United States Court of Appeals for the Federal Circuit
03-1512
CAMPBELL PLASTICS ENGINEERING & MFG., INC.,
Appellant,
v.
Les Brownlee, ACTING SECRETARY OF THE ARMY,
Appellee.
Kyriacos Tsircou, Sheppard, Mullin, Richter & Hampton LLP, of Los Angeles,
California, argued for appellant. With him on the brief was Gary A. Clark.
Domenique Kirchner, Trial Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, of Washington, DC, argued for appellee. With her
on the brief were Peter D. Keisler, Assistant Attorney General; David M. Cohen,
Director; and Todd M. Hughes, Assistant Director. Of counsel on the brief was Craig S.
Clarke, U.S. Army Legal Services Agency, of Arlington, Virginia.
Appealed from: Armed Services Board of Contract Appeals.
United States Court of Appeals for the Federal Circuit
03-1512
CAMPBELL PLASTICS ENGINEERING & MFG., INC.,
Appellant,
v.
Les Brownlee,
ACTING SECRETARY OF THE ARMY,
Appellee.
___________________________
DECIDED: November 10, 2004
___________________________
Before MICHEL, CLEVENGER, and DYK, Circuit Judges.
CLEVENGER, Circuit Judge.
Campbell Plastics Engineering & Mfg., Inc. ("Campbell Plastics") appeals the
decision by the Armed Services Board of Contract Appeals ("ASBCA" or "Board")
upholding an Administrative Contracting Officer's ("ACO's") demand for title to an
invention developed pursuant to a contract between Campbell Plastics and the U.S.
Army Chemical Research, Development and Engineering Center ("Army" or
"government"). See In re Campbell Plastics Eng'g & Mfg. Inc., ASBCA No. 53319
(Mar. 18, 2003). Because we conclude that Campbell Plastics failed to comply with the
invention disclosure provisions of the contract, we affirm.
I
On September 25, 1992, Campbell Plastics (named Venture Plastics, Inc., at the
time) entered into a cost-plus-fixed-fee contract, DAAA15-92-C-0082, with the Army to
develop certain components of an aircrew protective mask, as part of a program for
small disadvantaged business concerns pursuant to section 8(a) of the Small Business
Act,
15 U.S.C. § 637(a) (1988). See
13 C.F.R. § 124.1-.610 (1992) (implementing
section 8(a) programs).
Section I of the contract incorporates numerous clauses from the Federal
Acquisition Regulations ("FARs"), including a "Patent Rights—Retention by the
Contractor" clause from 48 C.F.R. § 52.227-11 (1991) ("FAR 52.227-11") that requires a
contractor to disclose any subject invention developed pursuant to a government
contract and sets forth certain substantive requirements for doing so. The clause
further provides that the government may obtain title if the contractor fails to disclose
the invention within two months from the date upon which the inventor discloses it in
writing to contractor personnel responsible for patent matters. Section I also
incorporates from 48 C.F.R. § 252.227-7039 (1991) ("FAR 252.227-7039") a "Patents—
Reporting of Subject Inventions" clause which requires the contractor to disclose subject
inventions in interim reports furnished every twelve months and final reports furnished
within three months after completion of the contracted work. Subsection H.11 of the
contract, titled "Patent Rights Reports," requires the contractor to submit all "interim and
final invention reports required by patent clause in Section I" on a "DD Form 882,
Report of Inventions and Subcontracts."
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On October 11, 1992, Mr. Richard Campbell, President of Campbell Plastics,
submitted to the Army a DD Form 882 wherein he expressly stated "no inventions." At
a post-award conference on November 17, an Army representative told Mr. Campbell
that a DD form 882 was due at least once every twelve months from the date upon
which the contract was awarded. Shortly thereafter, on December 14, Mr. Campbell
faxed several handwritten drawings to Mr. Jeff Hofmann, an ACO Representative. One
of the drawings identified a location for a "sonic weld or snap fit." Mr. Campbell's
submission was the first in a series of progress reports and drawings submitted during
Campbell Plastics's work under the contract that referenced sonic welding to varying
degrees.
On December 19, 1992, Mr. Campbell faxed a handwritten letter to Mr. Hofmann
seeking to "reopen the question of the sonic welding." The letter included an
explanation of the advantages of sonic welding and the assembly concept. On
January 20, 1993, Mr. Campbell provided Mr. Hofmann with two protective masks that
had sonic-welded side ports. In a January 27 monthly progress report, Campbell
Plastics noted, "We are also testing Sonic Welding the Kapton Film in a housing. This
also has to be tested for leakage and tension." On February 11, Mr. Campbell faxed
Mr. Hofmann a drawing of a side port having a sonic weld. In a monthly progress report
submitted on March 2, Campbell Plastics identified the task of "[t]esting of Sonic
Welding the Kapton film in a housing," and reported that sonic welding "looks viable."
Campbell Plastics further reported that a "prototype mold is currently being fabricated to
prove out the feasibility of sonic welding the Kapton Film and maintaining tension."
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On March 19, 1993, Mr. Campbell faxed Mr. Hofmann a sketch of the side port
voicemitter and the following note: "I am having this sketched up and a simple mold
made to test Sonic Weld/Kapton Concept." On March 22 and 24, Mr. Campbell faxed
various diagrams of the lens retaining system and the front voicemitter housing and
speaking unit, and indicated that certain joints were to be sonic welded. In monthly
progress reports dated April 29 and June 30, Campbell Plastics reported on its testing
of the use of sonic welding. On July 8, Mr. Campbell faxed drawings of the lens
retaining system to Mr. Hoffman and stated specifically that the assembly was sonic
welded. On July 21 and August 5, Mr. Campbell submitted cost estimates and noted in
each that the concept of sonic welding was "nearly complete."
On October 6, 1993, Mr. Joseph J. Stehlik, ACO, wrote to Mr. Campbell to
remind him that an Interim Report of Inventions and Subcontracts, preferably on a DD
Form 882, must be delivered at least every twelve months from the date of the contract,
listing the subject inventions during the period and also certifying that the required
procedures for identifying and disclosing subject inventions have been disclosed. In the
letter, Mr. Stehlik requested that Campbell Plastics submit an interim report within ten
days. On October 18, Mr. Campbell submitted a DD Form 882 but did not disclose an
invention.
In a monthly progress report dated June 6, 1994, Campbell Plastics stated,
"Eyelens Retaining System, Branson satisfied with Sonic Weld Concept – best under
design restrictions." On September 15, Mr. Campbell submitted a DD Form 882 that
again indicated that no invention had been developed under the contract. Campbell
Plastics did not submit another DD Form 882 for the remainder of the contract period,
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and it received no further request from the Army to do so. In monthly progress reports
dated October 7 and November 8, Campbell Plastics reported continued work on the
sonic welding process.
On February 7 and November 24, 1995, Mr. Campbell faxed Mr. Hofmann
drawings that identified changes in the dimensions of the eyelens retaining system to
facilitate sonic welding.
In June 1997, the Army published a report titled, "Design of the XM45 Chemical-
Biological, Aircrew, Protective Mask." The report disclosed research conducted by the
Army from October 1991 through July 1995, and referenced sonic welded components
in the mask.
In August 1997, Campbell Plastics contacted an attorney who soon after drafted
a patent application for a "Sonic Welded Gas Mask and Process." Campbell Plastics
filed the application on October 9, 1997. The U.S. Patent and Trademark Office
("USPTO") made the application available to the Army for the limited purpose of making
a secrecy determination pursuant to 35 U.S.C. § 181 (1994). Pursuant to the USPTO's
request, the Army reviewed Campbell Plastics's application by January 30, 1998.
The patent application issued on April 20, 1999, as
U.S. Patent No. 5,895,537
("the '537 patent"). The '537 patent expressly reserved for the government a paid-up
license and "the right in limited circumstances to require the patent owner to license
others on reasonable terms as provided for by the terms of Contract No. DAAA15-92-C-
0082 awarded by The Army." On April 28, Campbell Plastics notified the Army in writing
of the '537 patent.
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After an exchange of letters between the parties regarding the Army's claim to
joint ownership of the subject invention, including one in which the Army admitted that it
had, by June 1997, a report drafted by government employees that provided an
enabling disclosure of the invention, the ACO ultimately concluded that Campbell
Plastics forfeited title to the patent by failing to comply with FAR 52.227-11.
On March 14, 2001, Campbell Plastics appealed the ACO's decision. Both
parties filed cross-motions for summary judgment. Though Campbell Plastics conceded
in its motion that its disclosure was not in the form of a DD Form 882 as was required by
the contract, Campbell Plastics argued that it disclosed all technical aspects of the
invention to the Army and that the Army admittedly had an enabling disclosure of the
subject invention by June 1997. Campbell Plastics furthermore argued that forfeiture is
not favored by law, especially where the government suffered no genuine harm. In
short, Campbell Plastics framed its failure to comply with the contract as one in form
only, which should not result in the forfeiture of title to the subject invention.
In denying the appeal, the Board ruled that Campbell Plastics failed to satisfy its
contractual obligation to inform the Army that it considered sonic welding to be an
invention. The Board further ruled that any information the Army gleaned from its
review of the patent application for secrecy determination purposes and its own June
1997 report was not provided by Campbell Plastics, and that forfeiture was appropriate
under the circumstances. Finally, the Board recognized that FAR 52.227-11(d), which
specifies when the government "may" obtain title to a subject invention, vests the Army
with some discretion in determining whether to take title. The Board found, however,
03-1512 6
that the Army had not abused its discretion. Campbell Plastics now appeals the Board's
decision. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(10) (2000).
II
The Contract Disputes Act ("CDA"), 41 U.S.C. § 609(b) (2000), governs this
court's review of Board decisions. While the CDA provides for nondeferential review of
the Board's legal conclusions, it specifies that the Board's factual findings shall be final
and conclusive unless they are "fraudulent, or arbitrary, or capricious, or so grossly
erroneous as to necessarily imply bad faith, or if such decision is not supported by
substantial evidence."
Id.
III
Because we have never before defined a contractor's obligation to disclose a
"subject invention" under FAR 52.227-11, this case presents a matter of first impression
for this court.
In 1980, Congress passed the Bayh-Dole Act,
35 U.S.C. §§ 200-212, the
statutory scheme from which FAR 52.227-11 arises. With few exceptions, the Act
allows nonprofit organizations and small business firms to elect to retain title to any
invention by the contractor developed pursuant to a government contract. For purposes
of the Act, Congress has termed these inventions "subject inventions." See
35 U.S.C.
§ 201(d)-(e) (1988) (defining an "invention" to mean "any invention or discovery that is
or may be patentable," and "subject invention" to mean "any invention of the contractor
conceived or first actually reduced to practice in the performance of work under a
funding agreement").
03-1512 7
Congress required that each government contract entered into pursuant to the
Act shall contain provisions that require the contractor to "disclose each subject
invention to the Federal agency within a reasonable time after it becomes known to
contractor personnel responsible for the administration of patent matters, and that the
Federal Government may receive title to any subject invention not disclosed to it within
such time."
35 U.S.C. § 202(c)(1) (1988). The reasons for this are clear. Though the
Act provides nonprofit organizations and small business firms the right to elect title to a
subject invention, it also vests in the government the right to a paid-up license to
practice the invention when the contractor elects to retain title,
id. § 202(c)(4), and the
right to receive title to the invention in the United States or any other country in which
the contractor has not filed a patent application on the invention prior to any pertinent
statutory bar date, id. § 202(c)(3). The disclosure provisions of section 202(c)(1) thus
provide the government adequate means with which to protect these rights.
Subsection I.53 of Campbell Plastics's contract incorporated the clause "Patent
Rights—Retention by the Contractor" of FAR 52.227-11, which obligates the contractor
to disclose "subject inventions" to the government and sets forth both substantive and
formal requirements for the disclosure. The clause states in relevant part:
(c) Invention disclosure, election of title, and filing of patent
application by contractor.
(1) The Contractor will disclose each subject invention
to the Federal agency within 2 months after the inventor
discloses it in writing to Contractor personnel responsible for
patent matters. The disclosure to the agency shall be in the
form of a written report and shall identify the contract under
which the invention was made and the inventor(s). It shall
be sufficiently complete in technical detail to convey a clear
understanding to the extent known at the time of the
disclosure, of the nature, purpose, operation, and the
03-1512 8
physical, chemical, biological or electrical characteristics of
the invention. . . .
(d) Conditions when the government may obtain title. The
Contractor will convey to the Federal agency, upon written request, title to
any subject invention—
(1) If the Contractor fails to disclose or elect title to the
subject invention within the times specified in paragraph (c)
of this clause . . . .
FAR 52.227-11.
Subsection H.11 of Campbell Plastics's contract, titled "Patent Rights Reports,"
requires the contractor to submit all interim and final invention reports "required by
patent clause in Section I" on a DD Form 882, "Report of Inventions and Subcontracts,"
and Campbell Plastics does not dispute that the DD Form 882 is the contractual means
for disclosing subject inventions pursuant to FAR 52.227-11(c)(1).1 In addition to the
disclosure requirements of FAR 52.227-11(c)(1), the form also requires a contractor to
report the title of the invention, whether it elects to file a patent application in either the
United States or a foreign country, and any foreign country so elected.
The language of the Patent Rights Reports clause and the incorporated FARs is
clear and unambiguous. It affords the government the opportunity to take title to any
invention by the contractor that is or may be patentable and was conceived or first
1
How a contractor would disclose on a DD Form 882 the technical aspects
of an invention in the detail required by FAR 52.227-11(c)(1) is not clear. The questions
on the form are not directed towards eliciting a disclosure of technical information, and
the form itself certainly provides no extra space for such a disclosure. In its brief, the
Army states that "[a] written report describing the technical features of the invention
must also be provided with the DD 882." Though we find no support in the contract
itself for the particular manner of disclosure proposed by the Army, we need not
concern ourselves with the question. Campbell Plastics admits that "[p]aragraph H.11
of the Contract . . . requires the written report [of FAR 52.227-11(c)(1)] to be submitted
on DD Form 882." It did not do so.
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actually reduced to practice in the performance of work under the contract if the
contractor fails to disclose on a DD Form 882 the technical aspects of the invention, the
inventor and the contract under which the invention was developed, within two months
of disclosing the invention to contractor personnel responsible for patent matters.
This plain-meaning interpretation of the contract is buttressed by the policy
considerations behind the Bayh-Dole Act. While Congress clearly intended "to promote
the commercialization and public availability of inventions made in the United States by
United States industry and labor," and "to encourage maximum participation of small
business firms in federally supported research and development efforts,"
35 U.S.C.
§ 200 (2000), it also provided the government with certain aforementioned rights to the
inventions and sought to ensure the safeguard of those rights by requiring government
contractors to disclose subject inventions. See
35 U.S.C. § 202 (stating that each
contract shall ensure that "the contractor disclose each subject invention to the Federal
agency within a reasonable time after it becomes known to contractor personnel
responsible for the administration of patent matters, and that the Federal Government
may receive title to any subject invention not disclosed to it within such time");
id. § 200
(listing the protection of the government's rights in federally supported inventions as a
policy objective). A single, written report containing the information required by FAR
52.227-11(c)(1) effectively provides such a safeguard.
Neither party disputes that Campbell Plastics first disclosed the method for
fabricating a sonic welded gas mask to its patent counsel in August 1997, or that the
method was indeed a "subject invention." At a minimum, then, the contract required
Campbell Plastics to disclose on a DD Form 882 by October 1997, the technical
03-1512 10
aspects of its method for fabricating a sonic welded gas mask, the inventor and the
contract under which the invention was developed.2 Campbell Plastics admittedly did
not do so, and instead indicated "no invention" and "none" on DD Form 882s that it did
submit.
Campbell Plastics contends, however, that it continually disclosed all features of
the invention throughout the contractual period. While it is at least debatable whether
the various progress reports and drawings Campbell Plastics submitted to the Army
together convey a clear understanding of the nature, purpose and operation of the
invention as well as the invention's physical, chemical, biological or electrical
characteristics, we think the contract requirement of a single, easily identified form on
which to disclose inventions is sound and needs to be strictly enforced. If we were to
find Campbell Plastics's style of disclosure sufficient, methods of disclosure could vary
widely from case to case. The government never would be sure of which piece of
paper, or which oral statement, might be part of an overall invention disclosure. But we
do not so find. The contract instead demands a single form for disclosure, which
enables the contracting officials to direct the inventive aspects of the contract
performance to the correct personnel in the agency for a determination of whether the
government has an interest in the disclosed invention, and for the government to
2
Despite the requirement of FAR 252.227-7039 that it submit an interim
report every twelve months, Campbell Plastics last submitted a DD Form 882 to the
Army on September 15, 1994. After that date, the Army never formally requested
another DD Form 882. We need not consider whether the Army waived the DD Form
882 requirement, however, because Campbell Plastics did not raise this issue before
the Board.
03-1512 11
determine how best to protect its interest. Sound policy is promoted by the rule of strict
compliance with the method of disclosure demanded by the contract.
Because Campbell Plastics's piecemeal submissions do not adequately disclose
the subject invention under the parties' contract, the government may take title to the
invention pursuant to FAR 52.227-11(d). The arguments Campbell Plastics advances in
an attempt to avoid application of that subsection are unavailing. Campbell Plastics
argues that the subsection refers only to the timing of the disclosure, and not to the
substance of the disclosure itself. Under Campbell Plastics's interpretation, however, it
could disclose anything under the sun in any form whatsoever and still avoid forfeiture,
so long as it does so within two months of disclosing the subject invention to its
personnel responsible for patent matters.
Campbell Plastics also argues that the government's possession of an enabling
disclosure of the subject invention by June 1997, and its review of the patent application
for secrecy determination purposes, satisfied Campbell Plastics's obligations under the
contract. But whatever information the government had regarding the invention, it did
not get it from Campbell Plastics in the form of a proper invention disclosure.
Finally, Campbell Plastics makes much of the fact that "forfeiture" is disfavored at
common law. The language of the contract is very clear, as is the statutory authority
behind FAR 52.227-11, which allows the government to take title to any invention not
properly disclosed. The Board was correct in holding that Campbell Plastics afforded
the government the opportunity to take title to its patent because Campbell Plastics
failed to disclose the invention in the manner specified in the contract. Campbell
Plastics cannot use the proposition that forfeiture is a disfavored remedy as an absolute
03-1512 12
shield to thwart the government's right to enforce the terms of the contract Campbell
Plastics willingly signed.
IV
The Board determined that because FAR 52.227-11(d) specifies when the
government "may" obtain title to a subject invention, the decision to demand title is a
discretionary matter. Although the Board did not understand Campbell Plastics to have
specifically raised the issue of whether the ACO's decision to demand title to the patent
in this case is within the bounds of discretion, the Board nonetheless addressed and
decided the issue. We surmise that the Board took this step because while Campbell
Plastics did not phrase its contention in the language of abuse of discretion, it clearly
argued that when the government obtains a license to the patent and is not otherwise
harmed, the penalty of forfeiture of title is unwarranted.
In deciding the abuse of discretion issue, the Board properly considered
(1) evidence of whether the government official acted with subjective bad faith;
(2) whether the official had a reasonable, contract-related basis for his decision; (3) the
amount of discretion given to the official; and (4) whether the official violated a statute or
regulation. See McDonnell Douglas Corp. v. United States,
182 F.3d 1319, 1326 (Fed.
Cir. 1999) (citing United States Fid. & Guar. Co. v. United States,
676 F.2d 622, 630
(Ct. Cl. 1982)). Ruling in favor of the government on each point, the Board concluded
that the ACO did not abuse his discretion in demanding title to the subject invention and
necessarily rejected Campbell Plastics's argument that when the government takes a
license in the invention and is otherwise not harmed, the government cannot cause
forfeiture of the patent.
03-1512 13
On appeal, Campbell Plastics sharpens the argument made to the Board,
arguing directly that the ACO abused his discretion by demanding title in circumstances
where the government allegedly has suffered no harm. The government responds that
indeed it has suffered harm from Campbell Plastics's failure to meet the notification
requirements, inter alia, by putting the patent rights of the United States in foreign
countries in jeopardy.
We agree with the Board that FAR 52.227-11(d) vests discretion in the
government in determining whether to invoke forfeiture when an invention has not been
correctly disclosed to it. We also agree that the test for abuse of discretion set forth in
McDonnell Douglas is the test to be applied in this case. We hold that harm to the
government is not a requirement in order for the ACO to insist on forfeiture and remain
within the bounds of sound discretion. Campbell Plastics points to nothing in its
contract with the Army, or in the relevant statute or its legislative history, that requires
the government to show harm to itself in order to invoke the remedy of forfeiture when it
is, as is the case here, otherwise warranted. Because the Board correctly applied the
proper test in deciding that no abuse of discretion was committed by the ACO in
demanding title to Campbell Plastics's patent, we reject Campbell Plastics's argument
that an abuse of discretion occurred here.
V
Campbell Plastics failed to comply with the disclosure provisions of the parties'
contract. The contract unambiguously provides that in such a case, the government
may obtain title to the subject invention. The decision of the Board to deny Campbell
Plastics's appeal is affirmed.
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COSTS
No costs.
AFFIRMED
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