United States Court of Appeals for the Federal Circuit
2006-1391, -1408
SEVENSON ENVIRONMENTAL SERVICES, INC.,
Plaintiff-Appellant,
v.
SHAW ENVIRONMENTAL, INC.,
Defendant-Cross Appellant.
Brian E. Ferguson, McDermott Will & Emery LLP, of Washington, DC, argued for
plaintiff-appellant. Of counsel on the brief were Kevin A. Szanyi and Nelson Perel,
Webster Szanyi LLP, of Buffalo, New York.
Mark S. Graham, Luedeka, Neely & Graham, P.C., of Knoxville, Tennessee,
argued for defendant-cross appellant. With him on the brief was Geoffrey D. Kressin.
Of counsel were Michael J. Bradford and J. David Gonce.
Appealed from: United States District Court for the Western District of New York
Judge Richard J. Arcara
United States Court of Appeals for the Federal Circuit
2006-1391, -1408
SEVENSON ENVIRONMENTAL SERVICES, INC.,
Plaintiff-Appellant,
v.
SHAW ENVIRONMENTAL, INC.,
Defendant-Cross Appellant.
__________________________
DECIDED: February 21, 2007
__________________________
Before LINN and DYK, Circuit Judges.*
LINN, Circuit Judge.
This is a patent infringement case in which the United States District Court for the
Western District of New York concluded at summary judgment that suit against a
hazardous waste remediation contractor was barred by government contractor immunity
under 28 U.S.C. § 1498. Because we agree with the district court that the contractor’s
use of the accused method was “for the Government and with the authorization and
consent of the Government,” see § 1498(a), we affirm.
*
Circuit Judge Moore heard oral argument in this appeal but subsequently
determined not to participate, taking no position in the decision of the case.
I. BACKGROUND1
This appeal relates to the cleanup of a lead-contaminated parcel of land near
Colonie, New York (“the Colonie site”) that is owned by the United States and managed
by the U.S. Army Corps of Engineers. The defendant, Shaw Environmental, Inc.
(“Shaw”), is a hazardous waste remediation firm that in 2002 contracted with the Corps
of Engineers to engage in cleanup and remediation work at the Colonie site.2 The
plaintiff, Sevenson Environmental Services, Inc. (“Sevenson”), is a corporation that
holds several U.S. patents regarding hazardous waste remediation, including some that
claim methods for treating hazardous waste by applying phosphoric acid: U.S. Patent
Nos. 5,527,982; 5,732,367; 5,916,123; 5,994,608; and 6,139,485. Sevenson alleges
that Shaw’s work at the Colonie site infringes these patents.
Shaw’s relationship with the Government is defined by two separate contracts,
the “Total Environmental Restoration Contract” (“TERC”) and the “Pre-placed Remedial
Action Contract” (“PRAC”). (The PRAC replaced the TERC because of funding issues.)
Both the TERC and PRAC require Shaw to perform hazardous waste remediation at a
1
The facts, which are undisputed in relevant part, are drawn from the report
and recommendation of Magistrate Judge Hugh B. Scott, to whom the case was
referred pursuant to 28 U.S.C. § 636(b)(1). The district court adopted the report and
recommendation in full. See Sevenson Envtl. Servs. v. Shaw Envtl., Inc., No. 02-CV-
527, slip op. at 1–2 (W.D.N.Y. Sep. 16, 2005) (report and recommendation of Judge
Scott) (“Report & Recommendation”); Sevenson Envtl. Servs. v. Shaw Envtl., Inc., No.
02-CV-527 (W.D.N.Y. Mar. 27, 2006) (order adopting Report & Recommendation).
2
Shaw is the third contractor at the Colonie site. The original contract was
with ICF Kaiser. It was ICF Kaiser’s subcontractor, Kiber Environmental Services, that
first performed a treatability study at the Colonie site and recommended the use of the
accused phosphoric acid method.
In early 1999, the ICF Kaiser contract was acquired by IT Group, Inc., and
IT Corporation (collectively, “IT”). In 2002, after IT declared bankruptcy, Shaw obtained
the remediation contract. The instant infringement action followed.
2006-1391, -1408 2
number of government-owned waste sites, including the Colonie site. Both contracts
contain the same authorization and consent clause:
The Government authorizes and consents to all use and manufacture, in
performing this contract or any subcontract at any tier, of any invention
described in and covered by a United States patent . . . used in
machinery, tools, or methods whose use necessarily results from
compliance by the Contractor or subcontractor with (i) specifications or
written provisions forming a part of this contract or (ii) specific written
instructions given by the Contracting Officer directing the manner of
performance.
Report & Recommendation, slip op. at 3.
Both contracts also require development of a Work Plan that contains a detailed
specification of the work that is to be performed. In particular, the TERC provides:
WORK PLAN (WP). For each TERC Delivery Order, the Contractor is
required to submit a WP. The WP, which is written by the Contractor,
describes the Contractor’s detailed approach for the performance of this
Delivery Order. The WP is based upon the Government’s statement of
work, which is a general description of work that the Contractor is required
to perform. The WP describes the activities that will be performed in the
field or office by the Contractor as outlined in individual Delivery Orders.
* * *
3.3 WP ACCEPTANCE. Except as otherwise provided in individual
Delivery Orders, approval of the WP is required prior to the start of field
activities. No change in the approved plan shall be implemented without
written concurrence of the Contracting Officer.
Similarly, the PRAC requires that the “Contractor must receive approval from the
Contracting Officer on all site-specific plans (i.e., Work Plan . . . , etc.) before initiating
any on-site activity.” The Work Plan for the Colonie site requires Shaw to use “a
phosphoric acid based stabilization system.”
Sevenson filed the instant patent infringement suit against Shaw in the United
States District Court for the Western District of New York on July 23, 2002. Complaint,
Sevenson Envtl. Servs., Inc. v. Shaw Envtl., Inc., No. 02-CV-527 (W.D.N.Y. July 23,
2006-1391, -1408 3
2002). Shaw moved for summary judgment on the ground that pursuant to its contracts
with the government and to 28 U.S.C. § 1498(a), the United States was the proper
defendant, and that the suit should therefore be dismissed. The district court, adopting
the report and recommendation of the magistrate judge, agreed and entered judgment
in favor of Shaw. Sevenson Envtl. Servs. v. Shaw Envtl., Inc., No. 02-CV-527
(W.D.N.Y. Mar. 22, 2006). The district court also denied as moot Shaw’s motion to
dismiss the case or otherwise sanction Sevenson for alleged discovery violations. Id.
Sevenson appeals. Shaw cross-appeals, asserting that the district court erred
(1) when it denied Shaw’s motion to dismiss for discovery violations and (2) when it
denied Shaw’s motion to amend its answer to include declaratory judgment
counterclaims against Sevenson as to additional unasserted patents.
We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
II. DISCUSSION
A. Standard of Review
We review de novo the district court’s grant of summary judgment. Depuy Spine,
Inc. v. Medtronic Sofamor Danek, Inc., 469 F.3d 1005, 1013 (Fed. Cir. 2006). Summary
judgment is appropriate when there is no genuine issue of material fact and the moving
party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). The facts material to this appeal are
not disputed; thus, we may determine as a matter of law whether summary judgment as
to government contractor immunity was appropriate.
2006-1391, -1408 4
In this case, Shaw’s immunity to suit hinges on the interpretation of its contracts
with the government. Interpretation of contracts is also a question of law that we review
de novo.3 See Applied Cos. v. Harvey, 456 F.3d 1380, 1382 (Fed. Cir. 2006).
B. Section 1498(a)
The relevant statutory provision reads as follows:
(a) Whenever an invention described in and covered by a patent of the
United States is used or manufactured by or for the United States without
license of the owner thereof or lawful right to use or manufacture the
same, the owner’s remedy shall be by action against the United States in
the United States Court of Federal Claims for the recovery of his
reasonable and entire compensation for such use and manufacture.
* * *
For the purposes of this section, the use or manufacture of an invention
described in and covered by a patent of the United States by a contractor,
a subcontractor, or any person, firm, or corporation for the Government
and with the authorization or consent of the Government, shall be
construed as use or manufacture for the United States.
28 U.S.C. § 1498(a). Because Shaw is a contractor, its use of the patented method
qualifies as “use . . . for the United States,” and it is thus immune from suit except “by
action against the United States in the United States Court of Federal Claims,” if two
criteria are met: (1) the use is “for the Government”; and (2) the use is “with the
authorization and consent of the Government.” Id.; see Hughes Aircraft Co. v. United
3
Ordinarily in patent cases, “[i]nterpretation of contract terms is a matter not
unique to our exclusive jurisdiction and is therefore reviewed under regional circuit law.”
Depuy Spine, 469 F.3d at 1013. Here, however, the relevant contract is one with the
government, and the relevant question is the scope of the government’s authorization
and consent to suit, in lieu of a private defendant, for patent infringement. Such a
question “bears an essential relationship to matters committed to our exclusive control
by statute,” Biodex Corp. v. Loredan Biomedical, Inc., 946 F.2d 850, 858–59 (Fed. Cir.
1991), both with respect to our jurisdiction over patent cases, see 28 U.S.C.
§ 1295(a)(1), and with respect to our jurisdiction over appeals pertaining to government
contract disputes, see 28 U.S.C. § 1295(a)(2), (a)(3), (a)(10). Accordingly, we review
the questions of contract interpretation presented by this appeal under Federal Circuit
law.
2006-1391, -1408 5
States, 534 F.2d 889, 897–98 (Ct. Cl. 1976). Sevenson argues that Shaw’s use of
phosphoric acid does not meet either criterion.
1. Use “for the Government”
Sevenson’s first argument is that the phrase “for the Government,” as used in
§ 1498(a), “refers to the ‘primary purpose of the contract’ between the private party and
the government.” Appellant’s Br. at 33. We disagree. The text of the statute contains
an awkward circularity: use “for the United States” is defined as use that is both “for the
Government” and “with the authorization and consent of the Government.” In context,
the “for the Government” prong of the definition appears to impose only a requirement
that the use or manufacture of a patented method or apparatus occur pursuant to a
contract with the government and for the benefit of the government. The statute
imposes no additional “primary purpose” condition.
The cases that Sevenson cites are not to the contrary. For example, in Riles v.
Amerada Hess Corp., a district court concluded that where an offshore oil drilling
operation leased drilling rights from the government for a 12.5% royalty and was
required to get government approval for its drilling platform installation methods, the
infringement of a patent on those methods was not part of a use “for the Government.”
999 F. Supp. 938, 940 (S.D. Tex. 1998). The government received some benefit from
the infringement, to be sure, but the drilling was not a “governmental function” that the
government had sought or required the driller to carry out. Id. Riles noted that
“[c]learly, Defendant did not agree to drill for the Government simply because the
Government receives some monetary benefit as a byproduct of the activity.” Id.
Similarly, in Larson v. United States, the United States Claims Court held that use of
2006-1391, -1408 6
infringing medical devices by Medicare and Medicaid providers did not fall within § 1498
because the use of those particular devices, though funded by the government, was not
required by it, nor were the providers under the government’s control. 26 Cl. Ct. 365,
369–70 (1992).
Here, in contrast, Shaw’s use of the accused method has been in its capacity as
a government contractor and pursuant to its contract for the benefit of the government.
In similar cases, where infringing activity has been performed by a government
contractor pursuant to a government contract and for the benefit of the government,
courts have all but bypassed a separate inquiry into whether infringing activity was
performed “for the Government.” Instead, the inquiry has reduced to the “very simple
question” of whether the plaintiffs “establish that the government authorized or
consented to the . . . infringement . . . , if such infringement in fact occurred.” Auerbach
v. Sverdup Corp., 829 F.2d 175, 180–81 (D.C. Cir. 1987) (applying the parallel copyright
infringement provisions of 28 U.S.C. § 1498(b)); see also Carrier Corp. v. United States,
534 F.2d 244, 247 (Ct. Cl. 1976) (proceeding, after a determination that infringing use of
a patented device was not directly “by the Government,” to an analysis of whether the
government authorized and consented to the infringing use).
Sevenson’s specific factual arguments on the “for the Government” question also
fail. It is irrelevant whether the TERC or PRAC encompassed a range of other tasks
besides remediation at the Colonie site; whether Shaw (or its predecessor) or the
Government selected the allegedly infringing method; whether the risk of an injunction
(one purpose of § 1498) was mitigated by the existence of noninfringing alternative
treatment methods; and whether Shaw agreed to defend against Sevenson’s patent
2006-1391, -1408 7
claims (an issue between Shaw and the government in which Sevenson has no stake).
It is also irrelevant whether Shaw reaped the benefits of choosing phosphoric acid
rather than another remediation method. The question is not whether the choice of
remediation method was made “for the Government,” but whether the infringing method
was practiced “for the Government,” and that question is answered in the affirmative by
the observation that the government sought and received hazardous waste remediation
services at the Colonie site. Any dispute about whether another method would have
benefited the government equally without infringing Sevenson’s patent rights goes to
whether the government “authoriz[ed] and consent[ed]” to this particular use.
2. Use “with the Authorization and Consent of the Government”
Where, as here, a government contract contains an explicit authorization and
consent clause (and the parties have alleged no alternative source for government
authorization and consent), the scope of the government’s authorization and consent to
liability naturally hinges on the language of that clause. Contrary to Sevenson’s
characterizations of this appeal as an implied authorization and consent case, the issue
here is whether the government, through the TERC and PRAC, expressly authorized
and consented to the use of the accused method.
Sevenson characterizes the authorization and consent clause as “narrow”—as
did our predecessor court, describing an almost identical clause, in Carrier. 534 F.2d at
247. In this case, however, the authorization language of the contract is broad enough.
Both the TERC and the PRAC grant government authorization and consent “to all use
and manufacture, in performing this contract . . . of any invention described in and
covered by a United States patent . . . used in machinery, tools, or methods whose use
2006-1391, -1408 8
necessarily results from compliance by the Contractor or subcontractor with (i)
specifications or written provisions forming a part of this contract.” Notably, this
language explicitly encompasses “specifications” that are a part of the contract, as well
as the base language of the contract itself. As both the government’s contracts
specialist and Sevenson’s Rule 30(b)(6) designee acknowledged, Shaw’s Work Plan is
such a specification. Because it requires that Shaw use the accused method at the
Colonie site, the accused use “necessarily results from compliance” with the contract’s
“specifications,” and the government has authorized and consented to the use.
Carrier, the only on-point, binding precedent that the parties have cited to us, is
thus factually distinguishable. In Carrier, a garbage company entered into a contract to
remove refuse at Andrews Air Force Base. 534 F.2d at 246. It was sued for
infringement of a patent on certain types of rubbish compactors and containers. Id. at
246. Interpreting § 1498(a) in light of a similar authorization and consent clause, and
notwithstanding a requirement that “[a]ll equipment . . . shall become operative only
after inspection and acceptance by the Contracting Officer or the Technical
Representative,” the Court of Claims held that the use of infringing equipment was not
“necessary” to the contract because “neither the contract specifications nor any specific
written instructions . . . required [the contractor] to use any particular type of equipment”
and “containers were available in the open market which could have been purchased
and used, and which would not have infringed plaintiff’s patent.” Id. at 247–48. Here, in
contrast, the government did more than an “inspection and acceptance”; it required in
the contracts the development of a detailed written Work Plan, and that Work Plan
required the use of the infringing method. Unlike the contractor in Carrier, Shaw’s use
2006-1391, -1408 9
of a noninfringing alternative to the accused method would put it in breach of its
contracts. Thus, Shaw’s use of the accused method was “necessar[y]” in a way that
use of patented devices in Carrier was not.
Accordingly, Shaw’s use of the contract was both “for the Government” and “with
the authorization and consent of the Government,” and Shaw is entitled to immunity
from suit under § 1498(a).
III. CONCLUSION
For the foregoing reasons, we conclude that the district court properly granted
summary judgment in favor of Shaw. Because we also discern no error in the rulings of
the district court relevant to Shaw’s cross-appeal on the issue of sanctions,4 we affirm.
AFFIRMED
4
In light of our affirmance of the appeal, we need not and do not reach the
issue presented in the cross-appeal concerning leave to amend the counterclaim or the
underlying jurisdictional questions raised thereby.
2006-1391, -1408 10