In IRIS Corp. v. Japan Airlines Corp., No. 10-1051 (Fed. Cir. Oct. 21, 2014), the Federal Circuit affirmed the district court's dismissal of the suit on the grounds that the allegedly infringing acts were carried out for the U.S. government and therefore exempted from infringement liability under 28 U.S.C. § 1498(a).
IRIS Corporation ("IRIS") sued Japan Airlines Corporation ("JAL"), alleging infringement of U.S. Patent No. 6,111,506 ("the ʼ506 patent"), which discloses methods for making an identification document including a contactless communication insert. IRIS alleged that JAL had infringed the ʼ506 patent by using electronic passports with embedded computer chips in its boarding and check-in processes at its facilities in the United States. JAL moved to dismiss the claim for failure to state a claim upon which relief can be granted, relying on, inter alia, a conflict-of-laws rationale. The district court granted JAL's motion to dismiss, holding that JAL was exempt from infringement liability because federal laws requiring the examination of passenger passports conflicted with U.S. patent law. IRIS appealed.
The Federal Circuit affirmed the district court's decision, holding that JAL was exempted from infringement liability under 28 U.S.C. § 1498(a), which limits infringement remedies when the alleged infringer uses or manufactures the patented invention for the U.S. government. In so holding, the Federal Circuit analyzed JAL's acts under a two-part test to determine whether the allegedly infringing acts were "for the United States." Slip op. at 4. The Federal Circuit explained that "[t]he statute further clarifies that an accused activity is 'for the United States' if . . . (1) it is conducted 'for the Government,' and (2) it is conducted 'with the authorization or consent of the Government.'" Id. (quoting 28 U.S.C. § 1498(a) (2012)). Further, the statute provides that if an allegedly infringing activity falls within the scope of § 1498(a), the patent holder may only seek redress for the alleged infringement in a suit against the U.S. government. Noting that the government's authorization or consent may be express or implied, the Court explained that in the present case, "the government has clearly provided its authorization or consent because—as the parties and the United States agree—[JAL] cannot comply with its legal obligations without engaging in the allegedly infringing activities." Id. (citation omitted).
"When the government requires private parties to perform quasi-governmental functions, such as this one, there can be no question that those actions are undertaken 'for the benefit of the government.'" Slip op. at 6 (citation omitted).
Since governmental authorization or consent does not end the § 1498(a) inquiry, the Court evaluated whether JAL's activity was "for the Government" by assessing whether the activity had been performed "for the benefit of the government." Id. at 5 (citations omitted). In explaining its determination, the Court elaborated as to the extent to which the government must benefit: "'[I]ncidental benefit to the government is insufficient,' but '[i]t is not necessary [for the Government] to be the sole beneficiary.'" Id. (alterations in original) (quoting Advanced Software Design Co. v. Fed. Reserve Bank of St. Louis, 583 F.3d 1371, 1378 (Fed. Cir. 2009)). Applying this standard, the Court held that "the government benefits here because [JAL's] examination of passports improves the detection of fraudulent passports and reduces demands on government resources," enhancing border security and assisting the government in "monitor[ing] the flow of people into and out of the country." Id. at 5-6. Indeed, the Court explained, "[w]hen the government requires private parties to perform quasi-governmental functions, such as this one, there can be no question that those actions are undertaken 'for the benefit of the government.'" Id. at 6 (citation omitted). Additionally, the United States admitted that suit under § 1498(a) is appropriate here, which the Court believed reinforced its conclusion that "IRIS's exclusive remedy is suit for recovery against the United States under § 1498(a)." Id.
Accordingly, the Court held that JAL's allegedly infringing actions fell within the scope of § 1498(a) and concluded that IRIS's complaint failed to state a claim upon which relief could be granted. The Federal Circuit therefore affirmed the district court's dismissal.
Judges: Prost, Newman, Hughes (author)
[Appealed from E.D.N.Y., Chief Judge Amon]
This article previously appeared in Last Month at the Federal Circuit, November 2014
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