3rd Eye Surveillance, LLC v. United States

In the United States Court of Federal Claims
No. 15-501C
(Filed: April 5, 2016)
) Patent case; government’s motions to
3RD EYE SURVEILLANCE, LLC and ) notify eight entities alleged to have an
DISCOVERY PATENTS, LLC, ) interest in the subject matter of the action;
) RCFC 14(b); standard for an “alleged
Plaintiffs, ) interest” under the notice provision of
) RCFC 14(b)
v. )
)
UNITED STATES, )
)
Defendant. )
)
Stephen A. Kennedy, Kennedy Law, L.L.P., Dallas, Texas, for plaintiffs.
David M. Ruddy, Trial Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, Washington, D.C., for defendant. With Mr. Ruddy on the briefs
were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Civil Division, and John
Fargo, Director, Commercial Litigation Branch, Civil Division, United States Department of
Justice, Washington, D.C. With him at the hearing were Joss Nichols, Civil Division, United
States Department of Justice and Nathan Grebasch, United States Department of Homeland
Security.
OPINION AND ORDER
LETTOW, Judge.
Pending before the court in this patent infringement case brought pursuant to 28 U.S.C.
§1498(a) are motions by the defendant (“United States” or the “government”) to notify eight
entities, each of which “is alleged to have an interest in the subject matter of the suit.” Rule
14(b) of the Rules of the United States Court of Federal Claims (“RCFC”). 1 The patents at issue
relate to alarm surveillance technology: U.S. Patent No. 6,778,085 entitled “Security System and
Method with Realtime Imagery,” U.S. Patent No. 6,798,344 entitled “Security Alarm System and
Method with Realtime Streaming Video,” and U.S. Patent No. 7,323,980, also entitled “Security
System and Method with Realtime Imagery.” In the motions, the government asserts that the
entities to be given notice have contracts with the government involving security or alarm
1
The eight entities are IndigoVision, LTD; Datawatch Systems, Incorporated; Tyco
Integrated Security LLC; Diebold, Incorporated; Vidsys, Inc.; EFW Inc.; Tactical Micro, Inc.;
and ICx Technologies, Inc.
systems, or components of such systems, that, based on plaintiffs’ allegations, may constitute
infringement of plaintiffs’ asserted patents. The government further asserts that each of the
contracts held by the eight entities contains a standard indemnity clause pursuant to 48 C.F.R.
(Federal Acquisition Regulation or “FAR”) § 52.212-4(h) or § 52.227-3, requiring the contractor
to indemnify the government against liability for patent infringement arising from performance
of the contract. The plaintiffs oppose all three motions on the basis that the government has not
sufficiently alleged an interest on the part of the named entities in the subject action to warrant
notice under RCFC 14(b). The motions have been fully briefed and were addressed at a hearing
on March 24, 2016. For the reasons stated, the court has concluded that the government’s
motions should be granted and all eight entities should be given notice of the proceedings
pursuant to RCFC 14(b).
BACKGROUND 2
A. Original Patent Infringement Complaint
Plaintiffs filed a complaint on May 15, 2015 alleging that the government was and is
infringing their patents for alarm surveillance systems. See 3rd Eye Surveillance, LLC v. United
States, 124 Fed. Cl. 438, 439-40 (2015). All three patents relate to a “security alarm system that
provides secure, realtime video and/or other realtime imagery of a secured location to one or
more emergency response agencies over a high-speed communications link.” Id. at 440 (quoting
’085 patent at Abstract). Plaintiff 3rd Eye Surveillance, LLC (“3rd Eye”) alleges that it is the
exclusive licensee of the three patents, and plaintiff Discovery Patents, LLC (“Discovery
Patents”) is the alleged assignee of all interests in the patents. Id. In their original complaint,
plaintiffs claimed that the government was developing and deploying infringing surveillance
systems either through the direct actions of government agencies or through third-party
consultants and contractors. Id. Plaintiffs claim damages for this infringement that “approach or
exceed $1 [b]illion.” Id.On September 16, 2015, the government filed a motion to dismiss plaintiffs’ complaint
for lack of subject matter jurisdiction under RCFC 12(b)(1), as well as a motion for a more
definite statement under RCFC 12(e). 3rd Eye, 124 Fed. Cl. at 439. In the latter motion, the
government asserted it could not reasonably respond to plaintiffs’ complaint because it did not
provide any information about the identity or location of the accused systems, nor did it provide
details of the allegedly infringing activity beyond a representative list of eight government
entities “responsible for military, security, and law enforcement functions,” as well as six third-
party “consultants and contractors” to the government. Id. at 440. The court denied the
government’s motion to dismiss but directed plaintiffs “to file an amended complaint that
(1) explains, with as much specificity as possible, why they believe certain government agencies
and third-party contractors to the government have developed and used surveillance systems that
infringe their patents, and (2) provides the publicly available information that was used to reach
2
To provide a background and context for the case, the court has drawn upon the
submissions of the parties attendant to the pending motions.
2
this conclusion.” Id. at 444.
B. Amended Complaint and Details on Government Contractors
The plaintiffs responded to the court’s order by filing an amended complaint on January
26, 2016, ECF No. 22. The amended complaint provided examples of locations where the
allegedly infringing surveillance systems are in use, including airports, government office
buildings and courthouses, and national border areas. Am. Compl. ¶¶ 9, 84. The complaint also
stated that “[t]he [g]overnment enters into contracts with third parties for hardware components
(such as cameras, audio sensors and computers/servers), software applications, and IT
technology consulting necessary to implement and operate the infringing [g]overnment security
systems.” Am. Compl. ¶ 11. Plaintiffs asserted that “[d]etailed specifications for the various
[g]overnment security systems are confidential.” Am. Compl. ¶ 10.
Plaintiffs provided information about “video cameras” in use at airports, such as Dallas
Fort Worth International Airport. Am. Compl. ¶ 17. Plaintiffs also submitted a news article
from January 2016 relating to Hitachi Data Systems Federal (“Hitachi Federal”), a government
contractor, describing an “airport security monitoring system” that uses “video intelligence” and
an “automated monitoring system.” Am. Compl. ¶¶ 18-20. Plaintiffs stated that they “do not
allege that Hitachi Federal is directly or indirectly infringing the [asserted] patents at this time,”
but the government’s airport monitoring system, as described in the article and evidenced by the
video cameras in use, infringes one or more of the claims in the three patents at issue. Am.
Compl. ¶¶ 43-48.
Plaintiffs also provided information about security systems in use at government
buildings, including systems that use “Converged Security Information Management software”
provided by a contractor, Vidsys, Inc. (“Vidsys”). Am. Compl. ¶¶ 50, 52-53. Plaintiffs allege
that the government is infringing one or more of the claims in the ’344 patent and the ’980 patent
by using the Vidsys software “in connection with other components,” including video cameras
and other “sensors,” alarms, and access control systems such as “identity management, card
access, and biometrics.” Am. Compl. ¶¶ 57-66, 81-83. Plaintiffs do not allege that Vidsys is
infringing their patents or “that the Vidsys . . . software, by itself, directly or indirectly, infringes
the claims of [p]laintiffs’ patents.” Am. Compl. ¶¶ 79-80.
Plaintiffs additionally provided information on the government’s use of a “remote video
surveillance system” to “monitor[] portions of its border.” Am. Compl. ¶ 86. Plaintiffs point to
a contract recently awarded to General Dynamics to upgrade a border surveillance system. Am.
Compl. ¶ 87. 3 The system reportedly “includes a wide-area electro-optical and infrared multi-
sensor camera system that provides [government] agents with persistent ground surveillance and
real-time video analytics to effectively detect, track, identify, classify, and respond to missions
along the nation’s borders.” Am. Compl. ¶ 90. Plaintiffs assert that this system infringes one or
3
At the hearing, the government indicated it was not seeking to notify General Dynamics
under RCFC 14(b) because, among other things, the contract with General Dynamics apparently
does not contain a patent indemnity clause. Hr’g Tr. 7:6-14 (Mar. 24, 2016), ECF No. 40.
3
more of the claims in the ’344 patent and the ’980 patent. Am. Compl. ¶¶ 100-03.
Plaintiffs also included in their complaint a summary of government contracts under
General Services Administration (“GSA”) Schedules 70 and 84, which are used to obtain
“hardware components, software and other components needed to provide security systems for
secured locations.” Am. Compl. ¶¶ 104-06. In this summary, plaintiffs identified contracts with
two entities, IndigoVision, LTD (“IndigoVision”) and Datawatch Systems, Incorporated
(“Datawatch”), for “security system[s] that include[] . . . video cameras, sensors, a control center
to receive input from computers connected to such sensors, and the capabilities of providing real-
time video of alarm events to response agencies.” Am. Compl. ¶ 105. Plaintiffs also stated that
the government purchases goods and services from Vidsys through GSA Schedule 70. Am.
Compl. ¶ 106.
C. The Government’s Motions to Notify Interested Third Parties
1. The government’s first motion: IndigoVision and Datawatch.
On February 5, 2016, the government filed a motion to notify IndigoVision and
Datawatch as interested third parties under RCFC 14(b). Def.’s Opposed Mot. to Notice Third
Parties (“Def.’s First Mot.”), ECF No. 23. The government based its motion on the fact that both
IndigoVision and Datawatch are named in Paragraph 105 of plaintiffs’ amended complaint as
vendors under GSA Schedule 84 and potential providers of an infringing “security system.”
Def.’s First Mot. at 2. With its motion, the government provided a Federal Supply Schedule
Price List for IndigoVision under contract number GS-07F-0271Y for numerous components
related to “closed circuit surveillance systems” and “facility management systems.” Id. Ex. A.
The government also provided a similar price list for Datawatch under contract number GS-07F-
0634N for components related to an “access control system” and other “security and monitoring”
systems. Id. Ex. B. Finally, the government provided “Contract Clause Document[s]” for both
IndigoVision and Datawatch showing that both contracts contained a standard indemnity clause
related to intellectual property, FAR § 52.212-4(h):
Patent indemnity. The Contractor shall indemnify the ordering activity and its
officers, employees and agents against liability, including costs, for actual or
alleged direct or contributory infringement of, or inducement to infringe, any
United States or foreign patent, trademark or copyright, arising out of the
performance of this contract, provided the Contractor is reasonably notified of
such claims and proceedings.
Id. at 3, Ex. C at A39, Ex. D at A186. 4 The government contended that “pursuant to the patent
indemnity clause in each underlying contract, the companies . . . may have an interest in the
subject matter of this suit within the meaning of RCFC 14(b).” Id. at 3.
4
The government provided the exhibits to its motions as separate appendices, but the
several appendices were paginated sequentially. For ease of reference, this opinion refers to
these page numbers as “A __.”
4
2. The government’s second motion: Tyco Integrated Security LLC, Diebold,
Incorporated, Vidsys, and EFW Inc.
The government filed its second motion to notify interested third parties on February 12,
2016, the same day it filed its answer to the amended complaint. Def.’s Second Mot. to Notice
Third Parties (“Def.’s Second Mot.”), ECF No. 25. The second motion requests that the court
authorize notices to be issued to Tyco Integrated Security LLC (“Tyco”), Diebold, Incorporated
(“Diebold”), Vidsys, and EFW Inc. (“EFW”), a wholly owned subsidiary of Elbit Systems of
America, LLC. Def.’s Second Mot. at 1-2. With its motion, the government provided contract
number DJM-14-A32-V-0014 between the United States Marshals Service and Tyco relating to
“management, supervision, manpower, materials, supplies, and equipment necessary to plan,
schedule, coordinate, and assure effective performance of security services.” Id. Ex. B, at A8. 5
It also provided a redacted version of contract number DJM-15-A32-V-0033 between the United
States Marshals Service and Diebold for the “management, installation, maintenance, and central
station monitoring” of “[h]ome [i]ntrusion [d]etection [s]ystem[s].” Id. Ex. C. at A1l1. The
government provided a redacted version of contract number N00406-15-P-1941 between the
United States Navy and Vidsys for the VidShield software application to be used in video
surveillance systems operated by the Navy. Id. Ex. D, at A129-30. 6 Finally, the government
provided award information for contract number HSBP1014C0004 between the United States
Department of Homeland Security and EFW for goods and services related to the Integrated
Fixed Towers border surveillance system cited in Paragraph 93 of the amended complaint. Id.
Ex. E, at A161, & G; see also Reply in Support of Def.’s Second Mot. Ex. (providing a redacted
version of the contract with EFW), ECF No. 32.
The contracts with Tyco, Diebold, and Vidsys contain the standard indemnity clause set
out at FAR § 52.212-4(h). Id. at 3-6 & Ex. B, at A52, Ex. C, at A95, Ex. D, at A134. The
contract with EFW contains an indemnity clause related to patents set out at FAR § 52.227-3:
The Contractor shall indemnify the Government and its officers, agents, and
employees against liability, including costs, for infringement of any United States
patent (except a patent issued upon an application that is now or may hereafter be
withheld from issue pursuant to a Secrecy Order under 35 U.S.C. 181) arising out
of the manufacture or delivery of supplies, the performance of services, or the
5
Tyco was one of the “consultants and contractors” listed in Paragraph 11 of the original
complaint through which plaintiffs alleged the government had “deployed unlicensed and
infringing surveillance systems.” Compl. ¶ 11. The amended complaint omitted this list, but
included allegations of government contracts with third parties. Am. Compl. ¶¶ 104-07. The
amended complaint did not specifically name Tyco as a contractor involved in infringing
activity.
6
Like Tyco, Vidsys was named in the original complaint as one of the “consultants and
contractors” with which the government had been working to deploy infringing systems. Compl.
¶ 11. Vidsys was named in Paragraphs 50, 52-53, and 106 of the amended complaint.
5
construction, alteration, modification, or repair of real property (hereinafter
referred to as construction work) under this contract, or out of the use or disposal
by or for the account of the Government of such supplies or construction work.
Id. at 8 & Ex. G, at A217 (emphasis in original); see also Reply in Support of Def.’s Second
Mot. Ex. at A334. Accordingly, the government asserted that each of the four entities “may have
an interest in the subject matter of this suit within the meaning of RCFC 14(b)” by virtue of the
respective patent indemnity clauses. Id. at 4-6, 8.
3. The government’s third motion: Tactical Micro, Inc. and ICx Technologies, Inc.
In its third motion to notify interested third parties, filed February 29, 2016, the
government requested that the court authorize notice to two additional entities: Tactical Micro,
Inc. (“Tactical Micro”) and ICx Technologies, Inc. (“ICx”). Def.’s Mot. for Leave of Court to
Notice Third Parties (“Def.’s Third Mot.”), ECF No. 30. 7 With its motion, the government
provided a redacted version of contract number HSBP1016D00002 between United States
Customs and Border Protection and Tactical Micro for “procurement of goods and services
related to the Mobile Video Surveillance System . . . Program.” Def.’s Third Mot. at 3 & Ex. A.
The government also provided a redacted version of contract number HSBP1011C00024
between United States Customs and Border Protection and ICx “for procurement of goods and
services relating to the Mobile Surveillance Capability . . . system.” Id. at 5 & Ex. B. 8 The
government asserts that both programs are part of the “border security technology plan”
referenced in Paragraph 93 of the amended complaint, which according to plaintiffs involves
infringing systems. Id. at 3, 5. The contract with Tactical Micro contains the standard indemnity
clause under FAR § 52.212-4(h), and the contract with ICx contains the standard indemnity
7
The government filed its third motion seventeen days after submitting its answer on
February 12, 2016. It acknowledged that its third motion was out of time under RCFC
14(b)(2)(B)(ii), which requires the government to “file any motion for notice on or before the
date the answer is required to be filed.” Def.’s Third Mot. at 2. However, Clause iii of the same
rule states that “[f]or good cause shown, the court may allow a motion for notice to be filed at a
later time.” Id. (quoting RCFC 14(b)(2)(B)(iii)). The government explained that it had been
investigating potentially interested third parties since the amended complaint was filed on
January 26, 2016, and that it did not receive the contract information from the pertinent
government agency until February 26, 2016. Id. For good cause shown, the government’s
request for leave to submit its motion out of time is GRANTED.
8
In their response to the government’s third motion, plaintiffs asserted that ICx “no
longer exists” because FLIR Integrated Systems, Inc. (“FLIR”) acquired all outstanding shares of
ICx’s common stock in October 2010. Pls.’ Resp. to Def.’s Third Mot. (“Pls.’ Third Resp.”) at
6, ECF No. 35. This assertion is not correct. FLIR indeed purchased all of the stock of ICx, not
ICx’s assets, and ICx remains a viable corporate entity, albeit one wholly owned by FLIR. Hr’g
Tr. 13:8-24. In its reply supporting the third motion, the government noted that the contract with
ICx was amended in June 2014 to add FLIR as the “doing business . . . name” for ICx and stating
that “[a]ll other contract terms and conditions remain the same.” Reply in Support of Def.’s
Third Mot. at 4 & Ex. A, ECF No. 38.
6
clause under FAR § 52.227-3. Id. at 4, 6 & Ex. A at A41, Ex. B at A89. As with its prior
motions, the government asserted that Tactical Micro and ICx “may have an interest in the
subject matter of this suit within the meaning of RCFC 14(b)” by virtue of the respective patent
indemnity clauses. Id. at 4, 6.
JURISDICTION
This court has exclusive jurisdiction to adjudicate patent infringement claims against the
federal government “[w]henever 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.” 28 U.S.C. § 1498(a). In that respect, “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). “[D]irect infringement of a patent occurs when the
government directly uses or manufacturers the patented invention without a license, or when,
through a procurement contract or otherwise, the government consents to the use or the
manufacture of the patented invention for its benefit without first obtaining a license.” Liberty
Ammunition, Inc. v. United States, 119 Fed. Cl. 368, 385 (2014) (citing Decca Ltd. v. United
States, 640 F.2d 1156, 1166-67 & n.15 (Ct. Cl. 1980)) (internal citations omitted), appeal
docketed, No. 15-5061 (Fed. Cir.). Accordingly, the court has jurisdiction over the present case.
ANALYSIS
A. Standard for an “Alleged Interest” Under the Notice Provisions of RCFC 14(b)
Plaintiffs’ opposition to the government’s motions rests primarily on their assertion that
the government has not sufficiently alleged that the third-party entities have an interest in the
present action such that notice under RCFC 14(b) is necessary or appropriate. As the plaintiffs
would have it, the standard for an “alleged interest” under this rule should be the plausibility
standard articulated by the United States Supreme Court in Bell Atlantic Corp. v. Twombly, 550
U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009). Pls.’ Resp. to Def.’s Second Mot.
(“Pls.’ Second Resp.”) at 3, ECF No. 31; Pls.’ Third Resp. at 6-7. This standard, which was
established in the context of pleading requirements to survive a motion to dismiss under Rule
12(b)(6) of the Federal Rules of Civil Procedure, states that “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal,
556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). 9 A “plausible” claim requires enough
“factual content” to allow the court to “draw the reasonable inference” that the requested relief is
warranted. Id. While appearing to acknowledge that this court has never applied the
Twombly/Iqbal standard in the context of an RCFC 14(b) motion, plaintiffs nevertheless argue
that for “public policy” reasons, the court should adopt this standard to prevent the government
9
Because RCFC 12(b)(6) mirrors the equivalent rule in the Fed. R. Civ. P., the court has
adopted this pleading standard for motions to dismiss under RCFC 12(b)(6). See, e.g., Wolens v.
United States, __ Fed. Cl. __, __, 2016 WL 853724 at *4 (Mar. 4, 2016); Palafox St. Assocs.,
L.P. v. United States, 114 Fed. Cl. 773, 780 n.2 (2014).
7
from “run[ning] roughshod over litigants, especially in patent infringement cases.” Pls.’ Second
Resp. at 3. Otherwise “no standard of review” would appertain in a motion for notice under
RCFC 14(b), allowing the government to “invoke the names of several contractors as potential
responsible parties” in an effort to “increase the complexity and cost of a case.” Pls.’ Third
Resp. at 6-7. Plaintiffs draw an analogy to calling upon an “ally in war” through use of a “mere
allegation” of interest. Pls.’ Second Resp. at 2.
RCFC 14(b)(1) states that “[t]he court, on motion or on its own, may notify any person
with the legal capacity to sue or be sued who is alleged to have an interest in the subject matter
of the suit.” Within 42 days of service, a person notified under this rule “may file an appropriate
pleading setting forth the person’s interest in the subject matter of the litigation.” RCFC 14(c).
If a third party receiving notice under RCFC 14(b) decides to file a pleading under RCFC 14(c),
“that third party has standing to seek adjudication of the claims at issue in the suit.” Uusi, LLC v.
United States, 110 Fed. Cl. 604, 610 (2013) (citing USHIP Intellectual Props., LLC v. United
States, 98 Fed. Cl. 396, 405 (2011)). This rule is separate from the provisions for intervention
under RCFC 24, in which a party can move to intervene of right in a pending action (RCFC
24(a)) or request the court’s permission to intervene (RCFC 24(b)). However, both RCFC 14(b),
and RCFC 24(a) refer somewhat similarly to a person “who is alleged to have an interest in the
subject matter of the suit,” RCFC 14(b)(1), and a person who “claims an interest relating to the
property or transaction that is the subject of the action,” RCFC 24(a)(2).
This court and its predecessor, the United States Court of Claims, have construed the
“alleged interest” requirement of RCFC 14(b)(1) broadly, stating that “an apparent interest is
sufficient for notice to issue ‘[e]ven in those situations where an alleged third party interest in the
suit is uncertain.’” Uusi, 110 Fed. Cl. at 609 (quoting Allied Oil & Supply, Inc. v. United States,
60 Fed. Cl. 223, 225-26 (2004) (in turn quoting Del-Rio Drilling Programs, Inc. v. United States,
17 Cl. Ct. 844, 849 (1989))). The “interest” at issue generally involves a pecuniary interest,
whether a “direct pecuniary interest” or a “potential pecuniary interest.” Pacific Gas & Elec. Co.
v. United States, 98 Fed. Cl. 699, 701 (2011) (citing Bowser, Inc. v. United States, 420 F.2d
1057, 1060 (Ct. Cl. 1970); Allied Oil, 60 Fed. Cl. at 228; Bird v. United States, 51 Fed. Cl. 536,
541-42 (2002)). 10 In the context of a motion by the United States to notify a third party, a
“pecuniary interest” can be established through an allegation that a third party may be required to
indemnify the government in the event the government is found liable in the subject action. See,
e.g., Uusi, 110 Fed. Cl. at 611 (“[The third parties] have identified their clear interest in the
subject matter of this litigation, namely their potential indemnification responsibilities if the
[g]overnment is found liable to [p]laintiffs for patent infringement.”). To do this, the
government need only make a “nonfrivolous claim for indemnity” against the third party. See
Carrier Corp. v. United States, 534 F.2d 250, 251 (Ct. Cl. 1976) (per curiam); accord
Philadelphia Suburban Corp. v. United States, 211 Ct. Cl. 354, 356 (1976) (applying Carrier in
denying a motion to quash notice to an entity against whom the government “alleged a non-
frivolous claim”); Uusi, 110 Fed. Cl. at 610; Allied Oil, 60 Fed. Cl. at 226.
10
Contrastingly, a judge of this court has held that “an interest in fulfilling . . . contractual
obligations,” as opposed to a specific pecuniary interest, is not sufficient for an “alleged interest”
under RCFC 14(b). Pacific Gas, 98 Fed. Cl. at 702.
8
The distinction between the Twombly/Iqbal plausibility standard and the “nonfrivolous”
standard employed by this court under Carrier and its progeny for notice under RCFC 14(b) is
significant. As plaintiffs would have it, the plausibility standard applies and requires either an
admission by the government that the third parties are selling infringing security alarm systems
to the government or are selling component parts with “no substantial non-infringing uses.” See,
e.g., Pls.’ Second Resp. at 5 (asserting that only contractors who are selling infringing alarm
systems have an interest under RCFC 14(b) and stating that “[i]f the [g]overnment properly
alleges that [the third party] sells to the [g]overnment, or has sold the [g]overnment, an
infringing system, [p]laintiffs will withdraw [their] opposition”); Pls.’ First Resp. at 2, 4 n.5
(stating that a contractor “must be . . . providing services that have no substantial non-infringing
uses before it can be liable” for infringement). For this position, plaintiffs rely on the statute
governing private-party patent infringement, 35 U.S.C. § 271, which establishes “three possible
types of infringement: (1) direct infringement, where a party is proven to practice each and every
element of a given claim in a patent; (2) indirect infringement, where a party induces others to
infringe with knowledge of the patent and knowledge that his or her activities would lead to the
infringement of the patent; and (3) indirect infringement by parties who sell component parts that
have no substantial non-infringing uses.” Pls.’ Second Resp. at 3-4.
Plaintiffs’ reliance on 35 U.S.C. § 271 is misplaced. Although the statutory framework
for private-party patent infringement in 35 U.S.C. § 271 is “similar” and “parallel” to that
applied by this court to patent infringement claims under 28 U.S.C. § 1498(a), it is not the same.
Zoltek Corp. v. United States, 672 F.3d 1309, 1321 (Fed. Cir. 2012) (quoting Motorola, Inc. v.
United States, 729 F.2d 765, 768 (Fed. Cir. 1984)). Under Section 1498, infringement occurs
“[w]henever 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.” 28 U.S.C. § 1498(a) (emphasis added). This framework ties the
government and contractors together, such that liability for the contractor’s “use and
manufacture” of an infringing item is assigned to the government. See Penda Corp. v. United
States, 44 F.3d 967, 970 (Fed. Cir. 1994) (commenting that “no judgment has been or could be
entered” against a government contractor in a patent infringement suit against the government
under Section 1498); Decca, 640 F.2d at 1167 (A “contractor’s activity is deemed under
[S]ection 1498 to be for the [g]overnment.”) Accordingly, the extent of the contractor’s
contribution to the “use or manufacture” of an infringing item is not relevant to establishing the
government’s liability for infringement under Section 1498.
Plaintiffs also improperly frame the question of “interest” under RCFC 14(b) as whether
the named entities could be found to be infringing plaintiff’s patents, rather than whether the
entities could be required to indemnify the government if the government was found liable
for infringement. The two questions are not the same. Under the indemnity clause in FAR
§ 52.212-4(h), a contractor agrees to indemnify the government for any patent infringement
“arising out of the performance of th[e] contract.” Similarly, the patent indemnity clause in FAR
§ 52.227-3 requires the contractor to indemnify the government for patent infringement “arising
out of the manufacture or delivery of supplies, the performance of services, or the construction,
alteration, modification, or repair of real property . . . under this contract.” This court does not
have jurisdiction to determine the extent of a contractor’s obligations to indemnify the
government under these clauses, as these would be governmental claims against third parties.
9
Penda Corp., 44 F.3d at 970 (citing Carrier Corp., 534 F.2d at 251). That said, the language of
these clauses demonstrates that a contractor could very well have a pecuniary interest in the
outcome of a patent infringement suit against the government by virtue of these indemnification
provisions, even if the contractor is not directly manufacturing or selling devices or materials
that would themselves infringe.
Plaintiffs make much of the fact that they have affirmatively stated that many of the
entities the government seeks to notify are not infringing their patents, or at least do not appear to
be infringing their patents based on presently available information. See Pls.’ Second Resp. at 2
(characterizing the government’s position as “even when a patent owner disavows infringement
by [a contractor], this [c]ourt must grant a Rule 14(b) [m]otion if the [g]overnment ‘merely
alleges’ that it could be entitled to indemnification”); see also Pls.’ First Resp. at 2 (stating that
“publicly available” information suggests that IndigoVision and Datawatch are not directly
infringing plaintiffs’ patents); Pls.’ Second Resp. at 6-8 (stating that Tyco and Diebold appear to
sell “antiquated system[s]” that would not be considered infringing, and that Paragraph 79 of the
amended complaint states that “Vidsys does not appear to be infringing”); Pls.’ Third Resp. at 8
(stating that the information provided for Tactical Micro does not establish that it is infringing
plaintiffs’ patents). Plaintiffs suggest that because they do not presently claim that the entities
are infringing their patents, these entities do not have a valid interest in the subject proceeding.
The plaintiffs’ arguments in this respect fail to take into account the early stage of the present
proceedings, which is dictated in part by the requirement in Rule 14(b) that the government file
its motions for notice no later than the date of its answer, absent good cause for a later filing.
RCFC 14(b)(2)(B)(ii). 11 As this case proceeds, the parties will have an opportunity to conduct
discovery and, in due course, the court will conduct claim construction proceedings to
“determin[e] the meaning and scope of the patent claims asserted to be infringed.” Markman v.
Westview Instruments, Inc., 52 F.3d 967, 976 (Fed. Cir. 1995) (en banc), aff’d, 517 U.S. 370(1996). If at any point plaintiffs wish to stipulate that certain systems or components provided
by contractors to the government do not infringe or contribute to infringement of the patents at
issue, there is a mechanism for them to do so through a voluntary, partial dismissal of claims
under RCFC 41(a)(1)(A)(ii). See Reply in Support of Def.’s Third Mot. at 10 (citing, e.g., Joint
Stipulation of Dismissal, Ensign-Bickford Aerospace & Defense Co. v. United States, No. 13-cv-
57 (Fed. Cl. July 12, 2013), ECF No. 36; Stipulation to Dismiss Claims, Blue Spike, LLC v.
United States, No. 13-cv-419 (Fed. Cl. July 10, 2014), ECF No. 55). Unless and until this
11
Due process problems can arise with later notice. See Bowser, 420 F.2d at 1060-61
(concluding in a patent case that where notice and summons to an indemnitor were not issued
until after entry of judgment, the indemnitor had been deprived of a fair hearing and the
indemnitor was not required to indemnify government, absent a new action), upheld in pertinent
part on recons., 427 F.2d 740, 741 (Ct. Cl. 1970).
Additionally, the standard indemnity clause in the FAR related to intellectual property,
FAR § 52.212-4(h), sets out an apparent condition on application of the indemnity, expressed in
the form of a proviso: “provided the Contractor is reasonably notified of such claims and
proceedings.” See supra, at 4 (quoting FAR § 52.212-4(h) in full). The government’s motion
for notice to be given pursuant to RCFC 14(b) would ostensibly serve to implement this proviso.
10
occurs, however, plaintiffs’ statements to this effect do not deprive the third-party entities of an
interest in this case.
Simply stated, the government is requesting that the court formally notify third parties
that might otherwise be prejudiced by the outcome of the present proceedings and allow those
parties to have standing to participate in the proceedings. Uusi, 110 Fed. Cl. at 610. As a result,
the standard for an alleged interest under RCFC 14(b) must be no higher, and may well be lower,
than the standard for intervention of right under RCFC 24(a), where a party need only show an
interest in the subject of the proceeding such that “disposing of the action may as a practical
matter impair or impede the movant’s ability to protect its interest.” RCFC 24(a)(2) (emphasis
added).
Accordingly, to allege an interest in the present case for the purposes of a motion under
RCFC 14(b), the government must make a nonfrivolous claim that the entities to whom notice
would be given could be required to indemnify the government if it was found liable to plaintiffs
for patent infringement, or that these entities otherwise have a pecuniary interest in the outcome
of the case. Carrier Corp., 534 F.2d at 251; Pacific Gas, 98 Fed. Cl. at 701.
B. Applying the Standard for Notice Under RCFC 14(b) to the Government’s Motions
Applying the “nonfrivolous claim of a pecuniary interest” standard to the government’s
motions, the court concludes that the government has alleged a sufficient interest for all eight
named entities in the subject proceeding.
1. The government’s first motion: IndigoVision and Datawatch.
The government has provided evidence, in the form of Federal Supply Schedule Lists,
that both IndigoVision and Datawatch are engaged in activities on behalf of the government that
involve the manufacture and sale of security systems, or components of them, that appear related
to the subject matter of the present patent infringement suit. See Def.’s First Mot. at Ex. A & B;
see also Am. Compl. ¶ 105 (stating that IndigoVision advertises a potentially infringing security
system, and Datawatch “offers many of the same services”). The government has also provided
evidence that its contracts with IndigoVision and Datawatch contain the standard indemnity
clause set out in FAR § 52.212-4(h). Def.’s First Mot. at Ex. C & D. Accordingly, the
government has made a nonfrivolous claim that IndigoVision and Datawatch, through these
indemnity provisions, have a pecuniary interest in the subject proceeding.
2. The government’s second motion: Tyco, Diebold, Vidsys, and EFW.
The government has provided its contracts (or portions of them) with Tyco and Diebold
showing that these companies are involved in the manufacture, sale, maintenance, and operation
of security systems on behalf of the United States Marshals Service. Def.’s Second Mot. Ex. B
& C. It has also provided portions of its contract with Vidsys sufficient to establish that this
company provides software to the United States Navy to enable its “video surveillance system.”
Id. Ex. D. The government similarly provided portions of its contract with EFW showing that
this company is engaged in providing “goods and services” to U.S. Customs and Border
11
Protection in support of a “border surveillance system.” Id. at 7 & Exs. E & G; Reply in Support
of Def.’s Second Mot. Ex. All four contracts contain either the indemnity clause stated in FAR
§ 52.212-4(h) or that set out in FAR § 52.227-3. Accordingly, the government has made a
nonfrivolous claim that Tyco, Diebold, Vidsys, and EFW have a pecuniary interest in the subject
proceeding.
3. The government’s third motion: Tactical Micro and ICx.
The government has provided portions of its contracts with Tactical Micro and ICx
sufficient to show that both companies are engaged in providing to U.S. Customs and Border
Protection goods and services for mobile surveillance systems along the U.S. border. Def.’s
Third Mot. Ex. A & C. These contracts contain either the indemnity clause stated in FAR
§ 52.212-4(h) or that set out in FAR § 52.227-3. Accordingly, the government has made a
nonfrivolous claim that Tactical Micro and ICx have a pecuniary interest in the subject
proceeding.
CONCLUSION
For the reasons stated, the government’s motions to authorize notice to the eight named
entities pursuant to Rule 14(b) are GRANTED. The clerk shall issue notice to each entity, as
specified in RCFC 14(b)(3). Service of the notices shall be accomplished in accord with the
provisions of RCFC 14(b)(4). 12
It is so ORDERED.
s/ Charles F. Lettow
Charles F. Lettow
Judge
12
The government has also filed a motion for an extension of time to file the joint
preliminary status report due following the filing of the answer, which occurred on February 12,
2016. The government suggests that an extension would enable the noticed entities time to
decide whether to join the action and for the joining entities to participate in developing the joint
preliminary status report. The government’s motion for an enlargement of time, ECF No. 33, is
GRANTED, and the joint preliminary status report shall be due on or before May 20, 2016.
12