot be sustained on this ground. Granted, in creating a new remedy, § 1498( a) inherently creates new rights. Howev e r, there is not hing about the text of § 1498(a) that either suggests or requires the existence of any substant ive or conceptual link bet w een thes e rights and remedies and those provided by the pat ent laws (pursuant to 35 U.S.C. §§ 154(a) and 281, respectively). The independenc e of these two sets of rights and remedies results from § 1498(a) conditioning the ava ilability of a remedy (and the inherent creation of a corresponding right) only on the “ i nvent ion [being] descri bed in and covered by a patent” (emphasis added) and the inventi on’s being “used or manufact ured by or for the United States without license of the owner thereof or lawful right

. . . .” (emphasis added). The “coverage” provided by a patent i s , of course , defined by the scope of its cl aims. See,
e.g. , Johnson & Johnston Assocs. v. R.E. Serv. Co. , 285 F.3d 1046, 1052 (Fed. Cir. 2002) (expounding on the “f undamental principle that claims define the scope of patent protection”); see also Sri Int'l v. Matsushita Elec. Corp. , 775 F.2d 1107, 112 1 (Fed. Cir

. 1985) (“It is the claims that measure the invention. ” (citing Aro Mfg. Co., Inc. v. Convertible Top Replacement Co., Inc. , 36 5 U.S. 336, 339 (1961))). Accordingly, a § 1498 right and remedy exist whenever an accused embodiment, used or manufactured by or for the gov ernment, falls within the scope of the patent claims as

04-5100, -5102 - 5 -properly construed. 1 The “coverage” inquiry is indep endent of the natur e and identity of the Title 35 rights that might have been avail able against a private infringer under t h e same circumstances. Indeed, prior to the passage of § 1498(c) , the remedy created by § 1498(a) was broader than that availabl e against private parties in s o me instances. Aga i n, the plain text of subsection (a) makes this clear. Whereas § 271(a) contains a territoriality restriction, § 1498( a) contains none . Indeed, if § 1498(a) had not created a cause of action against the gov ernment t hat was broader, with r e spect to overseas inf r ingement, than that available against a private infringer, then it is difficult to understand the purpose of § 1498(c)—a subsec tion spec ifically barring § 1498 claims that “aris[e] in a foreign country.” In summary, patentees have the following rights and remedies: (1) a 35 U.S.C. § 281/271 remedy (for which ne ither 28 U.S.C. § 1498(a) nor any other statute provides a waiver of sovereign immunity) for transgre ssion of rights granted by 35 U.S. C. § 154, and (2) a 28 U.S.C. § 1498 remedy (assertabl e against the federal gov ernment) for transgressions of an inher ently -defined right to be compens ated for government manufacture or use of inventions covered by patents. Because § 1498(a) created new and independent rights and remedies, rather t han merely waiv ing sovereign immunity

1 In a § 1498 case, determining the sc ope of the claims proceeds via the same two-step analy s is that occurs in a § 271(a) action, namely claim c o nstruction, followed by a determination of whether t he claims—as c o nstrued—read on the accused device. See Lemels on v. Unit ed States , 752 F.2d 1538, 15 48 (Fed. Cir. 1985) (“Although this court has noted that a section 1498 action and a title 35 action are only parallel and not identical, the pr inciples of claim cons truction and reading claims on accused devices and methods are the same for either type of action.”) (citations omitted). Of course, the rights triggered when embodiments fa ll within the claims may differ under § 1498 and § 271. 04-5100, -5102 - 6 -with respect to an old remedy (i.e. § 281) , one cann ot argue that § 1498(a) a priori requires § 271(a) as an underlying and predicate cause of action. In fact, not even NTP posited a relationship specif ically between § 271(a) and § 1498, s ubsection (a) . Rather the articulated relationship—the so-called “NT P proposition”—is between § 271( a) and § 1498 as a whole . See NTP , 418 F.3d at 1316 (holding that “direct i n fringement under se ction 271(a) is a necessary predicate for government liability under sect ion 1498”). Not even NTP requires us to ignore the importance of § 1498, subsection (c), as Judge Dyk urges us to do in his concurrence. I should explain that the per curiam opinion—which I join—does indeed state that the government’s “liability does not exist pursuant to § 1498(a )” and that “1498(a ) bars Zoltek’s c l aims.” (emphasis added). However, this usage simply reflects the fact that subsection (a) creates the caus e of action. Consequently, liability—if not precluded b y subsection (c)—must arise pursuant to subs ection (a). The court’s opinion today in no way endorses the view that s ubsection (c) is irrelevant, although we clearly d o acknowledge the precedentia l effect of the NTP proposition, as ar ticulated by the NTP
court. Judge Dyk’s concurrence advances a sec ond argument in support of the NTP proposition, namely that § 1498(a) was intended to be t he “exact equivalent” of § 271(a), citing for support Richmond Sc rew Anchor Co. v. United States , 275 U.S. 331, 343 (1927) . A careful reading of that case re veals, however, that the Court made no such pronouncement. Richmond Screw was a case about the assignability of patent claims. The backdrop was Rev. St at. § 3477, which forbade inter alia the ass i gnment of patent infringement c l aims a gainst the United States t hat had not been reduced to

04-5100, -5102 - 7 -judgment. Thus, under § 1498(a), as it exis ted prior to amendment in 1918, when a government contractor infringed a patent, the patent ow ner had bot h an assignable right of action against the contra ctor under § 271(a) and a clai m against the government pursuant to § 1498(a), with the latter being non-as signable pursuant to Rev. Stat. § 3477. The 1918 amendments to § 1498 eliminated the remedy against the contractor pursuant to § 271(a), confini ng the patentee to a suit agains t the government for his entire com pensation. See Pub. L. No. 65- 182, 40 St a t. 704, 705 (1918). The salient question was what would become of assigned claims against the contractor. Did Rev. Stat. § 3477, which barred the a ssignment of claims against the United States, prevent the assignee of a § 271(a) clai m against a governm ent contractor from pursuing a 1498(a) claim against the government pursuant to the 1918 Amendmen t? Troubled b y the possibility of the 1918 Act effecting an uncompensated taking under the Fifth Amendment, the Court held that § 3477 did not apply “to the assignment of a claim against the United States which is created by the Act of 1918 in so far as the Act deprives the owner of t he patent of a remedy against the in fringing private c o ntractor for infringements thereof and makes the Government indemnitor for its . . . infringements.” Richmond Screw , 275 U.S. at 346. Contrary to Judge Dyk’s reading, the Cour t did not assert a blanket proposition that § 1498(a) must be viewed as being coextens ive in all respects with § 271(a). It is true that the Court said, as quoted in his c oncurrence, that “[w] e must presume that Congress in the pass age of the Act of 1918 intended to secure to the owner of the patent the exact equivalent of what it was taking away from him.” (emphasis added).

04-5100, -5102 - 8 -The concurring opinion appears to assume—inc orrectly—that “what it is taking a w ay” refers to § 271(a) as a whole, leading J u dge Dyk t o conc lude that the Act of 1918 (constituting § 1498, as amended) is “the exac t equiv a lent” of § 271(a). H o wever, the Court tells us what it was referring to by the words “what it was taking away ,” and it was not referring to § 271(a) rights globally. Rather, it was referring—narrowly—to the assignability of rights purs uant to § 271(a). The next two sentences of the quoted passage, which the concurrence omits, make this point clear. We must presume that Congress in the passage of the Act of 1918 intended to secure to the owner of t he patent the exact equi valent of what it was tak i ng away from him. It wa s tak i ng away his assignable claims against the contractor for the latter' s infringement of his patent. The assignability of such claims was an important element in their value and a matter to be taken into account in pr oviding for their ju st equivalent. Id. at 345 (emphasis added). In its care ful—and restrictive—analysis the Supreme Court actually declined the opportunity to ar ticulate a broad, sweepi ng relation between § 271(a) and § 1498. The NTP court should not have articulated su ch a relationsh i p, especially not through reliance on logically flawed dicta, and I can see neither the need nor the clear basis for us—at least in this case—to a tte mpt to sup port thr ough logic, post hoc , what the NTP court has wrought through folly. Per haps the NTP proposition will in the future gain recognition as a useful expedient agai nst the backdrop of a more thoroughly interpreted § 1498. For now, however, I vi ew the proposition as bei ng no more than an inadvertent leap of faith from the specific to the gener al. A ccordingly, while I join the court’s opinion—recognizing that NTP binds us—my confidence that we are reaching the just and logical outcome st ems not from it, but from the following analy s is.

04-5100, -5102 - 9 -II. I believ e that this case poses two substant ial questions of statut ory interpretation. First, when is a patented method “used” under § 1498(a) ? Second, does an infringement action “arise[ ] in a foreign c ountry” under § 1498(c) if some steps of a claimed method are practiced abroad? I conclude that a party “uses” a met hod claim within § 1498(a) only when it practices every step of the cl aimed method. Furthermore, an action for an infringing use of a patented method “arises in a forei gn country” under § 1498(c) whenever any claimed step is practiced abroad. I would therefore have affirmed the trial court’s conclus i on that § 1498 bars Zolt e k ’s claims, even if we were not c o mpelled t o recogniz e NTP as precedent. Section 1498 provides, in relevant part: Whenever an invention describ ed in and covered by a patent of the United States is used . . . by or for the United States without license of the owner thereof or lawful right to use or m anufacture the same, the owner's remedy shall be by action against the United St ates in the United States Court of Federal Claims for the rec o very of his reasonable and entire compensation for such use and m anufactu re. . . . For the purposes of this section, the use . . . of an invention described in and covered by a patent of the United States by a contractor, a subcontra ctor, or any per son, firm, or corporation for the Government and with the authorization or c o nsent of the Government, shall be construed as use . . . for the United States

. 28 U.S.C. § 1498(a) (2000) (e mphases added). At § 1498(c) , Congress further limited the scope of claims under § 149 8(a) with a foreign country ex ception. That limitation provides: The provis ions of this section s hall not apply to any claim aris ing in a foreign country. 28 U.S.C. § 1498(c) (2000).

04-5100, -5102 - 10 -Both sections require interpretation. First, the court must determine the meaning of a “use,” as applied to a method claim, in § 1498(a). Second, the court must determine when a c l aim “arises” in a foreig n country under § 1498(c). The trial court complicated this analysis by collaps ing the two steps together. 2 Although the tw o sections must be construed in harmony to preserve the integrit y of the statutory scheme, in the first instance the questions of “use” and “arising” are separable. I address each issue in turn.
A. The court’s statutory analys is must give effect to Congress ’ s intent when enacting the statute. See Nat’l Labor Relations Bd. v. Lion Oil Co. , 352 U.S. 282, 297 (1957) (observing that the court bears “a judicial responsibility to f i nd that interpretation which c an most fairly be said to be embedded in the statute, in the sense of being most harmonious with its schem e and with the general purposes that Congress manifested”); Doyon, Ltd. v. United States , 214 F.3d 1309, 1314 (Fed. Cir . 2000). The analysis begins with the text of the statute. Robins on v. Shell Oil Co. , 519 U.S. 337, 340 (1997); White v. Dep’t of Justice , 328 F.3d 1361, 1374 (Fed. Cir. 2003). To fully understand the meaning of a statute, however , the court looks “not only to the particular statutory language, but to the design of the statute as a whole and to its object and policy.” Crandon v

. United States , 494 U.S. 152, 158 (1990); accord Dunn v. Commodity Futures Trading Comm’n , 519 U.S. 465, 478 (1997).

2 The Court of Federal Claims ultimately conclude d that § 1498(c) precluded any claim f o r a “u se” of a patent ed process unle ss ev ery step of the claimed process took place “within the United States.” Zoltek , 51 Fed. Cl. at 836. 04-5100, -5102 - 11 -In this cas e the text of § 1498( a) is si lent on the test for “use” of a patented method. The spec ific problem is a question of degree. In particular, one m u st decide whether “use” means practicing some steps of a claimed method, or instead requires practicing every claimed step. At the outset I note that it is well-settl ed, as a matter of pat ent law, that an infringing use of a patent ed method requires practicing every step claimed in t h e method. 3 S e e Smith & Nephew, Inc. v. Ethicon, Inc. , 276 F.3d 1304, 1311 (Fed. Cir. 2001) (“Infringement arises when all of the steps of a claimed method are performed[.]”); see als o NTP , 418 F.3d at 1318 (“[ A] process cannot be used ‘within ’ the United States as required by se ction 271(a) unless eac h of the steps is performed within this countr y .”); 4 accord Deepsout h Pack ing Co., Inc. v. Laitram Corp. , 406 U. S. 518, 528 (1972) (“[A ] combination patent [asserted under § 271(a)] protects only against the operable assembly of the whole and not the manufacture of its parts.”). The rule applies the long-s e ttled principle, more commonl y phrased in terms of products and the elements of device claims, t hat infringement requires practicing each and ev ery limitation of the assert ed patent c l aim. See V-Formation, Inc. v. Benetton Group SpA , 401 F.3d 1307, 1312 (Fed. Cir. 2005) (recogniz i ng the black-lett er law that an accused product infringes a patent claim only if eac h and ev ery limitation in the claim appears in the accused product); Becton Dicki nson & Co. v. C.R. Bard, Inc. , 922 F.2d 792, 796

3 See 35 U.S.C. § 271(a)(2000) (“Except as otherwise pr ovided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United Stat es or im ports into the United Stat es any patented invention during the term of the patent ther efor, infringes the patent.”).

4 Although NTP merges the question of conduct (the use) and location (within the United Stat es) in this explanation of § 271( a), the court plainly adopts the proposition that an infringing use requires pr acticing ev ery step of a claimed method. 04-5100, -5102 - 12 -(Fed. Cir. 1990) (“To establis h infringement of a patent, every limitation set forth in a claim must be found in an acc u sed product or process exactly or by a substantial equivalent.”). “[A]ll [specifi ed elements in a patent claim] must be regarded as material, leaving open only the question whether an omitted part is supplied by an equivalent device or instrumentality.” W illia m W. Hubbell v. Un ited States , 179 U.S. 77, 82 (1900). Nothing in the text of § 1498 warr ants a contrary interpretation of an infringing use here. Indeed, the result is consistent with the narro w reading that a court mu st assign § 1498. Because § 1498(a) waives sovereign immu nity for infringement actions against the government, a court must give the statute a strict construction. See Lane v. Pena , 518 U.S. 187, 192 (1996); Unit ed States v. Sherwood , 312 U.S. 584, 590 (1941) (citing Schillinger v. United States , 155 U.S. 163 (1894)); Shoshone I ndian Tribe v. United States , 364 F.3d 1339, 1346 (Fed. Cir. 2004); RHI Holdings, Inc. v. United States , 142 F.3d 1459, 1461 (Fed. Cir. 1998). The waiver “must be unequivocally expressed in statutory text” and the courts will not imply exce ptions. Lane , 518 U.S. at 192 (citing United Stat es v. Nordic Village, Inc. , 503 U.S. 30, 33-34, 37 (1992) and Irwin v. Dep’t of Veterans Affairs , 498 U.S. 89, 95 (1990)). Consistent with these pr inciples a c ourt must resolve any ambiguity in the statut e “in favor of immunity.” See Unite d States v

. Williams , 514 U.S. 527, 531 (1995). Apply i ng thes e principles to § 1498(a) makes the narrowest interpretation of an infringing “us e ” presumptively correct. Because I must narrowly construe the breadth of the stat utory language, the sovereign immunity analys is confirms that the “use” of a claim ed method under § 1498(a ) requires practicing every step in the claim.

04-5100, -5102 - 13 -B. Assuming Zoltek alleges an inf r inging us e, the question becomes wher e the § 1498(a) claim arises. Under § 1498(c), C ongress curtailed its sovereign immunity waiver to preclude § 1498(a) claims “arising in a foreign country.” The qu estion here is the extent of this curtailm ent when the government practi ces a patented process havin g multiple steps. In addressing this question, it is useful to imagine fo ur factual s c enarios. The first and easiest scenario is where all of the steps of the process were performed in this country—a situation in which there is no questi on that a claim, if any, must arise in the United Stat es. The second scenario is wher e all of the steps were performed abroad, as is true in this cas e wit h the alleged infringement of t he Nicalon fiber claims. (I address these claims in the next section.) Later in the opinion, I will address the meaning of 1498(c) in the contex t of the third and fourth sc enarios, in which some, but not all steps were performed abroad; in the third scenario, the last step of the process is practiced abroad, and in the fourth scenario (as with the Ty ranno fiber claim s ), the last step is practiced in the United States.
1. I shall start with the Nicalon fiber claims, in which all of the infringing steps were performed abroad. Clearly the infringing acti vity is entirely outsi de the United States from a geographical perspective. Therefore, it does not occur “within” the United States as required by § 271(a), as the law has long recogniz e d that patent infringement claim s arise where the infrin ging activit y is cons ummated. See, e.g. , Deepsouth , 406 U.S. at 527 (holding that final asse mbly abroad of a patented dev ice cannot be an infringing

04-5100, -5102 - 14 -manufacture within the meaning of § 271( a)). But this is not a § 271(a) action, and there is therefore no a priori reas on why this court must inte rpret the “arising in a foreign country” language of § 1498(c) as being antonym ous with the phrase “ within the Unit ed States,” as used in § 271(a). However, based on a review of the l egislative history and a broad construction of § 1498(c)—a construc tion necessary to limit the scope of Congress’ waiver of s o vereig n immunity under § 1498(a)—I would hold th at § 1498(c) precludes at a minimum those actions premis ed on infringing activity in which all steps of the infringing proce ss are performed abroad. Congress enacted § 1498(c) in 1960 as par t of its amendments providing an action against the gov ernment fo r copyright infringement. See Pub. L. No. 86-726, 74 Stat. 855 (1960). While Congr ess consider ed various drafts, the State Department suggested the language eventually codified at § 1498(c). 5 The discussion
accompany ing the suggestion indicates that the Department specifically intended the langu age o f subsection (c) to remedy concerns that the propose d b ill would allo w suit for actions abroad, by the United States, w h ich infringed copyrights. See H. Rep. No. 86-624, at 6-7 (1959 ) (reprin ting June 5, 1958 letter from William B. Macomber, Jr., Assistant Secretary of State, to James O. Eastland, Chai rman of the Senate Judiciary Committee). Recognizing that the patent provisions of § 1498(a) had the same ambiguity “with respect to infri ngement s occurring abroad,” the State Department suggested making the foreign country excepti on applic able to both patent an d copyright infringement. Id. at 7. The Commerce Department agreed tha t there was ambiguity

5 The State Department comments were directed to H.R. 8419, a predecess o r bill to H.R. 4059. H.R. 4059 was e nacted on September 8, 1960. See Pub. L. No. 86-726, 74 Stat. 855 (1960) (codified at 28 U.S.C. § 1498). 04-5100, -5102 - 15 -concerning “an act of infringement in a foreign c ountry,” and endorsed the State Department suggestion. See id. at 5-6 (reprinting Feb. 27, 1959 letter from Frederick H. Mueller, Under Secretar y of Commerce, to Emanuel Ce ller, Chairman of the House Judiciary Committee). The foreign country exception at § 149 8(c) adopts the State Department suggestion without c hange. See Pub. L. No. 86-726, 74 Stat. 855 (1960) (codified in relevant part at § 1498(c)). In short, the legi slative history confirms that Congress intended §1498(c) to foreclose actions on § 1498(a) violations taking place in, or arising in, a foreign country. In construing statutory language, it is prudent to be cognizant of constructions that courts have accor ded to i dentical language, where it occu rs in other statutes. Here I recognize that Congr ess took the language of § 1498( c) fr om identical language found at 28 U.S.C. § 2680(k), adopt ed twelve y ears earlier. 6 Normally, where Congress borrows language from one statute in enacting another, the meaning accor ded terms i n the source statute can be tak en as probative of the meaning in the borrowing statute. See Lorillard v. Pons , 434 U.S. 575, 580-81 (1978); id. at 581 (“[W]here . . . Congress adopts a new law incorporating sections of a prior law, Congress normally can be presumed to have had knowledge of the interpretation given to the incorporated la w, at least insofar as it a ffec t s the new statute[.]”).

6 The Federal Tort Claims Act ( “ FTC A”) waives sovere ign immunity for certain tort claims agains t the United States. See 28 U.S.C. § 1346(b ). The statute contains a foreign country exception that precludes § 1346(b) liabi lity for “[a]ny claim arising in a foreign country.” 28 U.S.C. § 2680(k). Congress enact ed this provision in 1948. See 62 Stat. 984, 985 (1948). Twelve y ears later, Congress used the same language when enac ting § 1498(c). See Pub. L. No. 86-726, 74 Stat. 855 (1960) (codified at § 1498(c)). 04-5100, -5102 - 16 -Plainly, many determinants of the borro wed statute canon are satisfied here. The statutes serve similar purposes. Both provision s limit the potential government liability occ u rring abroad by curtailing Congre ss’s sovereign immunity waiver for tort liability. Moreover, during Senate sub- committee hearings, the testimony made clear that § 1498(c) was int ended to provide an exc l usi on analogous to § 2680( k). 7 In this case, however, the meaning of § 2680(k) has limited value for interpreting § 1498(c ). This is true because the borrowed statute c anon is not absolute, and it does not justify results either inconsis tent with the statutory scheme at bar , or leading to functional absurdity in application. Consequently, for t he reasons given below, I conclu de that the borrowed statute canon does not compel us to in terpret §1498(c) in light of § 2680(k). In Sosa v. Alvarez-Machain , 124 S. Ct. 2739 (2004), t he Supreme Court held that a “claim arising in a foreign count ry,” under § 2680(k), referred to where tortious injury is suffered. “[T]he FTCA’s foreign country exc eption bar s all claims based on any injury suffered in a foreign country, regardless of wher e the tortious act or omission occurred.” Id. at 2754. A patent infringement claim, however , is different in kind from the tortious injuries contemplated by § 2680(k). Though patent infringement claims may be vi ewed as species of tort claims, they are subject to a territoriality restriction unk nown in general tort law. Deter m ining the

7 See Infringement of C opyrights: Heari ngs on H.R. 4059 Before the Senate Subcommittee On Patents, Trademarks, and Copyrights of the Senate Com m ittee on the Judic i ary, 86th Cong. 12-13 ( 1960) (statement of Arthur Fisher, U.S. Registrant of Copyrights) (“[I]t was originally felt t hat [§ 1498(c)] was unnecessary, that a tort committed abroad would not be subject to suit under the act. . . . [I]t is quite clear that whatever is the situation with res pect to infringements committed abroad, this act leaves the situation in status quo; it does not affect it. [§ 1498(c )] simply says that this [section] shall not apply to torts committe d abroad[.] . . . [O]th er agencies have not felt safe in operating under the Government Tort Claims Act, and . . . we should simply follow along with a substantially par allel pos ition to the patent law.”). 04-5100, -5102 - 17 -liabilities of the United States for patent infringement under 28 U.S.C. § 1498(a) requires the application of only United States law, because section 1498 c o nditions the
governmen t’s liab ility on the exis tence of patent right s granted by the United States. In contrast, the FTCA r equires ap plication of local la w to determi ne the liab ility of the United Stat es, and under governing choice of law principles, the local law to be applied is typically the law of the place where t he injury occurred. 28 U.S.C. § 1346(b)(1) (2000). Allowing recovery for foreign injury where the causative acts occurred in the United States thus raised the sp ecter that the liab ility of the Un ited St ates would b e governed by foreign law. No similar probl em exists under the patent laws becaus e United Stat es law will apply to the infringing acts occurring in the United Stat es. Under these circumstances, construing the “arising in ” language of section 1498(c) to look to the place of the infringing act rather than the place of the in jury is perfectly consistent with the Congressional objectives. 8 Although Z o ltek urges the c ourt to read § 1498(c) as lim ited to claims aris ing under foreign patent laws, neither Zoltek’s s uggestion nor the Supr eme Court’s rationale in Sos a sensibly applies here. First, § 1498(a) pl ainly provides f o r actions concerning “invention[s ] described in and covered by a patent of t h e United States[.]” 28 U.S.C.

8 Our cases concerning personal jurisd iction in patent cases, which look to “the location . . . at w h ich the inf r inging acti vity directly impacts on the interests of the patentee,” Beverly Hills Fa n Co. v. Sovere ign Corp ., 21 F.3d 1558, 1571 (Fed. Cir

. 1994), address where suit may be brought to enf orce an existing s u bstantive claim, but those cases do not define the su bstantive claim itself. The question of whether a patent infringement claim can be maintained at al l (controlled by sections 1498(a) and 1498(c ) where the alleged infr inger is the government) is analy t ically distinct from the personal jurisdiction issue. Any uncertainty as to the scope of the patent la w must be determined before addressing pers onal jurisdiction over the claim. 04-5100, -5102 - 18 -§ 1498(a). Zoltek’s analysis woul d read this provision, in vi ew of § 1498(c), as waiving sovereign immunity to allow infringement actions under a fo reign patent if the asserted claim coinc i ded with protections under an is sued U.S. patent. I find that reading styliz ed and unper suasive. If Congress intended to allow s u it against the government for infringing a foreign patent, it would have so stated, and not limited the possib l e actions by reference to parallel U.S. patents. Moreover, Zoltek’s suggestion is inconsistent with the plain language of § 1498( c) and the structure of § 1498. It would make little sens e for Congress to curtail the sovereign immuni ty waiv er at § 1498(c) if the underlying action in § 1498(a) allowed s u it “under foreign law.” In short, § 1498 is c o nsistent with a provision to vindicate a U.S. patent right, no t a foreign patent right. Second, for similar reasons, unlike § 2680(k), § 1498(a) does not require a choice of law analy s is and the Sosa cons ideration of plac e of injury is simply inapplic able here. In sum, the § 1498(a) claim arises where the infringing activity is c onsummated. This analys i s precludes Zoltek’s Nicalon fi ber allegations. Where all the steps of a process patent are performed abroad, the claim “aris e s in a foreign c ountry,” and the action is barred by § 1498(c). The record evidences that the accused Nic a lon fiber products were made entirely in Japan. Zoltek’s contention t hat the government violated § 1498(a) when Lock heed’s Japanes e s u bcontractors “used” Zoltek’s method claims t o make the Nicalon products, therefore, fits s quarely within our interpretation of § 1498(c)

. The same holds for the Tyranno fiber allegat ions, insofar as the fibers were made in Japan. The Court of Federal Claims correctly determined that it lacked jurisdiction t o decide thos e allegations.

04-5100, -5102 - 19 -2. The infringement allegations concerni ng t he Tyranno fiber products, however, cannot be tethered to any single location. T h is present s the difficult question. Although the fibers were made overseas , the record shows that the fina l products were made in the United States. According to Zoltek’s infringement alle gations, some of the claimed method steps were practiced in Japan, and so me in the United Stat es. The allegedly infringing conduct, in short, was not confined within nati onal boundaries. Does such conduct “arise in a foreign c ount ry” within the meanin g of § 149 8(c) ? As explained herein I conclude t hat it does, with the effect of barring Z o ltek’s Tyranno fiber product allegations. Put dif f erently, I read “claims arising abr oad” exp a nsively, as capturing any claim that does not arise entir ely th rough domestic infringing c onduct. In doing so, I reject any contention that the anal ysis depends on where any individual step of the claimed method was practiced. Two longs tanding interpretative princi ples support the conclusion that the language at § 1498(c), limiting t he sovereign immunity waiver at § 1498(a), includes within its proscription the conduc t disputed in this action. First, the courts generally disfavor extraterritorial applicatio n of United States law. See EEOC v. Arabian Am. Oil Co. , 499 U.S. 244, 248 (1991) (“It is a long-standing princ i pl e of American law that legis l ation of Congres s, unless a contrary intent appears, is mean t to apply only within the territori al jurisdiction of the United States.”). The principle r e sts on sound policy, including a concern to avoid conflict with ot her national laws, regard for international comity, choice of law analysis, and sepa ration of powers. Thus, in Deepsouth , the Supreme Court expressly refus ed to extend the scope of § 271( a) to capture an extra04-5100, -5102 - 20 -territorial manufacture of an infringing dev ic e absent express guidanc e from Congress. “Our patent system makes no claim to extraterri torial effect . . . a nd we correspondingly reject the claims of others to such contro l over our markets.” 406 U.S. at 531 (citin g Brown v. Duchesne , 60 U.S. (19 How.) 183, 195 (1856) and Boes ch v. Graff , 133 U.S. 697, 703 (1890)). In narrowi ng the reac h of actions under § 1498(a), § 1498(c) manifests a Congres sional intent to limit infringement actions where conduct by or f o r the government sounded abroad. Reading § 1498(c) to foreclose the action at bar is consistent with a strict view of the extra-territoriality principle. 9 Second, this view comports with the narro w construction that a court must afford sovereign immunity waivers. A court must resolve textual ambi guity in a statutory waiver in favor of immunity. As noted abov e, the waiver must be clear, and ambiguitie s resolved in favor of i mmunity. Since th e waiver must be construed narrowly, the § 1498(c) exc l usion—serving to narrow t he wa iver at § 1498( a)—must be construed broadly. Cf. Shoshone Indian , 364 F.3d at 1346. Given an expansive reading, these principles indicate that a cl aim “arises in a foreign country” under § 1498(c) if, as wit h the Tyranno product allegations, some st eps of a claimed method are practiced abroad. 10 Although this court has never decided ho w § 1498(c) applies to transnationa l conduct in practicing a patent ed method, on one occ a si on our predecess o r court was

9 The dissent suggests that we have ignored the Fifth Amendment in determining the proper jurisdictio nal scope provided by § 1498.

10 While not a basis for my interpretati on of § 1498, I note that any rule that allowed sovereign im munity, and liability, to turn on where a defendant practiced any given step of a claimed method would s i mply inv i te strategic manipu lation and prov e unworkable. Potential infri ngers would simply move their conduct offshore—if only for the last ste p of the pro c ess—in order to av oid the specter of § 149 8(a) liability. 04-5100, -5102 - 21 -confronted with allegat ions of infr inging us e of a transnational dev i ce . In Decca Ltd. v. United States , 544 F.2d 1070 (Ct. Cl. 1976), as in this c a se, the government argued that § 1498(c) was a dis p ositive bar to jurisdicti on. The Court of Claims, however, neither
express l y interpreted nor applied the statute. 11 Instead, as explaine d below, it crafted a test for determining an effective “location” of the accused, int e rnationally dispos ed, device. The Decca court then determined that if such a device could be said to be located “within the United Stat es,” the § 1498(a) claim for infringing use would aris e where the device was “located.” For sever a l reasons I conclude that no c o mparable test should apply to the facts in this case. To understand why, it bears reviewin g the case in detail. Decca involv ed the Omega long range radio nav igation system. Certai n components of th e system— broadcast stations—were located overseas. The plaintiff, Decca, owned U.S. Patent No. 2,844,816, which claim ed radio nav igation systems. 12 It alleged that the Omega system infringed c e rtain dev ice claims in the ’816 patent and t hat the government violated § 1498(a) by using the Omega syst em. The governm ent sought dismissal, arguing that becaus e some broadcast towers wer e located in Norway and othe r overseas locations, the action arose in a fo reign country and was barred by § 1498(c).

11 Indeed, alt hough the United States briefed t he issu e in conjunction with a motion to dismiss, the trial divis i on of the C ourt of Claims specifically noted in its pretrial order that “[j]urisdi ction is not disputed and is hereby determined to be present.” Decca , No. 299-70, Pre-Trial Order ¶ 1 (Ct. Cl. Mar. 20, 1975).

12 The trial c ourt found the government liable for an in fringing use of claim 11, which claimed a hyperbolic radio navigation system. See ’816 patent, col. 12, l. 63 – col. 13, l. 34 (claim 11); Decca , 544 F.2d at 1083. With mi nor changes in the factual findings, the three judge panel adopted the trial court’s analysis. Decca , 544 F.2d at 1072. 04-5100, -5102 - 22 -The court disagreed. The Court of Claim s defined the “location” of the Omega system to be “in Unit ed States terri tory,” implicitly reasoning that an infringing use “within the United St ates,” a forti o ri , does not give rise to an infringement claim “arisin g in a foreign country” under § 1498(c). In sum, Decca stands for the narrow, and collateral, proposition that under § 1498(a) the infri nging use of a claimed devic e “arises” where an accused devic e is “located.” There are, however, no “use of device” cl aims at issue in this ac tion, and Decca is therefore inappos ite. In Decca , the elements of a patented device were assembled, one by one and in diff erent countries, and the device was therefore made. Likewise, in this case, the steps of a patented process we re practiced, one by one and in different countries, and the process was therefore performed. Howe ver, these cases are not analogous, because the concept of the “use” of a device is fundamenta lly dif f erent from the use of a process. Whereas utility can be e x tracted fr om a d e vice o n ly after it has been “made,” utility is extracted from a process concurrent with its being “practiced.” See NTP , 418 F.3d at 1318 (“Because a pr ocess is nothing more than the sequence of actions of which it is comprised, the use of a process necessarily involv es doing o r performing each of the steps recited. This is unlike use of a system as a whole, in which the components are used collectively, not indi v i dually.”). As a consequence of this failure in the analogy, Decca is neither on point nor par ticularly instructive. Consequently, I would decline an y invitation to extend Decca ’s rationale bey o nd its intended context of device claims to prac ticing the steps of a claimed method. In particular, the Decca rationale for characterizing t he accused Omega radio navigation system as “located . . . within the United States” thre atens to swallow the § 1498(c )

04-5100, -5102 - 23 -limitation if applied to the process claim at bar. Dec c a ’s infringement analysis placed “particular emphasis on the ownership of the equipment by the United States, the control of the equipment from the United St ates and on the actual benefic ial use of the system within the United States.” 544 F.2d at 10 83. Relying on these observations, both the trial court and the appellate panel concluded t hat the “location of the infringement is within United States territory.” Id. at 1074. The panel relied, in particular, on the fact that the infringing broadcast equipment “is designed and built b y the United States Government,” and that the “location of the whole . . . is where the ‘master’ station or stations are, which is in the United St ates of A m erica, and where all the stations are monitored, pres ently in Washington, D.C.” Id. Were a court to extend Decca ’s r easoning here, it could conclude that where the government, or a contractor acting at th e government’s direction, commi ssions or directs the conduct later accused of infri nging a method patent, the resulting claim for infringing use under § 1498(a) “arises” withi n the United States, and not abroad, under § 1498(c). Applying the Decca reasoning out of its intended cont ext of device claims, however, would effectively read the plain l anguage of § 1498(c) out of existenc e. The statute concerns allegations of infringement against the governm ent, and it is difficult to imagine c i rcumstances where such conduct w ould not be traceable ba ck to the federal government, thus completely avoiding the na rrowing ef fect of § 1498(c) on Congress’s waiver of s o vereign immunity. In short, if the accused conduct is always traceable t o decision m a king in the United States, proximat ely causing otherwise “infringing” conduct abroad, then such claims will nev er be restri cted by the prohibition at § 1498(c).

04-5100, -5102 - 24 -III. In sum, the infringing use of a patented me thod under § 1498(a) consis ts of practicing all steps in the c l aimed method. Because the in jury from infringement is intangible and not amenable to geographical refe rence, the cause of action cannot be said to aris e where injury is suffered, and the § 2680(k ) cases are of limited value in interpreting § 1498(c). I would thus look to where the infringing conduct occurred to ascertain where the claim arises. In the fi rst analysis , no particular step has primacy. But since a court must give the sovereign immunity waiv er at § 1498 narro w construction, I must view the exclusion at § 1498(c) broadly and resolve ambiguity in favor of immunity. For that reason, § 1498(c) precludes an action premised on infringing use of a method claim if some steps of the method ar e practi ced abroad. Since Zoltek’s Tyranno product claims falls wit hin this construction, they are barred. Thus, the trial court properly concluded that it lacked jurisdiction over those infringement allegations. The dissent argues that I must be care ful to construe § 1498 in a manner that does not somehow run afoul of the Fifth Amendment. Its concer n is fundamentally misguided, however, even if one assumes, for sake of argum ent, that a patent is a type of property to which Fifth Amendment protecti ons apply. Section 1498 is a waiver of sovereign immunity, the scope of whic h is completely within the dis c retion of

04-5100, -5102 - 25 -Congress. 13 In fact, there is no Fifth Amendment requi rement that § 1498 exist at all; it is the responsib ility of Congress, and of Co ngr ess alo ne to decid e whether, and to wha t extent, it will permit the courts to help it fulfill its Con s titutional obligations under the Takings Clause. 14 A court need not concern itself with whether § 1498, construed narrowly in recognition of Co ngr ess’ sole power to waive sovereign immunit y , provides
a compens ation scheme that is compliant with the requirements of the Tak i ngs Clause

. It is not our place to interp ret sovereign immunity waivers with an ey e to ward their Takings Clause sufficiency vel non , because the Constit u tion does not require Congress

13 See Lynch v. United States , 292 U.S. 571, 582 (1934) (“The sovereign’s immunity from suit exists whatever the char acter of the proceeding or the source of the right sought to be enforced.

. . . [including] those arising from some violation of rights conferred upon the citizen by the Constitution

. . . .” (ci t ing Schilli nger v. United States , 155 U.S. at 166, 168 (“The United States cannot be sued in their courts without their consent, and in granting such consent Congr ess has an absolute discretion to specify the cases and contingencies in wh ich the liability of the Gove rnment is submitted to the courts for judicial det ermination. Beyond t he letter of such consent the courts may not go, no matter how beneficial they may deem, or in fact might be, their possession of a larger jurisdiction over the liabili ties of the Government.”))).

14 Indeed, before the passage of the Tucker Act, ch. 359, § 1, 24 Stat. 505 (1887) (codified as a m ended at 28 U.S.C. § 1491), Congress had sole responsib ility for paying takings claims . No judicial relief wa s availab l e

. See, e.g. , Langford v. United States , 101 U.S. 341, 343 (1879) (holding t hat notwithstanding the obligation of the United States to pay just co mpensation, there existed no re medy in the courts because “Congress has made no provision by any general law for ascertai ning and paying this just compensation”). In Ly nch v. United States , the Supreme Court reaffirmed the discretion of Congres s to reserve to itself the payment of just compensation for Fifth Amendment takings. 292 U. S. 571. In that case, the C ourt started by recognizing that “[r]ights against the United States arising out of a contract with it are protected by the Fifth Amendment.” Id

. at 579. It held, however, that Congress may elect to retain the sole power to remediate alleged “taki ngs” of these contractual rights. See id. at 582 (“When the United States creates rights in indi viduals against itself , it is under n o obligation to provide a remedy through the courts. It may l i mit the Individual to administrative remedies. And wit hdrawal of all remedy, adminis tra t ive as well as le gal, would not necessarily imply r epudiation. So long as the contractual obligation is recognized, Congress may direct its fulfillmen t without t he interpositio n of either a court or an administrative tribunal .” (emphasis added) (citing United States v. Babcock , 250 U.S. 328, 331 (1919) and Tu tun v. United States , 270 U.S. 568, 576 (1926))). 04-5100, -5102 - 26 -to create remedies in t he courts at al l

. If C o ngress di d no t create a statutory scheme for compensation as provided under § 1498, it would follo w that without such a provision, compensation would need to be obtai ned through legislative action.
IV. For the aforegoing r easons, I believe that there exists an additional, and independent, basis for reaching the decision of the court today that § 1498(a) liability for the use of process claims r equir e s all the steps to have be en practiced in the United States. In my view, ther efore, our decisio n today could have been reached withou t relying on NTP

.

04-5100, -5102 - 27 -

## United States Court of Appeals for the Federal Circuit

04-5100, -5102

ZOLTEK CORPORATION, Plaintiff-Cross Appellant,

v. UNITED STATES, Defendant-Appellant.

DYK, Circuit Judge , concurring. I join the court’s per curiam opinion but write separately to ex press my view that the court correctly held in NTP, In c. v. Research in Motion, Ltd. , 418 F.3d 1282, 1316 (Fed. Cir. 2005), that the gover nment can only be liable for in fringement under section 1498(a) if the same conduct wo uld render a private party li able for infringement under section 271(a). 1
I Section 1498(a) provides, in pertinent part: Whenever an invention describ ed in and covered by a patent of the United States is used or manufactured by or for the United Stat es without license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action agai nst the United Stat es in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.

1 Under 28 U.S.C. § 1292 (d)(2), “the nature and scope of our review are not limited to the certified question but [rat her] we are free to consider all questions material to the trial court’s order . . . .” United States v. Connolly , 716 F.2d 882, 885 (Fed. Cir. 1983).In my view, the purpose of section 1498(a) was to make the United St ates and its contractors liable for “use” of a patented inv ention that would in s i milar c i rcumstances constitute direct infringement by a private party. Patent rights are nothing more than t he rights to exclude others. See 3 5 U. S.C. § 154(a) (2000) (defining the pa tent grant in terms of its exclus ionary power s). In the case of private parties that right is cabi ned to infringement occurring within the United States. Congress could not hav e intended to confer broader rights against the United States than against private parties. The omission of the “wit hin the United States” la nguage (appearing in section 271(a)) from section 1498(a) does not suggest that the government’s liab i lity for infringement is broader than t hat of private parties. Sect ion 271( a) broadly defines the rights of patent holders agains t all persons who utilize the pat ented inv ention; the language of the section is br oad enough t o cover the Unit ed States. Sec t ion 271(a) does not, however, waive the government’s sove reign immunity. T hat was the purpose of the original section 1498, which was designed to provide a remedy against the government for the infringement described in section 271(a). In other words, unlik e section 271(a), section 1498(a) was no t designed to define what constitutes infringement (terminology that does not appear in section 1498(a)). Rather, it was intended to define the “owner’s remedy” agai nst the United St ates, when the Unite d States did not have a license or the “lawful right to us e” the patented invention. Th e question whether the Unit ed States had a lawful right to use the invention turned on whether a private par ty would have had s u ch a right, as the history of section 1498 confirms. The additional purpose of se ction 1498, as amen ded in 1918, was to
04-5100, -5102 2substitute a remedy against the United States for a rem edy against private parties working for the government. Legis l ation in 1910 first conferred the ri ght to sue the United States for infringement. Pub. L. No. 61-305, 36 Stat. 851 (1910). That legis l ation was simp ly designed to waive the sovereign immunity of t he United States for preexisting causes of action conf erred by the patent stat ute (what is now section 271(a)). 2 As the Hous e committee explained, “Our only purpose is to extend the jurisdiction of [the Court of Claims] so that it may enter tain s u its and award compensati on to the owners of patents in cas e s where the use of the inv ention by the United States is unaut horized and unlawful . . . .” H.R. Rep. No. 61- 1288, at 3 (1910). In considering the 1910 legislation, Congressm an Crumpacker stated t hat the bill “simply gives consent of the Government to these parties to sue in the Court of Claims fo r this class of liabiliti es that it would be liab l e to s u it for if it we re not for its so vereignty.” Congressman Currier, who introduced the bill, agreed, explaining that the bill “doe s not create any liability; it simply gives a remedy upon an existing liability.” 45 Cong. Rec. 8755, 8756 (1910). The 1918 amendments, Pub. L. No. 65-182, 40 Stat. 704, 705 (1918), similarly confirm that the purpose of the statute was simply to obligat e the United Stat es to the same extent as private parties. C ongress was c oncerned t hat when patented inventions were used or manufactured by ot hers for the United States, suit was bein g

2 The 1910 enactment provided: “That whenever an inv e ntion des cribed in and cover ed by a patent of the United States shall herea fter be used by the Unit ed States without licens e of the ow ner thereof or lawful right to use the same, such owne r may recover reasonable compensation for such use by suit in t he Court o f Claims.” Pub. L. No. 61-305, 36 Stat. 851.

04-5100, -5102 3brought against government empl oyees or contractors indiv i dually. Thus in 1918 , Congress changed the language of the 1910 statute to read: That whenever an invention des cribed in and covered by a patent of the United Stat es shall herea fter be used or manufactured by or for the Unite d States wit hout lic ens e of the owner t hereof or lawf ul right to use or manufacture the sam e , such owner’s remedy shall be by suit against the U n i t ed S t ates i n the Court of C l a ims fo r the r e covery of hi s reasonabl e and entire compensation for such use and manufacture

. Id. (emphasis added). Congress intended the 1918 am endment “to reliev e the c ontractor entirely from liability of every kind for the infri ngement of patents in manufacturing anything for the government, and to limit the owner of the patent . . . to suit aga inst the United States in the Court of Claims for the recovery of his reasonable and entire compensation . . . .” 3
Richmond Screw Anc hor Co. v. United Stat es , 275 U.S. 330, 343 (1928). Congress in taking this action could hardly have inten ded that the substituted rights against the United States would be broader than the original rights against the employee or contractor. Indeed, in cons truing the 1910 legislation (as amended in 1918) to resolve the question whether infringement claims again st the government were ass i gnable, the Supreme Court expressly held that the statute is an attempt to take away from a priv ate citizen his lawful claim for damage to his propert y by another privat e person whic h but for this act he would hav e against the private wrongdoer. . . . We must presume that Congress in the pass age of the act of 1918 intended to secur e to the owner of the patent the exact equivalent of what it was taking away from him.

3 What is now the seco nd paragraph of section 1498(a) , originally part of 35 U.S.C. § 94, was added in 1942 to further cl arify that actions against United States employees or contractors we re barred and replaced by an action ag ainst the United States. See Pub. L. No. 77-768, § 6, 56 Stat. 1013, 1014 (1942); S. Rep. No. 77-1640, at 5 (1942). 04-5100, -5102 4Id. at 345 (emphasis added). See als o Coakwell v. United States , 372 F.2d 508, 511 (Ct. Cl. 1967) (“[Section 1498] was not int ended to c h ange the basic incidents to whic h liability would attach f o r the purposes of seeking c o mprehensive compensation for the unlic ensed use of a patent ed invention.”). The “exact equivalent ” of section 271(a) li mits liabilit y to infringement occurring “within the United States.” 4 Accor d ingly, the government cannot be responsible for an infringing “use” under section 1498(a) unless t he act constitutes a directly infringing “us e within the United Stat es” under section 271(a), as Research in Motion correctly held. There is no need to decide the scope of section 1498(c) in this case.
II Finally, I note that Judge Plager’s intere sting discour se on takings jurisprudenc e completely fails to explain how t a king of a property right could possibly hav e occurred here. Patent rights are cr eatures of f ederal statute. 5 They do not exist in the abstract. If, as I urg e , the patent holder’s right to sue the government for infringement under 1498(a) is no broader than the ri ghts of the patent holder agai nst private parties under section 271(a), then there c an be no tak i ng resulting from the refusal to recognize a greater right against the government. A nd if, on the other hand, section 1498 is construed to give the patent holder greater rights against the government than against private parties, that right is necessarily defined by bot h sections 1498(a) and 1498(c) taken together. It makes no sense to say t hat section 1498(a) conf ers rights that are “taken” by section 1498(c). Under these circumstances ther e c an be no t a king by the

4 There is no occasion here to de termine whether claims for infringement liability under 271(f) and 271(g) may be br ought in suits against the government. 5 Unlike the situation in Ru ckels haus v. Monsanto Co. , 467 U.S. 986 (1984), we deal here with a property ri ght created by federal law. 04-5100, -5102 5government under any interpretati on of secti on 1498, quite apart from the barrier posed by the Supreme Court’s dec ision in Sch i llin ger v. United States , 155 U.S. 163 (1894). There is thus no basis for a Fifth Amendment takings c l ai m in this case even if Schillinger were overruled.

04-5100, -5102 6

## United States Court of Appeals for the Federal Circuit

04-5100, -5102

ZOLTEK CORPORATION, Plaintiff-Cross Appellant,

v. UNITED STATES, Defendant-Appellant.

PLAGER, Senior Circuit Judge , dissenting. There are two separate though re lated issues in this ca se, both matters of first impression. One is of major significanc e to our understanding of the constitutional obligations of the Unit ed States (“United States ” or “Government”); bot h relate as well to important rights of patent owners. 1 The first issue is, may an owner of a United States patent bring a cause of ac tion under the Fifth Amendm ent to the Constitution 2 against the United States for a ‘taking’ as all other owners of property rights may; or is a patent right somehow less of a property interest, not worthy of such constitutional protection? Until this case, this issue has never been addre ssed directly by this or any other court. The second issue, dealing with a cause of action for infringement of a United States patent, is raised in the context of a method or process patent claim involving

1 The term “patent owner” as us ed throughout this opinion includes assignees of a patent. 2 “[N]or shall private property be taken for public use, without just compensation.” U.S. Const. amend. V.multiple steps. When an owner of such a pat ent sues the United St ates for i n fringement under the provisions of 28 U.S.C. § 1498, the statute that authorizes such s u its against the Government, does the fact th at some or all of the steps are performed i n a foreign country preclude rec o very? If so, is this because of some inherent limitation in § 1498(a), or is it because of the express statutor y exception in § 1498(c) for a claim “arising in a foreign c ountry”? (The relev a nt statutory language is set out in the footnote below. 3 ) This is not only a new question of st atutory interpretation, but because of the way the Supreme Court and this court have understood § 1498, there are significant constitutional overtones as well.

I. Introduction Plaintiff inv ented and patent ed a process for manufacturing a carbon fiber s heet product, a product that is used in making military aircraft wit h a lo w radar s i gnature, the so-called ‘stealth’ aircraft. Defendant, the Unit ed States, so plaintiff alleges, caused the use of plaintiff’s patented inv ention in the c our se of having a new fi ghter plane, the F22 , built, and, according t o plaintiff, did it withou t permission and in violation of plaintiff’s rights. For this plaintiff seeks damages.

3 The relevant portion of 28 U.S.C. § 1498(a) reads: Whenever an invention describ ed 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 agai nst the United Stat es in the Un ite d States Court of Federal Claims for t he recovery of his reasonable an d entire compensation for such use and manufacture. Section 1498(c) reads in its entirety: “The pr ovisions of this sec t ion shall not apply to any claim arising in a foreign country.”

04-5100, -5102 2In the trial court, the Unit ed Stat es argued that, on the undisputed facts, plaintiff did not hav e a cause of action against the Gove rnment under either t he statutes of the United Stat es or under the Constitution. The argument before the trial court, and again on appeal, largely focused on 28 U.S.C. § 1498. That statute gr ants an owner of a United States patent the right to damages if the patented invention is used or manufactured by or for the Unit ed States without licens e or lawf ul right, and, i f it applies , it is under stood that the stat ute both waiv es the sov e reign’s im munity and gives the Court of Federal Claims jurisd iction to hear the cause. The trial c ourt concluded that, because of the limitations imposed by § 1498(c), plaintiff on the facts of this case c ould not state a claim for relief for patent infringement, and so granted the G o vernment partial sum m ar y judgment on that issu e. On the other hand, the trial court concluded that plaintiff does have a cause of action under the Fifth Amendment to the Constitution for a ‘taking’ of its pat ent rights by the Gov e rnment, a cause of action separate and distin ct from the infringement claim. 4 The trial co urt denied the Government summary judgment on t hat is sue. We accepted interlocutory appeal on both rulings.

4 The trial court and the majority opinio n both treat the probl em of the taking claim as one of establishing juri sdiction in the Court of Federal Claims. This is incorrect, since a well-pleaded complaint establishes ju risdiction; the legal issue is whether plaintiff has stated a claim for which relief can be granted. Further, with regard to the infringement issue, as the trial court ex plained, th e Government’s defense unde r § 1498(c) is an affirmative defense, and the pl eadings clearly estab lish a well-pleade d complaint. Again, a more accurate descrip tion of the issue is whether plaintiff has stated a claim for which relief c a n be granted. See Palmer v. United States , 168 F.3d 1310, 1313 (Fed. Cir. 1999) (“[A] court’s general power to adjud icate in s pecific areas o f substantive law

. . . is a question of a court’ s subject matter jurisdic tion,” whereas “the question of whether in a specific case a cour t is able to exercise its general power with regard to the facts peculiar to the specific claim

. . . is properly addressed as a question of whether the plaintiff has stated a claim upon which relief can be granted.”).

04-5100, -5102 3Although my panel colleagues cannot agree why, they do agree that (1) an owner of a United Stat es patent can be denied the basic protec tions of the Constitution, and that (2) if any one step of a multi-step patented proce ss occ u rs outside the United States, the Government is immune from liabi lity under § 1498 for its infringement of the patent. They are wrong on both propositions. I would uphold the trial court’s conclusio n that the taking c l aim s t ates a cause of action ent itling plaintiff to a full trial of the issue, and revers e the trial court’s erroneous conclusi on regarding § 1498. Since this is the exact opposite of what my colleagues are ruling, I respectfully dissent.

II. Overview As there are three other opinions in this case, I begin by s u mmarizing the problems I have with my colleagues’ c o llective and s e parate vie w s. First, in their per curiam opinion, my colleagues ’ anal ys is of the § 1498 liability issue consists of one brief paragraph that concludes, “where, as here, not all steps of a patented process have been performed in the Unit ed States, government liability does not exist pursuant to section 1498(a).” Per curiam op. at 6. T hey bas e t h is conclus i on on the erroneous assumption that a cause of action for infr i ngement of a patent by the United States under § 1498 is governed by the limitations of 35 U. S.C. § 271(a), the statute that defines infr ingement among priv ate litigants, and not by the expres s terms of 28 U.S.C. § 1498(a), the exclusive statut e that defines the Governm ent’s liabilit y in s i milar circumstances. In his conc urring opinion, Judge Gajarsa a cknowledges the problem with trying t o incorporate the terms of § 271(a) into § 149 8(a), but he has been persuaded that we are

04-5100, -5102 4bound by brief language on the subjec t found in this court’s NTP opinion, decided last year, suggesting that incorporation is established la w. Though he believes NTP is wrong on this point, Judge Gajarsa neverthele ss feels bound. Judge Dyk, on the other hand, in his conc urring opinion ar gues that the co mment in NTP is or should be controllin g law. Because of the way the majority i n their per curiam opinion reso lv e the issues in this case, apply i ng the magical incorporati on doctrine to § 1498(a), the trial court’s decision that plaintiff’s infringement claim is barred by the express terms of subsection (c) dealing with caus es that “arise in a fore ign country”—the issue that was c e rtified to us—is not addressed at all in the per curiam opinion, nor by Judge Dyk in his concurrence. Judge Gajarsa, however, does address it in his concurring opinion, see Gajarsa concurring op. at 14-24, even though, on his view of the statute as stated in the per curiam opinion, subsection (c ) has no bearing on the outcome. Since I do not dispos e of plaintiff’s infr ingement claim by rewriting § 1498(a) as the majority chooses to do, I must address t he subsec tion (c) exc eption. In part IV of this opin i on I will e x pla i n both wh y the majority’s incorp oration ass u mption ha s no basis in law, and why the as sumed ‘b inding effect’ of the NTP precedent is neither binding nor precedent. I will the n exp l ain that, at least with regard to the Tyranno process, the subsection (c) exception does not apply here . And finally I will comment on why the majority’s view of the limitat ions imposed by § 1498 raises s i gnificant c onstitutional

concerns. Second, regarding the takings issue, the per curiam opinion does pr ovide somewhat more analy s is, but the analys is is on the wrong subject. According to the per

04-5100, -5102 5curiam opinion, the takings issue in this ca s e turns on t he meaning of an 1894 Supreme Court case, Schillinger v. United States , 155 U.S. 163 (1894). The meaning of Schillinger is then stated in the op inion in one summary sentence, without reference to the facts of the case or the Supreme Court’ s actual holding. The remainder of the per curiam takings discus s ion goes off into a l engthy dis c ourse about why other cases decided some years later did not sub silentio overrul e S c hi ll i nger . Intere sting, but irrelevant. The key is Schillinger . As I shall exp l a i n ne xt, Schillin g e r does not stand for what the per curiam opinion tell s us it does, and thus the ma jority’s conclusion based on their reading of it is wr ong. (The concurr ences add little to the takings discussion, but where rele vant will be addressed below.)

III. The Fifth Amendment Taking Issue The Fifth Amendment to the Constitution prov ides a s e ries of protections for the indiv i dual against governmental abuses, and conc ludes: “nor shall private property be taken for public use, without ju st compensation.” This prov ision has a long and no ble history of protecting and pr eser ving property rights agains t unfettered Governmental seizure, and in so doing of prot ecting individual freedom and pers onal integrity from undue gov ernment authority. 5

5 [T]he only dependable f oundation of personal liber ty is the personal economic security of privat e property. . . . There is no surer way to giv e men the courage to be free than to in sure them a competence upon which they can r e ly. Men cannot be made free by laws un less they are in fact free because no man can buy and no man c an coerce them. That is why the Englishman’s belief that his home is his castle and that the king canno t enter it . . . [is] the very ess ence of the free man’s way of life. Walter Lippmann, T he Method of Freedom 101-02 (1934).

04-5100, -5102 6It is well understood that this constitu tional provision does not preclude the Government from taking privat e property fo r public use. Rather, the Constitution guarantees that the citizen will be fully compensated for such a taking. By requiring just compensation the Constitution makes the proper ty owner whole, and it also places a constraint on gov ernment ac tion by imposing the cost of such action on t he Government’s fisc, thus subjecting administr ative action to the discipline of public decision-making and legislativ e authorization. In recent years the Supreme Court ha s extended t he salutary protection of the Fifth Amendm ent to exc e ssive gov ernmental regulation—the ‘regulatory taking’ iss u e 6 —in addition to the traditional tak i ngs area i n which the government actually acquires priv ate property interests for its own use—the ‘physic a l taking’ iss ue. In the case before us, the matter falls into the traditional acquisition area. Plaintiff alleges that the Go vernment took its property—i ts government-granted patent right—when the Government’s subcontra ctors used the pat ented method in the production of certain products employed in t he F-22 pr oduction. 7 On its face, the claim seems straightforward. Proper ty rights are created by law. In the ordinary course, the law is state law. In the case of patents, the law is federal, and the patent statute

6 See, e.g. , Lucas v. S.C. Coastal Council , 505 U.S. 1003 (1992). 7 Section 1498 express l y makes t he Un ited States liable for the actions of its contractors and subcontractors: For the purposes of this section, t he use or manufacture of an invention described in and c o vered by a patent of the United States by a c o ntractor, a subcontractor, or any person, firm, or corporation for the Government and with t he authorization or consent of the Gov e rnment, shall be construed as use or manufactu re for the United States. 28 U.S.C. § 1498(a).

04-5100, -5102 7express l y declares that the ri ght s in an iss ued patent are pr ope rty. 35 U.S.C. § 261 (“[P]atents shall hav e the attributes of personal property.”); see also Cons ol. Fruit-Jar Co. v. Wright , 94 U.S. 92, 96 (1876) (“A patent for an invention is as much pro p erty as a patent for l and.”). One of the property attributes of a patent grant is the right to exc l ude all others, including the Government, from “making, using, offering for sale, or selling” the patented invention without the pat entee’s consent. 35 U.S.C. § 154(a)(1); see Carl Schenck, A.G. v

. Nor t ron Corp. , 713 F.2d 782, 786 n.3 (Fed. Cir. 1983) (“The patent right is but the right to exc l ude other s, the very definition of ‘propert y.’”). When a private party use s without authority an invention s ubj ect to patent rights, the wr ongful use is the tort of infringement. The patentee’s judicial remedy is a s u it for infringement in accordanc e with Title 35, United States Code. See 35 U.S.C. §§ 271, 281. However, when the wrongful use is committed by t he United States Government (or its agents ) , such suit is not brought under T i tle 35 but under T i tle 28, section 1498. ( T he judic i al remedy provided by 28 U.S.C. § 1498 will be discussed in Part IV, below.) Nevertheless, when t he Government choo ses to acquire a patent right wit hout prior permission of the owner, there is a wa y, unrelate d to infringement law and unique to the Government, through whic h a patentee’ s right to exc l ude ot hers may be obtained. The Government can exercis e its power of eminent domain and s i mply seize or, as we say, ‘take’ the property it nee ds for a public use. In effe ct, the Government forcibly acquires a license to use the invention. Howev e r, because of the Const i tution, the Government may do this only if it pays th e just compensation d e manded by the F i fth Amendment. The trial court examined the ques tion of whether t here could be s u ch a

04-5100, -5102 8taking independent of the terms of § 1498. T he court concluded, correctly, that the answer is yes, and that the Court of Federal Claims has jurisdiction under the Tucker Act to entertain that claim. The Government’s challenge to that c onclus i on is the first question c e rtified to this court. See Zoltek Corp. v. United States , No. 96-166 C (Fed. Cl. Feb. 20, 2004) (order). On appeal, the panel majority in its per cur i am opinion disagree s with the trial court. The opinion relies on it s understanding of the Schillinger case, in wh ich , according t o the per c u riam opinion, “the S upreme Court rejected an argument that a patentee c ould sue the government for patent infringement as a Fifth Amendment taking under the Tucker Act,” per curiam op. at 7, and, we are told, Schillinger remains goo d law. That statement i s ess entially the entire explanation offe red for the opinion’s slav ish reliance on Schillinger

. The problem with the majority’s statement of Schillinger is that it misconstrues the holding in Sch illin ger , and equates the taking claim wit h an infringement action, when as a matter of law these ar e two separa te legal c l aims founded on s e parate legal bases. The tort of patent infr ingement is statutorily bas ed and defined, and exists at the discretion of Congres s; the right to just compensatio n for a ta king is const i tutional, it is not a tort, and it requires no legislative bles sing. F u rthermore, Schillinger , on wh ich th e majority ba ses its resu lt, was not a taking case at all. Schillinger filed a petition in the C ourt of Claims for damages for alleged unauthoriz ed use of his patent by the Gove rnment. At the time (1894), it was understood that the jurisdiction of the Court of Claims for su its against the United State s lay in contract, but not in tor t. The Court of Claims held that since Schillinger’s suit di d

04-5100, -5102 9not involv e a contract, either expressed or implied, on the part of the Government for the use of the patent, the petit ion was outside of the jurisd iction of that court. The Supreme Court agreed. The Supreme Court said “[t]hat this acti on is one sounding in tort is clear.” 155 U.S. at 169. The Court opined that the Court of Claims has no jurisdiction of claims against the Government for mere torts. “Some element of contractual liability must lie at the foundat ion of ever y action.” Id. at 167. The Court restat ed “the frequent ruling of this court that cases sounding in tort are not cogniz a ble in the court of claims.” Id. at 169. Since the cause of action was for tort, and not contract, the C ourt affirmed the trial court’s dismissal of th e suit. In dissent, Justice Harlan first asked the question, “Can a s u it be maintained against the United St ates in the court of cl aims, as upon contract, for the reasonable value of such use of the pat entee’s improv ement?” Id. at 173 ( H arlan, J., dissenting). He argued that the constituti onal provision for just com pensation placed an implie d contractual duty on the Government to pay for w hat it used, and that plaintiff could waive the tort and sue on the contract. He further noted that “[t]here is another view of the ca se which is independent of
mere contr a ct.” Id

. at 179 (Harlan, J., dissenting). The newly enacted Tucker Act of 1887 for the first time gave the Court of Claims jurisdiction to hear and determine “all claims founded upon the constitu tion of the United States.” 8 Ju stice Harlan observed that “[i]f the claim her e made to be compensa ted for the use of a patented invention is not founded upon the constitution of the United States, it would be difficult to imagine

8 Act of March 3, 1887, 24 Stat. 505.

04-5100, -5102 10one that would be of t hat character.” Id. (H arlan, J., dissenting). But the Court majority gave scant attention to this argument; it di smissed it with the ba ck of its hand, stating summarily that such a broad reading could be applied to ev ery other provision of the Constitution as well as to every l a w of Congress. What is critical to appreci ate is that when Schillinger was decided in 1894, the judicial treatment of the t hen-new Tucker Act provision cit ed by Justice Harlan was st ill in its early stages of devel opment. It was not until some years l a ter, and the Suprem e Court’s decision in J a cobs v. United States , 290 U.S. 13 (1933), that the identity of a separate, non-statutory, cons titutional basis for takings remedies under the Fifth Amendment emerged. Al ong wit h that underst anding came the unde rstanding that the opening clause of the Tucker Act provides t he Court of Claims (now the Court of Federal Claims) with a separate jurisdictional basis for such actions, separate from its other bases. In Jacobs the Supreme Court left no doubt that a constitutional ‘taking’ claim wa s not simply another version of the typical Tu cker Act suit against the Government. The narrow issue before the Court was whether plaintiff, whose Fif t h Amendment taking claim against the Government for flooding of its land had already been adjud i cated in its favor, was entitled to interest on its award. If the taking suit against the Government was limited to traditional statutory remedi es, the answer was no, as no statutory provision for interest had been provided. The Cour t of Appeals had so held. The Supreme Court reversed, and awarded inte rest, stating that claim s for just compensation are grounded in the Constitution itself: The suits were based on the right to recover just compensation for property taken by the United States fo r public us e in the exercise of its

04-5100, -5102 11power of eminent domain. That right was guaranteed by t he Constitution. The fact that condemnation proc eeding s were not instit uted and that the right was asserted in suits by t he owners did not c hange the essential nature of the claim. The for m

of the rem e dy di d not qualify the right. It rested upon the Fifth Amendment. Statutory recogn ition was not necessary. A prom is e to pay was not necessary. Such a promise was im plied bec ause of the duty to pay im posed by the amendm ent. T h e suits were thus founded upon the Consti tution of the United States. Id. at 16 (emphasis added). That has been the law at least since 1933. Today a cause of action under the Fifth Amendment’s taking clause is understood to be neither a tort claim nor a contract claim, but a separate cause arising out of the self-executing language of the Fifth Amendment. As the Supreme Court recently explained in Firs t English Evange lica l Lutheran Church of Gl endale v. County of Los Angeles : [G]overnment action that works a ta king of property rights necessarily implicates the “constitutional obligati on to pay just compensation.” We have recognized that a landowner is ent itled to bring an action in invers e condemnat ion as a result of “‘the self-executing character of the constitutional provision with respec t to compensation.’” . . . Jacobs , moreover, does not st and alone, for t he Court has frequently repeated the view that, in the event of a taking, the co mpensation remedy is required by the Constitution. 482 U.S. 304, 315-16 (1987) (citati ons omitted) (emphasis added). Furthermore, there is no longer any q uestion that the opening clause of the amended Tucker Act covering “ a ll c l aims founded upon the constitution of the United States” provides the Court of Federal Claims with jurisdiction ov er such claims. How else could Fifth Amendment acti ons be brought today in the Cour t of Federal Claims for inverse condemnation, see, e.g. , Hendler v. United States , 952 F.2d 1364 (Fed. Cir. 1991), or for regulatory takings, see, e.g. , Fla. Rock Indus., Inc. v. United States , 18 F.3d 1560 (Fed. Cir. 1994)?

04-5100, -5102 12In the case of inverse condem nation takings, such as is the case here, the Government has not used its eminent domain power affirmatively, but is alleged by a plaintiff to have committed by Government ac tion a taking of privat e prope r ty without the just compensation required by the Fifth Am endment. If these cases are considered to be based on tort, the Court of Federal Claim s would be without jurisdiction as it remains well established that that court has no general tort jurisdiction. And, as in regulatory takings cas e s as well, there is no element of contractual or consensual understanding between t he owner whose property is taken and t he Government that takes it. If traditional contract-based jurisdic tion were required under the Tucker Act, the Court of Federal Claims would be wit hout jurisdic tion because there is no contract. Nevertheless, for the reasons explained by the Supreme Court in First Englis h , the Court of Federal Claims today under the Tucker Act hears and decides both inverse condemnat ion and regulatory takings cases, and we review them on appeal. Whatever relevance the argument in Schillinger may have had to constitutional takings back in 1894 regarding contract and tort jurisdiction in the Court of Claims, it has none now. 9 In the case before us, in response to t he trial court’s instructions plaintif f amended its pleading to make clear that its Fifth Amendment takings claim was separate and distinct from the statutory infringement claim. It is est ablis hed law that the Constitution creates its own remedy, and t he Tucker Act expressly gives jurisdiction over such constitutional claims to the Cour t of Federal Claims. Plaintiff has alleged a

9 Since Sc hillinger is not relevant to the question of whether plaintiff has a taking claim, the per curiam’s discourse regarding whether Croz ier v. Fried. Krupp Aktienges ellschaft , 224 U.S. 290 (1912), decided ei ghteen years after Schillinger , “effectively overruled Schillinger sub silentio ,” per curiam op. at 7, is equally ir relevant to the question of whether a separate cause of ac tion exists for a constitutional taking of a patent right.

04-5100, -5102 13property interest in its patent, and a taking of t hat interest by the United States. As the trial court correctly conclud ed, plaintiff’s non-frivolous a llegation of a constitutional taking claim comes within the j u risdiction of the Court of Federal Claims and entitles plaintiff to a trial on t he merits. Summary judgment in favor of the Government as the majority di ctates is wrong as a matter of l a w, and is a denial of plaintiff’s constitutiona l rights. In respons e to this explanation of establis he d law, the per curiam opinion s i mply repeats its confusion ov er statutory remedy and constituti onal right. The answer to the takings iss ue, we are told, “is simple. Unlike regulatory takings and the inverse condemnat ion of real property, th e ‘taking’ of a lic ense to us e a patent creates a caus e of action under § 1498.” Per curiam op. at 11. Consequently, since in the majority’s view there is no remedy on these facts under § 1498, there is no constitutional right either. The notion that the constitutional ri ght to just compensation is defined by the terms of a statute—§ 1498 in this case—is elaborated in Judge Gajarsa’s concurring opinion, in which he opines that “it is t he responsibility of C ongress, and of Congres s alone to decide whet her, and to w hat extent, it will permit the courts to help it fulfill it s Constitutional obligations under the Takings Clause.” Gajarsa conc urring op. at 26. This is a r e markable view of the Consti tut i on. Can it be that Congress, by a stroke of the legislative pen, may withhold the remedies and revoke the protections given to the citizenry by the Fifth Amendm ent, not to mention the other Articles of the Bill of Rights to the Constitution? Fort unately no authority exists for such a radical doctrine of legis l ative preempt ion over const i tutional rig h t. Wisely, Congress has never attempted to establis h one, and in fact Cong ress in the Tucker Act expressly provides

04-5100, -5102 14for the courts’ jurisdiction over these ta kings claims. To argue that Congress in enacting § 1498 successfully cabined the C onstitution is the rev e rse of the understanding that the Constituti on trumps legis l ation; it hardly seems app ropriate for this court to be the first to announce such a c ontrary vi ew of constitutional doctrine. Judge Dyk in his concurring opinion c oncludes that, since under his view of the case the Government’s conduct was non-infr inging (i.e., § 1498(a) was not violat ed because § 271(a) was not), ther e was no wr ong and thus no basis for a taki ngs claim. Dyk conc urring op. at 5. As a result, we do not know J udge Dyk’s view of t he takings issue direc t ly, though by joining the per curiam opinion he presumably shares Judge Gajarsa’s view of § 1498, what ever it is understood to be, as t he sole remedy for a taking of a patent right. In my view, the existence of a proper takings claim is an issue wholly independent of whether under § 1498 there is a v a lid c l aim t hat triggers a remedy under that statute. The latter is a question of statutory right granted by Congres s under its legis l ative authority pursuant to the Constit u ti on; the former is a matter of constitutiona l principle the vindication of which Congress has properly prov ide d for by remedy in the Court of Federal Claims pursuant to the provisions of the Tucker Act. The mixing an d merging of these two separate legal concepts in the manner the majority has done is incorrect as a matter of law, and l eads them to an erroneous conclusion.

IV. The Section 1498 Infringement issue The second issue bef ore us is whether plaintiff has stated a s e parate cause of action under 28 U.S. C. § 1498(a) for damages bas ed on a c l aim of unauthorized us e by

04-5100, -5102 15the Government. The answer is yes. The per curiam opinion’s decision to the contrary is bas ed on the proposition that there can be no Gov e rnment liability under § 1498(a) unless the same conduct, if done by a private party, would constitute infringement under 35 U.S.C. § 271(a). Howev e r, that statement, blending the two disparate s e ctions of the statutes into one, has no bas is in the statutory l anguage, nor is there binding precedent of this court in support of such a proposition. In his concurring opinion, Judge Gajars a acknowledges the problem with the incorporation theory, and therefore he presents an alte rnative argument that reaches the same result based on an int e rpretation of § 1498(c). For the reasons I s h all explain, that interpretation of s ubsection (c) is not c o rrect. Finally, I conclude this sec t ion with a comment about the constitutional concerns ra ised by the majority’s interpretation of § 1498.
1. The per curiam opinion concludes that, for the Government to be liable under § 1498(a) for the unauthorized use of a patent ed process, each claimed step must be performed in the United States . Nothing in § 1498(a) spea ks about performance in the United States; that not ion is come to only by inco rporating into § 1498(a) the requirement for infringement by a privat e party under 35 U.S.C. § 271(a): “whoever without authority . . . uses . . . any patented inv ention , within the United St ates . . . , infringes the patent.” (Emphasis added.) C ontrast that with t he actual language of § 1498(a): “Whenever a [patented] invention is used . . . by or for the United States . . . without lawful right . . . , t he owner’s remedy shall be by action against the United States.” Section 1498(a) si mply does not contain the sa me territorial limitation on

04-5100, -5102 16infringement as § 271(a). Congress obvious ly knew how to write limiting language when it wanted to; its absence m eans that there is nothing in s ubsection (a) of § 1498 that requires that the infringing activity, or any part of it, take plac e in the United States; that is the role play ed by subsection (c), discussed below. I do agree with one premise relied on by the majority—that under either § 1498(a) or § 271(a) the use of a method claim in order to infri nge requir e s that each and every step of the claimed process be per formed. There is no basis, however, for reading into § 1498(a) the require ment that each step be performed in the United States

. 28 U.S.C. § 1498(a) makes no reference to 35 U.S.C. § 271(a), nor does anything in § 1498 suggest any link between actions brought under Title 28 and thos e brought under the aut hority of Title 35. Indeed, t hough there may be similaritie s between the two, our cases make it clear t hat the statutes in Title 35 dealing with infringement litigation between private parties have no direct application to infringement litigation against the United States under 28 U.S.C. § 1498. See Motorola, Inc. v. United States , 729 F.2d 765, 768 (Fed. Cir. 1984) (“A lthough a sec t ion 1498 action may be similar t o a T i tle 35 action, it is nonetheless onl y par allel and not identic al. ”); see also Leesona Corp. v. United States , 599 F.2d 958, 968-69 (Ct. Cl. 1979). The per curiam opinion, rather than interp reting the relevant statutes, relies on what Judge Gajarsa refers to in his concurring opinion as the “NTP proposition,” to the effect that infringem ent under § 271(a) is necessar y fo r government liability under § 1498. See NTP, Inc. v. Research in Motion, Ltd. , 418 F.3d 1282, 1316 (Fed. Cir. 2005). Judge Gajarsa points out that the ev olution of this br oad statement began with

04-5100, -5102 17our predecessor court’s holding in Decca Ltd. v. United States , 640 F.2d 1156 (Ct. Cl. 1980). Decca involved a suit against the Gove rnment under § 1498, and stated that under that section the Government can be li able only f o r direct infringement and not inducement of infringement or contributory infringeme n t. Id. at 1167. Judge Gajarsa correctly describes how this c ourt mischar acterized that holding in a f ootnote in Motorola . See Motorola , 729 F. 2d at 768 n.3. In that case, a Claims Court decision had purported to incorporate 35 U. S. C. § 287— the patent marking statute—into § 1498 as an additional gover nment defense. The F ederal Circuit reversed, holding that incorporation was incorrect. The Motorola footnote, intended to support the noincorporation princ i ple by illustrating the v a rious s i tuati ons in which § 1498 differs from Title 35, at the end of the lengthy footnote managed to conf use the two in a somewhat incoherent sentence, a sentence t hat is at best mere di ctum. Where I part company with Judge Gajarsa is in the next evol utionary step, in which he concludes that the relati onship between § 271(a) and § 1498(a) suddenly became binding prec edent of this court in NTP . The parties in NTP were NTP, a U.S. corporation, the patent owner, and Resear ch in Motion, a Canadian corporation, the accused infringer. The suit was under Title 35. The United States was not a party to the suit, and 28 U.S.C. § 1498 was not at issue.
In NTP , the accused s ystem consisted of many components, one of which was a relay component locat ed in Canada. In dete rmining whether the accused infringer used the system “within the United States,” as re quired for infringement under § 271(a), this

04-5100, -5102 18court looked for guidance to De cca Ltd. v. United States , 544 F.2d 1070 (Ct. Cl. 1976), the facts of which wer e not unlike those of N T P

. 10
In Decca , the accused infringer was the Go vernment, and the s u it was under § 1498. The question was whether § 1498(c)—t he subsection exempting claims arising in a foreign country—precluded Government liability when some parts of the Omega positioning system were used worldwide. The Court of Claims determined that the Government was nev ertheless liable for the alleged infringing use becaus e control a n d beneficial use of the system we re not foreign-based. Decca , 544 F.2d at 1083. NTP simply applied the s a me reasoning to conc lude that the presence of RIM’s relay component in Canada did not preclude a jury from finding that use of the accused system too k place in the United St ates, as required under § 271(a). It is not surprising that the NTP panel found the Decca decis i on “instructive” because of the similar i ty in fact patterns. The result in NTP could have been justified without any formal ‘linking’ of t he Decc a statute and the NTP statute. The precis e ‘linking ’ sta t ement in NTP is: “Although Dec c a was dec ided within the context of section 1498, whic h raises questions of use by the United States, the question of us e within the United Stat es also was implic ated because direct infringem ent under section 271(a) is a necessary predicate f o r government liability under s e ction 1498.” NTP , 418 F.3d at 1316 (citing Motorola , 729 F.2d at 768 n.3). Since gov ernment liability under § 1498 was not at issue in NTP , the statement is not in any s ense necessary to the holding in
NTP , and it is at best a passing comment about a statute not before the c ourt. The

10 Note that there are two Decca decisions, one in 1976 addres sing the liability phase of the c a se, 544 F

. 2d 1070, and one in 1980 addr essing the damages phase, 640 F.2d 1156.

04-5100, -5102 19discussion that precedes and f o llows th e comment makes clear that the NTP cour t understood this. There exists no binding precedent of this court mandating that § 271(a) be incorporated into § 1498(a). Judge Dyk in his c o ncurring opinion ar gues for making the dictum in NTP controllin g law. He s upports his ipse dixit by piecing together bi ts of lan g uage from legis l ative history found in t he Congressional Record, langu age from cases on differen t matters, and broad conclusions about what Congress could not have meant by what it did not say

. His position has no basis in the statutory language a nd, as Judge Gajarsa cogently points out, i gnores the role of § 14 98(c), whic h is the only provision addressing the § 1498 extraterritoriality issue. If § 1498(a) incorporates a “withi n the United States ” territoriality requirement, so that the Govern ment is liable only wh en its infringing act occurs in t he United States, what is t he purpose of § 1498(c), the 1960 amendment to § 1498 that exempted Government li ability for claims arising in a f o reign country? If the Government’s infringing act must take plac e in the United St ates in order for the Government to be liable under § 1498(a), t hen exempting Government actions that arise in a foreign country under § 1498(c) is unneces sary. It is a court’s obligation to make every part of a statute have meani ng. The position advocated by Judge Dy k renders § 1498(c) meaningless.
2. Because § 1498(a), properly understood, does not incorporate the “within the United States” requirement of § 271(a), I agree with Judge Ga jarsa’s alternative vie w that we must look to § 1498(c) to dete rmine how and when the Go vernment’s liabilit y under § 1498(a) is subject to geographical constraints. Se ction 1498(c) reads in its

04-5100, -5102 20entirety: “The provisions of th is section shall not apply to any claim arising in a foreign country.” At the outse t it is well to remember that t he word “claim” in § 1498(c) means the same as ‘claim’ in a plead ing, i.e., a ‘cause of action.’ Thus we are looking for the earmarks of a cause of action, and where it arises. As noted above, I agree with Judge Gaj a rsa’s ans wer to the first question he poses in Part II of his concurring opinion: a patented method is us ed within the meaning of § 1498(a) only if all steps of the claimed process are per formed. Gajarsa concurring op. at 10-13. That propositio n seems clear enough, and correct. It follows that in order for a cause of action to arise under § 1498(a) for use of a method patent all steps of the method must have been practiced by the alleged infringer. The next question then is how does s ubsection (c) of § 1498 relate to patent infringement under subsection (a), i.e., when and how does a cause of action for paten t infringement against the United States aris e in a foreign count ry? The language of subsection (c) does not answer the question, nor is there anything in its legis l ative history that is particularly helpful. To re solve the issue before us we need not answer the question in its broad terms—the issue before us is a narrow one. When the use of a method patent is alleged, and we have c oncluded that a ll of the steps of the method must be performed in order for an infringement of the patent to have occurred, what are the requirements, with particula r regard to territori al location, for the performance of these steps? Where must t he steps be performed i n order for the cause of action to arise “in a foreign country”? Looking ac ross the range of choi ces, there are three. Th e first and easiest case is when each and all of the steps are completed within the Unit ed States. Here there i s

04-5100, -5102 21no foreign entanglement whatsoever, so s ubsection (c) has no application and th e Government is subjec t to the requirements of § 1498(a ) . That case is not before us, but it is useful to have it in mind as we pursue the remainder of the analys is. The secon d and next easiest cas e is when each and all of the s t eps are c o mpleted in a foreign country. If the prohibit i on in subs ection (c) is to have meaning in the context of using a method patent, it must apply he re. In the case before us , the Nicalon silicon carbide fibers were manufactured into sh eets in Japan, the record indi c a ting that all of the steps of the patented invention we re performed there. Even though those sheets were imported into the Unit ed States and used in t he Government’s fighter aircraft, summa ry judgment for the Government under § 1498 wo uld be appropriat e beca u se this would constitute a “claim arising in a forei gn country,” and subsec tion (c) affords the Government a complete defense. The interpretive problem becom es more dif f icult in the third case, in wh ich s o me of the steps of the method pat ent are practiced abroad, and so me in the Un ited States. That is the situation with th e silicide fiber mats made fr om Tyranno fibers, since the Tyranno fibers are manufactured in Japan a nd then pr ocessed into mats in the United States, allegedly requiring use of one or more of the steps of the patented method i n both places. In dealing with this fact patte rn, Judge Gajarsa in his concurring opinion tells us that each, i.e., all, of the steps must be performed within th e United States in order for a cause of action to avoid the arising-in-a-forei gn-country exce ption. Put another way, if any one step occurs outside the United States, it is a cause of action that arises in a foreign country, and thus is barred by § 1498(c).

04-5100, -5102 22That cannot be the law. A cause of action does not ‘arise’ in a p l ace just because any one step of a multi-step process pat ent occurs there. Beyond that, Judge Gajarsa’s position cannot be reconciled with the proposition that all steps must be completed before a compensable use, i.e., infringement of a method patent, occurs under § 1498(a). I understand my colleague’s dilemma—there is no guidance in the statute, in the legis l ative history, or i n prior cases as to what to make of this provision when the steps of a method patent have been performed both in and out of the country. B u t t h a t i s n o reason to abandon logical analy si s in preference for a policy-rooted an d res u lt-driven conclus i on. The logic of the statute and w hat seems to me to be the basic polic y underlying § 1498 is that when the Government has alle gedly benefited from infringing conduct by its contractors or subcontract ors, and when fairness decrees that the Government be held responsib le for its wrongs—the f und amental princ i ple underlying § 1498(a)—then the fact that one or another step of a pr ocess occurred outside the United States should n o t alone immunize the Government from liability. This case involves p a tent claims utiliz i ng nu merous steps in the m anufacture of a specialized high-technology materi al of unique interest to t he Gov e rnment. There is no basis in la w or policy for absolving the Gove rnment from liab ility, now and f o rever, for the wrongful conduct of its agents just because any one step of a multi-step patented method can be found to have oc curred outside t he Unit ed States—that is an invitation t o strategic conduct if ever there was one. I c onclud e that the Government is liab l e under § 1498(a) for an unauthorized us e of a method patent unless all steps of the method are

04-5100, -5102 23practiced abroad, thus causing the claim to be one “arising in a foreign count ry.” See § 1498(c).
3. Finally, because the per curiam opinion and at least one of the concurring opinions devotes so much time to the cas e s construing § 1498, I cannot, even in the interest of brevity, ignore the offered analy s es. The fore runner of § 1498, enacted in 1910, was a straightforward piec e of legis l at ion. The 1910 statute was entitled “An Act to Provide Additional Protection for Owners of Patents of the United States, and for Other Purposes,” and provided t hat “whene ver an inv e ntion des cribed in and covered by a patent of the United St ates shall hereafter be used by the United Stat es without licens e of the owner thereof or l a wful right to use the same, such owner may recover reasonable compensation for such use by suit in the court of claims.” 11 A straightforward reading of the st atute would be that this is a waiver by Congress of the Government’s sovereign immuni ty from the tort of patent infringement, and authority to sue the Government for the to rt in the Court of Claims. That, however, was not the way the Supr eme Court initially viewed the st atute when it came before the Court two years later in the case of Crozier v. Fried. Krupp Aktienges ellschaft , 224 U.S. 290 (1912). Plaintiff Fr ied. Krupp, the patentee, sought a permanent injunction against W m . Crozier, t he Chief of Ordnance of the United States Army, for unauthorized use of its patented invention regarding gu ns and gun carriages

. The Government demurred on t he grounds that the Court of Claims lacked jurisdiction over the suit.

11 Act of June 25, 1910, ch. 423, 36 Stat. 851.

04-5100, -5102 24The Supreme Court, after reviewing the hi story of infringement s u its agains t the Government up to and including Schillinger , turned to the new statute: In substance, therefore, in this case , in view of the public nature of the subjects with which the patents in quest i on are c oncerned and the undoubted authority of the United States as to such subjects to exert the power of eminent domain, the s t atute, looking at the substance of things, provides for the appropriation of a licens e to use the inventions, the appropriation thus made being s anctioned by the means of compensation for which the statute provides. 224 U.S. at 305. Working through the prolix la nguage, it seems that the Court chose not to read the new statute as a simple au thorization for suits for the tort of patent infringement against the Government, but instead r ead t he s t atute as an illustration of the Government’s obligations under the Fi fth Amendment. Why th e Court thought the statute was the one and not the other is not explained. Perhaps it was the longstanding rule, which t he Court had only rec ently reiterated in Sc hillinger , that the Court of Claims did not have jurisdiction over to rts. Perhaps it wa s discomfort with the permanent injunction being s ought against the Army’s effo rts to modernize its guns— after all Fried. Krupp was a German corpor ation and the drums of war, though still distant, were beating. Perhaps it was a bow to Justice Harlan’s di ssent in Schillinger arguing for using the Fifth Amendment to allow a recovery, though if the statute authorized a tort action, a power Congress clearly has , 12 there would be no need for a constitutional justification. Whatever the explanation, the Court in Crozier was clear: “[W]e think there is no room for doubt that the statute ma kes full and adequate provision

12 See Feder al Tort Claims Ac t, 28 U.S.C. § 1346(b).

04-5100, -5102 25for the exercise of t he power of eminent domain for whic h, considered in its final analys is, it was the purpose of th e statute to provide.” Id. at 307. Does it matter which of these underlying theories—tort or constitution—supports a plaintiff’s suit under § 1498? In some cases, it would not seem to matter. However, despite the fact that in light of m odern cases our adherenc e to the Crozier theory has been called “at best anachronistic and at worst mi sleading,” 13 in other cases the underlying theory has had an effect on the outcome; such case s continue to recite the taking theory. See, e.g. , Hughes Aircraft Co. v. United States , 86 F.3d 1566, 1571 (Fed. Cir. 1996) (“The government’s unlicensed use of a patented invention is properly viewed as a taking of property under the Fifth Amendment through the gov ernment’s exercis e of its power of emi nent domain and the paten t holde r’s remedy for such use is prescribed by 28 U.S. C. § 1498(a).”); Leesona , 599 F. 2d at 964 (“When the government has infringed, it is deem ed to have ‘taken’ the patent license under an eminent domain theory, and compensation is the just compensation required by the fifth amendment.”). If either the majority’s incorporation theor y or Judge Gajarsa’s alternative theory prevails, it will certainly matte r. To the extent § 1498 is understood to incorporate into its provisions the entitlement s provided by the F i fth Amendm ent’s ‘taking’ c l ause, any statutory limitation pr oviding les s than just compens ati on would be unconstitutional. Reading § 1498 to pr ovide that any one st ep in a method, no matter how strategically

13 Thomas F. Cotter, Do Federal Uses of Intellectual Property Implicate the Fifth Amendment? , 50 Fla. L. Rev. 529, 555 (1998) (“[T]he habit, in whic h both the Federal Circuit and the Court of Federal Claims continue to indulge, of invoking the takings mantra when discussing section 1498 claims is at best anachronistic and at worst misleading.”).

04-5100, -5102 26planned, will ins u late the Government fr om its own wrongdoing is hardly consonant with the purposes of the Fi fth Amendment. Judge Gajarsa responds to my concerns a bout the takings issue , and his merger of the constitutional requirement for just compensation with § 1498, by arguing that there is no constitutional requirement for a judicial remedy for a taking. See Gajarsa concurring op. at 25-27 & nn.13-14. He points out that Congress could choose t o provide the remedy directly by legislat ion. Perhaps; at least so long as the constitutionally required remedy is provided, that may be true. 14 But Congres s, since the creation of the Court of Cla ims, prefers not to s p end its time writing s pecial bills; instead, it has provided a judi cial remedy for takings clai ms through the Tucker Act and that remedy meets the r equirements of the Constitution. If the judicial remedy is limited to the provisions of § 1498, as my colleagues argue, then that sect ion must also meet the requirements of t he Constitution. The argument t hat Congress could satisfy the

14 Lynch v. United States , 292 U.S. 571 (1934), from which J udge Gajarsa seeks support (and which in turn relied fo r support on the now-ov ertaken Schillin ger opinion), stands on a quite different footing than an inv e rse condemnation case. Lynch was an insurance c ontract case, in whic h the plaintiff’s dec edent, by choosing t o contract with the Gov e rnment presumably f o r his own benefit, had chosen t o place his rights in the hands of a sovereign who asserts that it can determine contractual rights as it wants. Whether view ed as a contract remedy or, as Lync h tried to do, as some sort of a taking, the plaintif f’s decede nt had fo r good or ill put himsel f at risk of the Government’s claim t hat it is fr ee to change its policy

. In Lynch , the case turned on whether Congress, in revoking the ins u rance program, had withdrawn its consent to be sued under existing contracts—the Court held it had not. 292 U. S. at 583. Whether the Fifth Amendment is available as a remedy in cases involving mutual rights under Government contracts is not at issue he re. The issue here is whether the Fifth Amendment protects the indiv i dual from the unilateral ac ts of the sovereign, when inverse condemnation is called for, and it make s no constitutional sens e to say that persons who did not choose in the first in stance to deal with the Government are nevertheless at the me rcy of the Government ’s willing n e ss to pay.

04-5100, -5102 27Constitution by doing it all itself on an indi vidual bas is is academic ally inte resting, but hardly relevant.

************************** ***************** In sum, pl aintiff alleges inter alia that the Government has infringed its United States patent under the terms of United States patent law; on appeal, the issue is whether plaintiff has stated a cause of action under § 1498 for which relief could be granted. I would ho ld pla i ntiff has don e tha t, at lea s t with reg a rd to the silic ide fibe r mats made from Tyranno fibers, and would re mand the matter to the trial court for further proceedings on this issue, as we ll as on the constitutional taking claim.

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