IP Law Daily, PATENT—Fed. Cl.: Decision finding TSA had implied license to use company’s airport security system won’t be reconsidered, (Jul 21, 2020)

By John W. Scanlan, J.D.

Federal government’s use of eminent domain power to take license to use patent after infringement did not invalidate license, was not evidence of bad faith or coercion; government may lawfully exercise this power and pay compensation later.

The owner of a patent covering trays and carts used in airport security screening had impliedly granted the federal Transportation Security Administration (TSA) a license to use the trays and carts through its statements and actions, the U.S. Court of Federal Claims ruled in denying the patent owner’s request for reconsideration. The company did not provide a basis for the court to reconsider its ruling that the company granted the license under duress (SecurityPoint Holdings, Inc. v. U.S., July 17, 2020, Bruggink, E.).

In 2002, SecurityPoint submitted to the TSA a white paper regarding its proposal to provide its system of trays and carts for airport security screening in exchange for being allowed to sell advertising on the trays at no cost to the federal government. The company subsequently provided TSA an unsolicited but formal offer to provide the trays and carts at all national airports in exchange for a five-year contract to operate and maintain the trays and carts and to exclusively provide advertising on them. In 2005, TSA informed the company that it had not accepted its offer but invited the company to run a pilot program at Los Angeles International Airport (LAX) to test the system. SecurityPoint and TSA entered into a Memorandum of Understanding (MOU) for that pilot program. After a successful test, TSA invited other vendors to apply for a one-year TSA pilot Bin Advertising Program to provide bins in exchange for advertising and directed applicants to reach agreements with airports. SecurityPoint entered into contracts with airport operators or advertising brokers at more than 30 airports while asserting its patent rights. Eventually, the company brought patent infringement claims against the federal government and asked for damages. The government moved for summary judgment, arguing that the company had granted it an implied license to use the bins.

The U.S. Court of Federal Claims ruled that SecurityPoint had impliedly granted a license to the TSA because its statements and its conduct constituted an affirmative grant of consent or permission upon which the government had reasonably relied. It found that the company repeatedly had told the TSA that it would supply the bins at no cost to the government and said that it would be "absurd" to rule that the agency had no right to use these bins in the manner patented by the company. SecurityPoint had represented in the present litigation and in other litigation that the TSA had operated with an implied license in the airports with which SecurityPoint had reached agreements, the court said. Although SecurityPoint argued that a change made by TSA to the standard MOU that required airports to assume liability for patent infringement indicated that the agency had not relied upon its conduct, the court found that the agency did not require existing contractual arrangements to be modified but had made the changes as part of a larger effort to ensure the agency was protected from patent liability.

SecurityPoint moved for reconsideration, asserting that the decision was based on factual findings on summary judgment that were not supported by the evidence and that there were questions of material fact that should have prevented a grant of summary judgment to the government. It disagreed with the court’s holding that the implied licenses were not the product of duress, arguing that its participation in TSA’s Bin Advertising Program was the product of duress and that TSA’s actions were in bad faith because it took the patent without compensation and forced the company to negotiate with various airports individually. This reduced the value of the patent and forced the company to mitigate its damages by participating in the program, the company said.

The court concluded that SecurityPoint had not provided a basis for granting reconsideration. The court’s assertion that the company had offered the bins to TSA without cost was undisputed. The company asserted that its deals with the airports differed from the arrangements it contemplated when it made the offer to TSA because it had planned to work directly with the government rather than individual airports. While the court agreed with this statement, the company’s disagreement with how the court viewed the legal significance of these deals did not provide a basis for reconsideration. Although the airports rather than the agency were the contracting parties, the company provides the bins to TSA and receives a right to place advertising on them. The court observed that the company had conceded that the new arrangement gives rise to an implied license.

The court also found that its statement that the company’s business model had not changed before and after the infringement was not erroneous. It said that it had meant that the heart of SecurityPoint’s business was the placement of advertising on bins and carts and remained so after the infringement, not that the arrangement originally proposed by the company was the same as the arrangement eventually adopted by TSA. The court said that its original decision had gone on to explain that the fact that a license is granted after infringement does not make it invalid, and there was no change in the law or previously undiscovered evidence that would lead it to reconsider that holding.

Furthermore, the government’s use of eminent domain to take a license and use SecurityPoint’s patented method was not evidence of bad faith or coercion. While the government is required to pay for a license, it was not required to pay for it before taking it and its right to use the license is not conditioned on prepayment for the license. The court observed that the statutory requirement that the government provide compensation when it exercises the right of eminent domain supports the view that the circumstances did not involve duress. The court concluded by stating that SecurityPoint was not left without an alternative to participating in the Bin Advertising Program because it could, and did, enforce its patent rights against the United States in the Court of Federal Claims.

This case is No. 1:11-cv-00268-EGB.

Attorneys: Bradley Charles Graveline (Sheppard Mullin) for SecurityPoint Holdings, Inc. Gary Lee Hausken, U. S. Department of Justice, for the United States.

Companies: SecurityPoint Holdings, Inc.

Cases: Patent GCNNews