IP Law Daily, PATENT—Fed. Cir.: Government-use defense shields AeroVironment from drone patent infringement lawsuit, (Feb 4, 2026)

By Saurabh Kashyap, B.A., M.A., LL.B., LL.M.

AeroVironment’s development and use of the accused drones for the U.S. government, with its authorization, barred district court claims under 28 U.S.C. § 1498.

In a non-precedential disposition, the U.S. Court of Appeals for the Federal Circuit has affirmed a California district court’s grant of summary judgment in favor of AeroVironment, Inc., holding that the company’s manufacture and use of unmanned aerial vehicles under a NASA subcontract was immunized from patent liability before a district court under 28 U.S.C. § 1498(a). The court concluded that AeroVironment’s conduct was authorized and for the benefit of the U.S. government (Arlton v. AeroVironment, Inc., No. 21-2049 (Fed. Cir. Feb. 4, 2026)).

Background. The plaintiffs/appellants, Paul E. Arlton and David J. Arlton, are the named inventors and co-owners of U.S. Patent No. 8,042,763 (the ’763 patent), entitled “Rotary Wing Vehicle.” They operated Lite Machines Corporation, which developed unmanned aerial vehicle (UAV) technology under a series of Phase I and II contracts awarded by U.S. military agencies under the Small Business Innovation Research (SBIR) program. The defendant/cross-appellant, AeroVironment, Inc., is a defense contractor specializing in UAVs. In 2013, AeroVironment became a subcontractor to NASA’s Jet Propulsion Laboratory (JPL) to develop a UAV helicopter for planetary exploration.

The ’763 patent covers a rotary-wing UAV featuring an “elongated tubular backbone” and a “counter-rotating coaxial rotor system.” Lite Machines produced UAVs allegedly practicing claim 1 of the ’763 patent. In 2016, the Air Force declined to award Lite Machines any Phase III follow-on contract, leading to the company’s closure. AeroVironment, meanwhile, developed the “Ingenuity” UAV for NASA’s Mars mission, and a terrestrial version named “Terry” for testing and demonstration.

In August 2020, the Arltons filed a patent infringement complaint against AeroVironment in the Central District of California, alleging that the manufacture, use, and promotion of Ingenuity and Terry infringed the ’763 patent. In response, AeroVironment moved for summary judgment, invoking the government-use defense under 28 U.S.C. § 1498(a). It argued that its activities were undertaken for the U.S. government and with its express authorization and consent.

The district court agreed and granted summary judgment in August 2023. It found no genuine dispute that AeroVironment had acted pursuant to government contracts and that both Ingenuity and Terry fell within the scope of § 1498(a). The court also denied the Arltons’ motion for leave to amend their complaint to add trade secret claims and rejected AeroVironment’s request for attorney fees. The Arltons appealed the summary judgment ruling and denial of leave to amend; AeroVironment cross-appealed the denial of its fee motion.

Government-use immunity. The Federal Circuit began by affirming the district court’s judgment that AeroVironment’s activities were protected under 28 U.S.C. § 1498(a), which provides immunity to contractors when infringing conduct is done “for the Government” and with its “authorization or consent.” Citing Toxgon Corp. v. BNFL, Inc., 312 F.3d 1379, 1381 (Fed. Cir. 2002), the court held that both statutory elements were met.

The Arltons argued that the government could not have lawfully consented to AeroVironment’s infringement because, under 15 U.S.C. § 638(r)(4), the SBIR statute mandated that Phase III contracts be awarded to SBIR recipients like Lite Machines. But the court rejected this contention, explaining that § 638 governs procurement preferences, not patent liability, and provides no basis to override § 1498. Even if a procurement violation had occurred, the proper forum would have been the Court of Federal Claims in a bid protest—not a patent infringement suit.

Use of “Terry.” The Arltons next argued that AeroVironment’s use of the Terry drone was for commercial purposes and thus outside the scope of § 1498. The court disagreed. It found that Terry was a terrestrial analog of Ingenuity, created at the suggestion of JPL engineers for continued research and testing. The record included testimony that JPL used Terry to conduct acoustic testing and that the government expressly consented to its creation and use. NASA’s prime contract with JPL and its authorization clause extended to subcontracts like AeroVironment’s.

While the plaintiffs highlighted AeroVironment’s public demonstrations of Terry, including on CBS’s 60 Minutes and at events with prospective investors, the court found these activities to be de minimis and non-commercial. Citing TVI Energy Corp. v. Blane, 806 F.2d 1057, 1061 (Fed. Cir. 1986), the panel held that reputational benefits or internal discussions about commercialization were not enough to vitiate § 1498 immunity.

Denial of trade secret amendment. The Federal Circuit also affirmed the district court’s denial of the Arltons’ motion for leave to amend their complaint to add trade secret misappropriation claims. The plaintiffs moved for leave on March 22, 2021, after the scheduling order deadline had passed. The district court found they lacked diligence, noting that they suspected misappropriation as early as the filing of the original complaint and that key details about Ingenuity were already publicly available. Citing AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 946, 949 (9th Cir. 2006), the appellate court found no abuse of discretion in denying leave to amend.

Attorney fees. In its cross-appeal, AeroVironment challenged the district court’s refusal to declare the case “exceptional” under 35 U.S.C. § 285. AeroVironment argued that the plaintiffs pursued meritless claims despite clear § 1498 immunity. The Federal Circuit rejected that argument. Citing Octane Fitness, LLC v. Icon Health & Fitness, Inc., 572 U.S. 545, 554 (2014), the court emphasized that an exceptional case requires more than an incorrect legal theory. The district court had described the legal issues as nuanced and found no evidence of frivolity or bad faith. That assessment was entitled to deference and was not an abuse of discretion.

Thus, the Federal Circuit concluded that AeroVironment’s development and use of Ingenuity and Terry were clearly undertaken for the government with proper authorization, immunizing the company from an infringement lawsuit in district court under § 1498.

The Case is No. 21-2049.

Judge: Stark, L.

Attorneys: Heather B. Repicky (Barnes & Thornburg LLP) for Paul E. Arlton. Scott A. Felder (Wiley Rein, LLP) for AeroVironment, Inc.

Companies: AeroVironment, Inc.

Cases: Patent FedCirNews GCNNews