Wrong Defendant, Wrong Court: Plaintiff Wrongly Targets Government Contractors Instead of U.S. Government – Astornet Technologies Inc., v. BAE Systems, Inc. et al.

In a case addressing whether a patent holder can sue government contractors in district court, the U.S. Court of Appeals for the Federal Circuit upheld the dismissal of Astornet’s claims against three government contractors that supplied equipment to the Transportation Security Administration (TSA) finding that the plaintiff’s exclusive remedy was against the U.S. Government in the U.S. Court of Federal Claims. Astornet Technologies Inc., v. BAE Systems, Inc. et al., Case Nos. 14-1854, 15-1006, -1007 (Fed. Cir., Sept. 17, 2015) (Taranto, J.).

In June 2009, TSA sough bids for airport scanning equipment called Credential Authentication Technology/Boarding Pass Scanning System (CAT/BPSS). BAE Systems Information Solutions, a subsidiary of BAE Systems, and NCR, a company for which MorphoTrust eventually took over, won the bids over Astornet Technologies.

Soon after, Michael Haddad, an Astornet inventor, brought a suit in a federal district court in his own name and “doing business as wholly owned Astornet Technologies.” He named NCR, MorphoTrust’s predecessor, two subsidiaries of BAE Systems, TSA and the United States Army as defendants. The cases were later voluntarily dismissed without prejudice, and Astornet, but not Mr. Haddad, brought another suit in federal district court against NCR, MorphoTrust and BAE Systems. The claim alleged direct infringement by the three defendants for making, using, selling and offering to sell “products that embody that patented invention.” One month later, Astornet separated the three defendants into three separate complaints: an action alleging that BAE Systems directly infringed its patent; an action against NCR, and an action against MorphoTrust, the later two alleging indirect infringement under § 271(b) and (c). Specifically, the NCR and MorphoTrust actions alleged that the defendants infringed the patent by “at least inducing the TSA to use the [defendants’] CAT/BPSS system by providing the TSA the CAT/BPSS prototypes and 10 full CAT/BPSS systems, and instructing the TSA regarding the use of these systems in a manner which infringed” the patent.
NCR and BAE Systems filed motions to dismiss, arguing that 28 U.S.C. § 1498 barred the suits by limiting Astornet’s remedy to an action against the United States in the U.S. Court of Federal Claims. The district court agreed. The district court also sua sponte dismissed the case against MorphoTrust because the MorphoTrust case was one “in which the same defense has been asserted based on the same contract documents.” Astornet appealed.

On appeal, the U.S. Court of Appeals for the Federal Circuit analyzed § 1498(a), the statute requiring a patent owner to file suit against the United States in the U.S. Court of Federal Claims to recover damages for the unauthorized use or manufacture of a patented invention by or for the United States. The Court explained that the purpose of the statute was to stimulate contractors to furnish what the government needs while protecting them against infringement liability. Because the plaintiff’s claims specifically alleged that NCR, MorphoTrust and BAE Systems induced and contributed to TSA’s unauthorized use of the equipment and thus the direct infringement by TSA, the Court found that Astornet’s allegation met the “use of the patented invention by . . . the United States” provision in the section 1498(a) that § 1498(a) barred Astornet’s suit against the government contractors and barred suit outside of the U.S. Court of Federal Claims.