US Navy escapes $6m patent bill at Fed Circuit

The US Court of Appeals for the Federal Circuit has cancelled a $6 million patent win for a shipbuilder against the US Navy.

In a  precedential opinion issued yesterday, August 3, the Federal Circuit held that the US Court of Federal Claims was wrong to award FastShip its attorneys’ fees after the Navy was found to have infringed two patents.

The dispute stems to the early 2000, when FastShip bid for a government contract to design littoral combat ships, a highly manoeuvrable type of ship also capable of achieving high speeds.

FastShip was not awarded a contract, and later claimed that the Navy’s LCS program infringed two ship design patents.

The patents, assigned to FastShip, cover a hull design which “allows a large ship to travel at high speeds, despite difficult weather and sea conditions”.

The company successfully sued the Navy at the Claims Court in 2012, with the court ruling that the patents were valid and directly infringed.

FastShip followed up its victory on the merits with an award of attorneys’ fees worth $6.18 million. The Claims Court granted this award under USC 28, which allows inventors and small companies (with fewer than 500 employees) to recover fees where their patents have been infringed by the government.

To escape liability for attorneys’ fees under USC 28, the government must prove that its position was “substantially justified”.

But according to the Claims Court, it was “unreasonable for a government contractor to gather information from FastShip about designing an LCS but not to include it as part of the team that was awarded the contract”.

The Federal Circuit has now overturned FastShip’s fee award because the government’s pre-litigation conduct is not relevant under USC 28.

The court ruled earlier this year in a separate case, Hitkansut v United States, that the conduct to be considered for an award of attorneys’ fees against the government “does not include the act of infringement itself, [any] purported breach of contract, or any other underlying governmental actions”.

Under this rule, it was an error for the Claims Court to consider the government’s conduct before FastShip filed the litigation, the Federal Circuit ruled.

The Federal Circuit sent the case back to the Claims Court, with instructions to consider “whether the government’s litigation conduct alone, to the extent it was not substantially justified, was sufficient to justify a fee award”.

Did you enjoy reading this story?  Sign up to our free daily newsletters and get stories sent like this straight to your inbox.