Historic $130m+ Patent Infringement Award Against the United States of America

Sheppard Mullin Richter & Hampton LLP

A Sheppard Mullin trial team led by partners Brad Graveline and Laura Burson obtained one of the largest patent infringement damages awards against the United States of America for client SecurityPoint Holdings, Inc (SecurityPoint).  Sheppard Mullin partner Don Pelto and associates Kazim Naqvi, Rebecca Mackin, and Tom Carr were also key members of the trial team.  In addition, the Sheppard Mullin team included trial specialist Stephanie Limbaugh and legal assistants Dori Dellisanti and Ann Castro.

On October 22, 2021, the United States Court of Federal Claims released an opinion awarding SecurityPoint more than $100 million in damages for the United States’ unauthorized use of SecurityPoint’s U.S. Patent No. 6,888,460 (the “‘460 Patent”), which claims a method of moving and processing trays with carts in security screening checkpoints at all Cat X and Cat I airports in the United States. SecurityPoint’s patented method is now well-known and ubiquitous in security screening checkpoints at airports after the tragedy of 9/11.  In addition, the Court held that SecurityPoint is entitled to delay damages as well as additional damages for the United States’ continuing infringement of the patent after the close of fact discovery.  The parties agree that these additional damages will be at least another $30 million, making this one of the largest, if not the largest, patent infringement damages awards ever against the United States.

SecurityPoint brought its claim for patent infringement against the United States under 28 U.S.C. § 1498, in which Congress waived the sovereign immunity of the United States against patent infringement claims as well as certain copyright claims.  These claims must be brought in the United States Court of Federal Claims.

In the SecurityPoint case, the Court of Federal Claims bifurcated the case into two phases:  (1) patent validity; and (2) extent of infringement and damages.

In the first phase of the litigation, the government admitted infringement at ten airports, but challenged the validity of the patent, arguing that it was obvious over the prior art.  After discovery and a trial, the Court held that the ‘460 patent is valid and non-obvious.  The Court found that the government did not meet its burden of proving by clear and convincing evidence that the patent would have been obvious under 35 U.S.C. § 103.  In addition, the Court found that the objective indicia of non-obviousness weighed in SecurityPoint’s favor.  Specifically, the patented method (1) resulted in an unexpected increase in efficiency in passenger throughput and a reduction in injuries to TSA screeners; (2) met a long-felt, unmet need for improved efficiency at security checkpoints; (3) solved a problem others had failed to solve with regard to improving security checkpoint efficiency; (4) was copied by the government at security screening checkpoints nationwide; and (5) was praised by TSA and others working in the field  as a breakthrough in improving checkpoint efficiency.

In the second phase of the case, the Court considered the extent of TSA’s infringement and the amount of damages owed to SecurityPoint at Category X and I airports.[1]

In its opinion, the Court held that SecurityPoint “carried its burden of proving that its patented method had become the default means used by TSA for screening passengers at security checkpoints at all Cat X and Cat I airports.”  The Court noted that internal government documents showed and directed use of the patented method, and TSA employees testified that they were unaware of any airports that did not use the infringing method.  Additionally, the Court noted that, while SecurityPoint as the Patent Owner bore the burden of proving infringement, the government was the party in the best position to produce evidence relating to use and non-use of the patented method given that the government “had the advantage of virtually unrestricted access to TSA lanes and was the party best able to preserve the relevant metrics.” The government’s failure to come forward with any evidence rebutting infringement was a factor that weighed in favor of the Court’s infringement finding.

The Court also considered the government’s experts’ opinions regarding the extent of infringement.  One government expert conducted a survey of certain security screening checkpoints during limited periods of time in an effort to document instances of alleged non-use of the patented method.  But, the Court found that this survey suffered from numerous flaws, including the fact that the government’s survey expert used claim constructions in his analysis that differed from the Court’s.

With regard to damages, the Court held that SecurityPoint is entitled to a running royalty of  $0.02 per passenger.  In reaching this result, the Court considered each of the factors set forth in Georgia Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970), modified and aff’d, 446 F.2d 295 (2d Cir. 1971).  Pursuant to the Georgia Pacific construct, the Court looks at the factors the parties would have considered in a hypothetical negotiation at the time of first infringement, with the assumption that the patent is valid and infringed.  Some of the factors the Court considered were: (1) a previous license to the ‘460 Patent to a company that provided carts and trays to the government for use in the checkpoints; (2) benefits to the government in the form of reduced injuries to TSA agents from carrying trays, as well as enhanced security due to a more efficient process, and passenger time savings resulting from shorter security lines; (3) reduced staffing needs due to fact that TSA agents no longer needed to carry trays; (4) the extent of the government’s use of the invention; and (5) the relative bargaining power of the parties.  After consideration of these factors, the Court concluded that the parties would have agreed to a royalty of 2 cents per passenger in the hypothetical negotiation.  The Court has not yet entered a final judgment in this case because of remaining issues of infringement and damages at Cat II, III and IV airports.

This historic award against the United States is noteworthy for at least several reasons.  First, it demonstrates the importance of strong secondary indicia in an obviousness challenge.  Second, where a defendant is uniquely positioned to have in its possession evidence of infringement and non-infringement, in the absence of such records, a Court may rely on the best available evidence to determine the extent of infringement.  Third, although patent infringement damages awards against the government are not usually substantial, significant damages may be appropriate, especially where the government’s use is widespread and takes place over a long period of time.

FOOTNOTES

[1] U.S. airports are classified as Category (“Cat”) X, Cat I, Cat II, Cat III and Cat IV. Cat X airports are the largest and busiest, and Cats I-IV are the next busiest airports in descending order.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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