Riles v. Amerada Hess Corp.
47 U.S.P.Q. 2d (BNA) 1372, 999 F. Supp. 938, 1998 U.S. Dist. LEXIS 4428 (1998)
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Rule of Law:
A private contractor's use of a patented invention while operating under a federal lease is not considered 'for the United States' under 28 U.S.C. § 1498(a) merely because the government approves the contractor's plans and receives royalties from the operation. The primary purpose of the activity must be to serve a direct governmental interest, not the contractor's own commercial interests.
Facts:
- In 1987, Plaintiff, a professional engineer, was granted a patent for a new method of installing offshore platforms.
- Defendant, an oil and gas corporation, was awarded leases by the United States Government to conduct offshore exploration projects on the Outer Continental Shelf.
- The leases required Defendant to pay the Federal Government a 12.5% royalty on production.
- The leases also required Defendant's design, fabrication, and installation plans to be submitted to and approved by the U.S. Department of the Interior Minerals Management Service (MMS).
- Defendant submitted its plans for an offshore platform to the MMS, and the plans were approved.
- Plaintiff alleged that Defendant's planned method for installing the offshore platform would infringe upon Plaintiff's patented method.
Procedural Posture:
- Plaintiff filed a declaratory judgment action against Defendant in the United States District Court (court of first instance) on January 12, 1998.
- Defendant filed a Motion to Dismiss, arguing that 28 U.S.C. § 1498(a) required Plaintiff to sue the United States in the Court of Claims.
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Issue:
Does a private company's use of a patented invention on a federal lease constitute use 'for the United States' under 28 U.S.C. § 1498(a), thereby requiring the patent owner to sue the government instead of the company, when the government approves the company's plans and receives royalties from its operations?
Opinions:
Majority - Kent, District Judge
No. A private company's use of a patented invention on a federal lease does not constitute use 'for the United States' under 28 U.S.C. § 1498(a) simply because the government receives an indirect benefit like royalties. The court reasoned that the primary purpose of § 1498(a) is to prevent government work from being halted by patent infringement injunctions, not to act as an 'insurance plan for the torts of its agents.' The court found that Defendant's drilling activities were conducted primarily for its own commercial profit, with 87.5% of the royalty going to Defendant, not for the government's direct benefit. Although the government received a royalty and the project aligned with a national policy of making resources available, the actual activities primarily served the interests of the Defendant. The government's approval of the overall plans did not constitute authorization or consent to infringe a specific patent, as the government had no interest in the particular installation method chosen.
Analysis:
This decision clarifies and narrows the scope of the government contractor defense under 28 U.S.C. § 1498(a). It establishes that an indirect or incidental benefit to the government, such as receiving royalties from a private commercial enterprise on federal land, is insufficient to shield the contractor from patent infringement liability. The ruling distinguishes between work performed directly for a government purpose (e.g., a defense contract) and regulated private activity that serves a company's own financial interests. This places the onus on private companies operating under federal leases or permits to ensure their methods do not infringe on existing patents, as they cannot automatically shift liability to the government.
