LawFlash

Federal Circuit Ruling Reinforces Importance of Documenting Inventions Pre-Collaboration

January 10, 2022

The US Court of Appeals for the Federal Circuit recently reversed an appeal of a decision granting summary judgment that an invention was reduced to practice during the term of a cooperative research and development agreement thereby granting the government a license to use the invention. The outcome of this case highlights the importance of documenting existing inventions before entering into a development agreement.

The case in question, Ideal Innovations, Inc. et al. v. United States et al,[1] was an appeal by Ideal Innovations, Inc., Right Problems. In its reversal decision, the Federal Circuit held that whether a field test of a portion of the invention was sufficient to demonstrate that the invention was reduced to practice before the execution date of the cooperative research and development agreement (CRADA)—and therefore exclusively owned by the inventor with no license right to the government—was a genuine issue of material fact and, as such, summary judgment was inappropriate.

Background

The patents at issue—US Patent Nos. 8,365,648 and 8,651,008—claim highly survivable urban utility vehicles having armor meant to protect occupants from armor piercing munitions, specifically, explosively formed projectiles.[2]

The Appellants began developing this technology in early 2005 at private expense, with the goal of improving the existing wheeled armored vehicle systems while balancing the concerns of armor, mobility, and cost. In March 2006, the Appellants conducted a material test of its armor plating for the US Army’s Rapid Equipping Force (REF).[3] Following the successful test, in August 2006, the Appellants were awarded a contract to sell two prototype vehicles equipped with the armor to the Army.

In early February 2007, the Appellants entered into the CRADA with the Army Research Laboratory, which granted the government a license to practice any invention that was made in performance of work under the CRADA; a typical clause for these type of agreements with the government.[4] After further testing of prototype vehicles, the Appellants’ development proposals were ultimately rejected by the Army.

Trial Court (US Court of Federal Claims)

In October 2012, the Appellants discovered that their patented invention was being used by the Army and filed suit against the government in the US Court of Federal Claims. The key issue was whether the invention was reduced to practice during performance of the CRADA, which would have given the government a license to practice the invention.

The Appellants argued that the invention was first reduced to practice during material testing in March 2006, about one year prior to the effective date of the CRADA. The Appellants further contended that whether a person of ordinary skill in the art would have understood that the armored vehicle would work for its intended purpose based on the armor testing alone was a question of fact.

The Court of Federal Claims rejected these arguments and granted summary judgment for the government. It held that the March 2006 test was a test of armor alone, not of the claimed highly survivable urban utility vehicles incorporating the armor. Because the fully assembled vehicle had not been tested in replicated field conditions during this initial test, the court held that the invention could not have been reduced to practice prior to execution of the CRADA.[5]

Appeal Court (US Court of Appeals for the Federal Circuit)

On appeal, the Federal Circuit reversed the grant of summary judgment. It rejected the argument that, as a matter of law, the vehicles themselves had to be tested to reduce to practice the invention. As stated by the Federal Circuit, actual reduction to practice occurs when an inventor (1) constructs an embodiment or performs a process that meets all the limitations of the claimed invention; and (2) determines that the invention would work for its intended purpose.[6] Whether testing is necessary to determine an invention works for its intended purpose and whether a given test method is sufficient are questions of fact.[7]

The Federal Circuit agreed with the Appellants’ arguments that a fact finder could conclude that the testing in March 2006 proved the armor could withstand attacks from explosively formed projectiles and that a weight calculation proved the armor would work on an existing commercial vehicle: “We cannot say that no reasonable fact finder could rely on [the Appellants’] rather common-sense testimony to demonstrate that the coupon testing was sufficient to show that the invention would protect soldiers against various kinds of explosives while preserving mobility of the vehicle.”[8] Further, in applying a “rule of reason” analysis regarding reduction to practice, the court held that the contract with the REF corroborated the Appellants’ arguments, stating that a reasonable fact finder “could conclude that REF issued a purchase order for the prototype vehicles based on its conclusion that the armor was sufficiently tested to expect that the invention worked for its intended purpose.”[9] The Federal Circuit stated that reduction to practice does not require that the invention, when tested, be in a commercially satisfactory stage of development[10] and maintained, “[t]esting need not show utility beyond a possibility of failure, but only utility beyond a probability of failure.”[11] The Federal Circuit thus reversed and remanded for further proceedings.

Because the Federal Circuit remanded the case, it will be important to monitor the Court of Federal Claim’s analysis of whether the March 2006 armor testing was sufficient to show the invention worked for its intended purpose before execution of the CRADA.

Takeaway

Going forward, collaborators should be aware that the terms of a development agreement (such as a CRADA) may include language that grants the government a license to technology that is reduced to practice during the term of the agreement. If an inventor wants to maintain exclusive rights to an invention, it is important to confirm and document that the invention’s conception and reduction to practice occurred before entering into a development agreement. It is also prudent to ensure that any contract or agreement with the government acknowledge and list the contractor’s preexisting patents and technical data that may be used during performance.

Inventors should be sure to keep clear records of conception and testing during development before working with a third party and consider filing patent protection ahead of the collaborations with third parties to establish their background intellectual property rights. Ideally, collaborators should consider expressly carving out certain subject matter from a development agreement altogether to avoid a finding of an unintended license or joint ownership of an invention or its improvements.

CONTACTS

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the authors, John L. Hemmer (Philadelphia) or Andrew N. Dietrick (Philadelphia), or any of the following lawyers from Morgan Lewis’s defense industry team:

Chicago
Jason C. White

Dallas
Sheila A. Armstrong

Houston
C. Erik Hawes

Orange County
Mark J. Itri
Soyeon Pak "Karen" Laub

Philadelphia
Kenneth J. Davis

Washington, DC
Robert C. Bertin
Giovanna M. Cinelli



[1] No. 2020-2065, 2021 WL 5754818 (Fed. Cir. Dec. 3, 2021). The government brought Oshkosh Corp. and General Dynamics into this case for supplying allegedly infringing vehicles to the government.

[2] Id., slip op at 2-3.

[3] Id., slip op at 3.

[4] Id., slip op at 4. The CRADA defines “made” as “the conception or first actual reduction to practice” of an invention.

[5] Id., slip op at 9.

[6] Id., slip op at 10.

[7] Id. Barry v. Medtronic, Inc., 914 F.3d 1310, 1322 (Fed. Cir. 2019); z4 Techs., Inc. v. Microsoft Corp., 507 F.3d 1340, 1349 (Fed. Cir. 2007); see also Scott v. Finney, 34 F.3d 1058, 1061 (Fed. Cir. 1994) (“[T]he testing requirement depends on the particular facts of each case, with the court guided by a common[-]sense approach in weighing the sufficiency of the testing.”).

[8] Id., slip op at 12.

[9] Id.

[10] Scott, 34 F.3d at 1061.

[11] Id. at 1062.