Securitypoint Holdings, Inc. v. United States

In the United States Court of Federal Claims
No. 11-268C
(Filed: March 16, 2020)
***********************
SECURITYPOINT HOLDINGS, INC., Motion for partial
summary judgment; RCFC
Plaintiff, 56(b); RCFC 1; Implied
license by conduct and
v. statements; Economic
duress; 28 U.S.C. § 1927;
THE UNITED STATES, Unnecessarily duplicating
proceedings.
Defendant.
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Bradley C. Graveline, Chicago, IL, with whom were Laura M.
Burson, Los Angeles, CA, and April E. Weisbruch,
Washington, DC, for plaintiff.
Gary L. Hausken, Director, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Joseph L. Hunt, Assistant
Attorney General, Washington, DC, with whom were Conrad J. DeWitte, Jr.,
Lee Perla, Carrie E. Rosato, Brian N. Gross, and Shahar Harel, for
defendant.
ORDER
BRUGGINK, Judge.
Defendant moves for partial summary judgment that plaintiff has
granted an implied license to the government for the use of the ‘460 patent
at airports in which SecurityPoint has an agreement to operate. Defendant
moves on two grounds: 1) that plaintiff’s contractual relationship with airport
operators, or their agents (advertising brokers), implies a grant of license to
the Transportation Security Administration (“TSA”) to use the method of
plaintiff’s patent in those airports, and 2) that plaintiff is judicially estopped
from asserting otherwise due to the positions it has taken against the United
States before the United States Court of Appeals for the District of Columbia.
Plaintiff opposes the motion and has separately filed its own motion
in limine regarding the issue, asking the court to preclude evidence and
argument of an implied license. Defendant cross-moved after plaintiff’s
motion, asking for its fees and costs in responding to plaintiff’s in limine
motion, citing 28 U.S.C. § 1927, which gives federal courts the power to levy
the cost of responding to duplicative and excessive filings against those that
file them. All three motions are fully briefed. We deem oral argument
unnecessary.
I. Background and Arguments 1
Plaintiff began soliciting TSA in 2002 to provide its system of trays
and carts for security screening in exchange for the right to sell advertising
on the trays. SecurityPoint repeatedly told TSA that there would be no cost
to the government. TSA eventually implemented the Bin Advertising
Program, which allowed airport operators to enter memoranda of
understanding (“MOU”) with TSA to allow SecurityPoint, or other
contractors, 2 to provide the physical trays and carts to TSA. SecurityPoint
then enters a separate agreement with the airport operator for the right to
place advertising on the trays, usually in exchange for a cut of that revenue.
No privity between TSA and plaintiff exists under these arrangements.
Plaintiff has since contracted with airport operators or advertising
brokers in over 30 airports nationwide, including nine of the fifteen busiest.
Plaintiff’s damages expert has included those airports in his calculations of
royalty damages from 2008 forward but has reduced his total figure by the
amount of revenue that plaintiff has generated at those airports.
Defendant points out that plaintiff has on several occasions made the
representation in the present litigation and separately to the D.C. Circuit that
TSA operates with an implied license in those contracted airports. 3 The
1
These facts are drawn from the parties’ briefing and are not in dispute.
2
Presumably with a license from SecurityPoint.
3
The record in both cases is replete with such representations. See, e.g.,
SecurityPoint Holdings, Inc. v. Transp. Sec. Admin., 769 F.3d 1184, 1188
(D.C. Cir. 2017) (stating that plaintiff’s position was that TSA had the
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government thus argues that both plaintiff’s affirmative conduct in providing
the trays and carts to TSA at the contracted airports and its representations in
court are reason enough to preclude compensation for TSA’s use of
plaintiff’s patented method at those airports.
SecurityPoint first responds that the motion comes too late because it
is one day beyond Rule 56(b)’s 30-day window after the close of discovery
for the filing of motions for summary judgment. On the merits of the
question posed by defendant, SecurityPoint argues that defendant’s
amendment of the MOU to require airports to indemnify TSA for any
intellectual property infringement shows that the government never relied on
plaintiff’s conduct as granting a license. Plaintiff also avers that defendant
has not shown, nor made any attempt to show, when the implied licenses
would have been in effect at the contracted airports, whether the licenses
covered all of the security lanes at those airports, and whether the licenses
covered all claims of the patent. Finally, plaintiff also raises the defense of
duress, arguing that any license granted was the result of economic duress
stemming from TSA’s decision to take plaintiff’s method and apply it
nationwide.
On the issue of whether it should be estopped from claiming damages
for the use at SecurityPoint-contracted airports, plaintiff argues that its
positions in the two suits are not inconsistent because the scope of the license
has not been taken up by either court. It also argues that the D.C. Circuit did
not rely on its license argument and that plaintiff has garnered no unfair
advantage because it only began claiming damages from these airports due
to defendant’s inability to provide any useful data in discovery as to how
much passenger throughput should be deducted at licensed airports.
Plaintiff’s motion in limine purports to raise a Daubert issue with
regard to defendant’s expert’s use of the implied license in his damages
calculations. SecurityPoint argues, for the reasons listed above, that Mr.
McGavock’s method of calculating damages is not reliable and should thus
be precluded by the court along with any argument regarding an implied
license.
“benefit of an implied license to practice the invention . . . at any airport
covered by an agreement between SecurityPoint and the airport operator”);
SecurityPoint Holdings, Inc. v. United States, No. 11-268C, Claim
Construction Hr’g Tr. 10, 57 (Nov. 14, 2012); Summ. J. Oral Arg. Tr. 134-
135 (Feb. 21, 2014).
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II. Implied License
As a preliminary matter, we find defendant’s motion timely. Rule 1
establishes that the court’s rules are to be construed and administered to
“secure the just, speedy, and inexpensive determination of every action and
proceeding.” RCFC 1. Plaintiff has presented no good reason why this
matter of law should not be addressed now. Had the court anticipated it, we
would have included a deadline for such a motion, and Rule 56(b) would not
be implicated. We could not have anticipated the need to address this issue
any earlier, however, because plaintiff has long maintainted in this action,
and elsewhere, that TSA operated with its implied blessing at those airports
at which SecurityPoint is contracted to provide trays and carts. We thus
decline to apply Rule 56 in these circumstances. The motion is timely.
A. Plaintiff’s Conduct and Statements Establish an Implied License
We begin with the question of whether plaintiff’s conduct implied a
grant of license to TSA. We conclude, as a matter of law, that it does. See
Met-Coil Sys. Corp. v. Korners Unlimited, Inc., 803 F.2d 684, 687 (Fed. Cir.
1986) (“the existence of an implied license[] is a matter of law”). A right to
use a patented invention is implied when the patentee gives an affirmative
grant of consent or permission to the alleged infringer through statements or
conduct upon which the infringer reasonably relies and thus would be
materially prejudiced if the patentee then proceeded to make a claim of patent
infringement. Winbond Elecs. Corp. v. Int’l Trade Comm’n, 262 F.3d 1363,
1374 (Fed. Cir. 2001). Although the burden is on the infringer, Bandag, Inc.
v. Al Bolser’s Tire Stores, Inc., 750 F.2d 903, 924 (Fed. Cir. 1984), no
material questions of fact are in dispute as to the existence of such a license.
It was SecurityPoint that twice solicited the government with an offer
to supply TSA with its system and the materials needed to execute its
patented method. It repeatedly told TSA, as it has this court, that the supply
of trays and carts would come at no cost. TSA eventually took plaintiff up
on that offer and created the program that remains in place today to allow
airport operators to contract with SecurityPoint to supply its system and
materials. It would be absurd to assume that no right to use the implements
in the manner patented by plaintiff accompanied the deal. Cf. Gen. Elec. v.
United States, 572 F.2d 745, 784-85 (Ct. Cl. 1978) (holding, inter alia, that
the supply of unpatented components of an invention to the government
resulted in an implied license to assemble and use those components in the
patented manner).
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There is no serious argument that plaintiff has not offered its system
to the government free of charge. Plaintiff’s point rather is that TSA’s
subsequent actions—particularly its change to the standard MOU to require
patent liability indemnity from the airports—show that the government did
not rely on SecurityPoint’s conduct as having granted a license. We disagree.
When TSA made its change to the MOU, it did not require the existing
agreements to be modified. SecurityPoint Holdings, Inc. v. Transp. Sec.
Admin., 867 F.3d 180, 184 (D.C. Cir. 2017). After a remand by the D.C.
Circuit, TSA explained its revision to the MOU as the result of “a
comprehensive review of TSA agreements to ensure the inclusion of
appropriate intellectual property provisions” undertaken after the hiring of a
new agency attorney. Id. It stated to the circuit court that the indemnity
language was broad and not specific to SecurityPoint because it was meant
to be a comprehensive shield from liability arising from any patent that might
cover the methods or materials used in security screening. Id. The court
accepted that explanation and found it reasonable. Id. at 199. From these
two facts, we draw the conclusion that the change to the MOU does not
suggest a lack of reliance on an implied license on the part of TSA. The
decision not to change the existing MOUs rather is evidence that TSA
continued to view its liability as limited vis-à-vis SecurityPoint due to the
implied license—the very same license that plaintiff has repeatedly told the
courts that it granted to TSA. Further, the broad nature of the indemnity
provisions makes them irrelevant to the question of whether TSA relied on
SecurityPoint as having granted it a right to use the patented method. The
provisions were not specifically targeted at plaintiff.
The government would be prejudiced if a license was not implied
against plaintiff for those airports where SecurityPoint is supplying the trays
and carts because its conduct would almost certainly have been different
without the right to use the patented method. Although TSA took no steps
to limit its liability in airports without Bin Advertising Program participation,
that does not suggest that its course would be the same in those airports where
the program was in place. It likely would have insisted on revising the MOU
already in place at those airports or ending the program prematurely. We do
not view this as an open fact question—nor does plaintiff argue that it is
one—because requiring defendant to prove what it might have done under
other circumstances would be unfair to it in view of plaintiff’s acquiescence.
Defendant would be prejudiced if a license is not implied.
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B. There is No Question of Fact Regarding Duress
As to the argument that a fact question regarding duress ought to
prevent summary judgment, we disagree. Plaintiff offers not a scintilla of
evidence that it was in any way coerced to sell advertising in exchange for
providing trays and carts. Instead, it cites the timeline of events, arguing that
its advertising agreements are merely an attempt to mitigate damages after
defendant began appropriating its intellectual property. Plaintiff thus
believes that the economic incentives worked as duress to force it to enter
into these agreements. Even if credited, that would be insufficient as a matter
of law to constitute coercion.
As the Court of Claims explained in Fruhauf Southwest Garment Co.
v. United States, economic duress will only void an agreement where one
side accepted the terms involuntarily because the circumstances permitted no
alternative and that acceptance resulted directly from the coercion of the
other party. 126 Ct. Cl. 51, 62 (1953). We have nothing of the sort here. It
was plaintiff, in fact, that approached the government, prior to TSA’s use of
the patented method, with an unsolicited proposal to begin supplying its
system and materials to the government in exchange for the right to place
advertising. The business model was the same before and after the date of
first infringement. It would be silly to argue that a license granted or implied
after the date of infringement is invalid ab initio. 4 Such a license simply
operates to limit future liability, as it will here. 28 U.S.C. § 1498 militates
against the idea that the circumstances provided no alternative to
SecurityPoint. Plaintiff has a remedy at law for the unauthorized use of its
method. It wisely continued its business of supplying trays and carts to TSA
where it could pursaude airport operators to let it display advertising, and the
effect of those arrangements implies a license to use plaintiff’s method.
There was no legal duress.
C. The Scope of the Licenses is Not Clear
The issue of the implied license is not entirely resolved, however. We
do not know the time period of the licenses at various airports and whether
those licenses would include lanes at which SecurityPoint was not operating.
On those two questions, we agree with plaintiff that the scope of the licenses
4
In fact, plaintiff does not allege that its contracts with airports are
unenforceable due to duress. It avers instead only that any implied license
flowing from such agreements would be void as the product of duress.
6
is unclear.
We can say with confidence, however, that there is no outstanding
issue as to whether the implied license would include the steps contained in
independent claim 1. Plaintiff argues that its license may only have granted
use of the patent’s dependent claims that the trays be adapted for displaying
advertising since that is what SecurityPoint’s agreement with the airports
concerns: advertising.
As defendant points out, however, that position is irreconcilable with
basic patent law. Dependent claims incorporate the independent claim or
claims on which they are founded because the independent claims provide
the patentable novelty. 35 U.S.C. § 112 (2012) (“A claim in dependent form
shall be construed to incorporate by reference all the limitations of the claim
to which it refers.”). See Honeywell Int’l Inc. v. Universal Avionics Sys.
Corp., 498 F.3d 982, 995 (Fed. Cir. 2007). Thus, even if we agreed that the
licenses implied by the agreements between plaintiff and the airport
operators were limited to dependent claims 4 and 14, they would necessarily
cover the steps included in independent claim 1.
The only issues remaining for trial are the scope of the particular
licenses as to timing and the number of lane included at those airports.
Because we find that the circumstances establish an implied license, we need
not reach the question of judicial estoppel.
III. SecurityPoint’s Motion In Limine
The existence of an implied license established, the principle basis on
which plaintiff moved in limine disappears. Because we find an implied
license to have been granted for those airports in which SecurityPoint
operates, it is not problematic for Mr. McGavock to have taken that fact into
account in his measurement of damages. His analysis is neither confusing
nor inherently unreliable for that reason.
Plaintiff also urges that it has already accounted for the facts relied on
by the court and defendant by excluding from its damages calculation the
amounts of revenue already generated at the airports in which SecurityPoint
operates. Nothing further should be imputed against SecurityPoint, plaintiff
argues, because it would be fundamentally unfair to force it to choose
between 1) going out of business and suing the government for infringement
or 2) merely accepting whatever terms it could get after infringement but lose
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the right to compensation at those airports. That false bifurcation is
unsupported by the facts. Plaintiff was not at the mercy of TSA when it
negotiated with the airports and advertising brokers that it did. Plaintiff’s
business model was unchanged before and after infringement. We find no
reason to limit defendant’s introduction of evidence and argument regarding
implied licenses. Plaintiff’s motion is denied.
That leaves only defendant’s cross-motion that the cost of responding
to plaintiff’s motion in limine should be shifted to plaintiff because it is
unnecessarily duplicative of the issues addressed by the briefing in
defendant’s motion for summary judgment. We agree with defendant. As
explained above, the basis for plaintiff’s motion to exclude is the same as its
opposition to defendant’s summary judgment motion: it does not believe an
implied license is proper on the facts presented and the equities as they are.
It did not require another motion and series of briefs to flesh out those issues.
Plaintiff presented no separate argument under the Daubert standard as to
why Mr. McGavock’s opinion was unreliable. There was no reasonable basis
for filing a separate motion in limine. We thus shift the cost of defendant’s
response to the plaintiff pursuant to 28 U.S.C. § 1927.
Accordingly, the following is ordered:
1. Defendant’s motion for partial summary judgment (ECF No. 428)
is granted to the extent that an implied license exists for those airports
at which SecurityPoint has an agreement to operate and at which it
provide its trays and carts to TSA. The motion is denied with respect
to the precise scope of those licenses regarding timing and whether all
lanes were included at all of those airports.
2. Plaintiff’s motion in limine (ECF No. 434) is denied.
3. Defendant’s cross-motion for unduly multiplying proceedings is
granted and its cost of responding to the motion in limine will be borne
by plaintiff.
4. The parties are directed to confer and attempt to agree upon the
proper amount to be remitted to the United States for the cost of
responding to plaintiff’s motion. The parties shall file a status report
on or before April 6, 2020, with the agreed upon amount, or if not
agreed upon, their respective positions. The parties should consult
our September 14, 2018 order to resolve questions of the appropriate
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rate.
s/Eric G. Bruggink
ERIC G. BRUGGINK
Senior Judge
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