CHARLES F. LETTOW, Judge.
Pending before the court in this patent infringement case brought pursuant to 28 U.S.C. §1498(a) are motions by the defendant ("United States" or the "government") to notify eight entities, each of which "is alleged to have an interest in the subject matter of the suit." Rule 14(b) of the Rules of the United States Court of Federal Claims ("RCFC").
Plaintiffs filed a complaint on May 15, 2015 alleging that the government was and is infringing their patents for alarm surveillance systems. See 3rd Eye Surveillance, LLC v. United States, 124 Fed. Cl. 438, 439-40 (2015). All three patents relate to a "security alarm system that provides secure, realtime video and/or other realtime imagery of a secured location to one or more emergency response agencies over a high-speed communications link." Id. at 440 (quoting '085 patent at Abstract). Plaintiff 3rd Eye Surveillance, LLC ("3rd Eye") alleges that it is the exclusive licensee of the three patents, and plaintiff Discovery Patents, LLC ("Discovery Patents") is the alleged assignee of all interests in the patents. Id. In their original complaint, plaintiffs claimed that the government was developing and deploying infringing surveillance systems either through the direct actions of government agencies or through third-party consultants and contractors. Id. Plaintiffs claim damages for this infringement that "approach or exceed $1 [b]illion." Id.
On September 16, 2015, the government filed a motion to dismiss plaintiffs' complaint for lack of subject matter jurisdiction under RCFC 12(b)(1), as well as a motion for a more definite statement under RCFC 12(e). 3rd Eye, 124 Fed. Cl. at 439. In the latter motion, the government asserted it could not reasonably respond to plaintiffs' complaint because it did not provide any information about the identity or location of the accused systems, nor did it provide details of the allegedly infringing activity beyond a representative list of eight government entities "responsible for military, security, and law enforcement functions," as well as six third-party "consultants and contractors" to the government. Id. at 440. The court denied the government's motion to dismiss but directed plaintiffs "to file an amended complaint that (1) explains, with as much specificity as possible, why they believe certain government agencies and third-party contractors to the government have developed and used surveillance systems that infringe their patents, and (2) provides the publicly available information that was used to reach this conclusion." Id. at 444.
The plaintiffs responded to the court's order by filing an amended complaint on January 26, 2016, ECF No. 22. The amended complaint provided examples of locations where the allegedly infringing surveillance systems are in use, including airports, government office buildings and courthouses, and national border areas. Am. Compl. ¶¶ 9, 84. The complaint also stated that "[t]he [g]overnment enters into contracts with third parties for hardware components (such as cameras, audio sensors and computers/servers), software applications, and IT technology consulting necessary to implement and operate the infringing [g]overnment security systems." Am. Compl. ¶ 11. Plaintiffs asserted that "[d]etailed specifications for the various [g]overnment security systems are confidential." Am. Compl. ¶ 10.
Plaintiffs provided information about "video cameras" in use at airports, such as Dallas Fort Worth International Airport. Am. Compl. ¶ 17. Plaintiffs also submitted a news article from January 2016 relating to Hitachi Data Systems Federal ("Hitachi Federal"), a government contractor, describing an "airport security monitoring system" that uses "video intelligence" and an "automated monitoring system." Am. Compl. ¶¶ 18-20. Plaintiffs stated that they "do not allege that Hitachi Federal is directly or indirectly infringing the [asserted] patents at this time," but the government's airport monitoring system, as described in the article and evidenced by the video cameras in use, infringes one or more of the claims in the three patents at issue. Am. Compl. ¶¶ 43-48.
Plaintiffs also provided information about security systems in use at government buildings, including systems that use "Converged Security Information Management software" provided by a contractor, Vidsys, Inc. ("Vidsys"). Am. Compl. ¶¶ 50, 52-53. Plaintiffs allege that the government is infringing one or more of the claims in the '344 patent and the '980 patent by using the Vidsys software "in connection with other components," including video cameras and other "sensors," alarms, and access control systems such as "identity management, card access, and biometrics." Am. Compl. ¶¶ 57-66, 81-83. Plaintiffs do not allege that Vidsys is infringing their patents or "that the Vidsys . . . software, by itself, directly or indirectly, infringes the claims of [p]laintiffs' patents." Am. Compl. ¶¶ 79-80.
Plaintiffs additionally provided information on the government's use of a "remote video surveillance system" to "monitor[] portions of its border." Am. Compl. ¶ 86. Plaintiffs point to a contract recently awarded to General Dynamics to upgrade a border surveillance system. Am. Compl. ¶ 87.
Plaintiffs also included in their complaint a summary of government contracts under General Services Administration ("GSA") Schedules 70 and 84, which are used to obtain "hardware components, software and other components needed to provide security systems for secured locations." Am. Compl. ¶¶ 104-06. In this summary, plaintiffs identified contracts with two entities, Indigo Vision, LTD ("Indigo Vision") and Datawatch Systems, Incorporated ("Datawatch"), for "security system[s] that include[] . . . video cameras, sensors, a control center to receive input from computers connected to such sensors, and the capabilities of providing real-time video of alarm events to response agencies." Am. Compl. ¶ 105. Plaintiffs also stated that the government purchases goods and services from Vidsys through GSA Schedule 70. Am. Compl. ¶ 106.
On February 5, 2016, the government filed a motion to notify Indigo Vision and Datawatch as interested third parties under RCFC 14(b). Def.'s Opposed Mot. to Notice Third Parties ("Def.'s First Mot."), ECF No. 23. The government based its motion on the fact that both Indigo Vision and Datawatch are named in Paragraph 105 of plaintiffs' amended complaint as vendors under GSA Schedule 84 and potential providers of an infringing "security system." Def.'s First Mot. at 2. With its motion, the government provided a Federal Supply Schedule Price List for Indigo Vision under contract number GS-07F-0271Y for numerous components related to "closed circuit surveillance systems" and "facility management systems." Id. Ex. A. The government also provided a similar price list for Datawatch under contract number GS-07F-0634N for components related to an "access control system" and other "security and monitoring" systems. Id. Ex. B. Finally, the government provided "Contract Clause Document[s]" for both Indigo Vision and Datawatch showing that both contracts contained a standard indemnity clause related to intellectual property, FAR § 52.212-4(h):
Id. at 3, Ex. C at A39, Ex. D at A186.
The government filed its second motion to notify interested third parties on February 12, 2016, the same day it filed its answer to the amended complaint. Def.'s Second Mot. to Notice Third Parties ("Def.'s Second Mot."), ECF No. 25. The second motion requests that the court authorize notices to be issued to Tyco Integrated Security LLC ("Tyco"), Diebold, Incorporated ("Diebold"), Vidsys, and EFW Inc. ("EFW"), a wholly owned subsidiary of Elbit Systems of America, LLC. Def.'s Second Mot. at 1-2. With its motion, the government provided contract number DJM-14-A32-V-0014 between the United States Marshals Service and Tyco relating to "management, supervision, manpower, materials, supplies, and equipment necessary to plan, schedule, coordinate, and assure effective performance of security services." Id. Ex. B, at A8.
The contracts with Tyco, Diebold, and Vidsys contain the standard indemnity clause set out at FAR § 52.212-4(h). Id. at 3-6 & Ex. B, at A52, Ex. C, at A95, Ex. D, at A134. The contract with EFW contains an indemnity clause related to patents set out at FAR § 52.227-3:
Id. at 8 & Ex. G, at A217 (emphasis in original); see also Reply in Support of Def.'s Second Mot. Ex. at A334. Accordingly, the government asserted that each of the four entities "may have an interest in the subject matter of this suit within the meaning of RCFC 14(b)" by virtue of the respective patent indemnity clauses. Id. at 4-6, 8.
In its third motion to notify interested third parties, filed February 29, 2016, the government requested that the court authorize notice to two additional entities: Tactical Micro, Inc. ("Tactical Micro") and ICx Technologies, Inc. ("ICx"). Def.'s Mot. for Leave of Court to Notice Third Parties ("Def.'s Third Mot."), ECF No. 30.
This court has exclusive jurisdiction to adjudicate patent infringement claims against the federal government "[w]henever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same." 28 U.S.C. § 1498(a). In that respect, "the use or manufacture of an invention described in and covered by a patent of the United States by a contractor, a subcontractor, or any person, firm, or corporation for the Government and with the authorization or consent of the Government, shall be construed as use or manufacture for the United States." 28 U.S.C. § 1498(a). "[D]irect infringement of a patent occurs when the government directly uses or manufacturers the patented invention without a license, or when, through a procurement contract or otherwise, the government consents to the use or the manufacture of the patented invention for its benefit without first obtaining a license." Liberty Ammunition, Inc. v. United States, 119 Fed. Cl. 368, 385 (2014) (citing Decca Ltd. v. United States, 640 F.2d 1156, 1166-67 & n.15 (Ct. Cl. 1980)) (internal citations omitted), appeal docketed, No. 15-5061 (Fed. Cir.). Accordingly, the court has jurisdiction over the present case.
Plaintiffs' opposition to the government's motions rests primarily on their assertion that the government has not sufficiently alleged that the third-party entities have an interest in the present action such that notice under RCFC 14(b) is necessary or appropriate. As the plaintiffs would have it, the standard for an "alleged interest" under this rule should be the plausibility standard articulated by the United States Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009). Pls.' Resp. to Def.'s Second Mot. ("Pls.' Second Resp.") at 3, ECF No. 31; Pls.' Third Resp. at 6-7. This standard, which was established in the context of pleading requirements to survive a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, states that "a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570).
RCFC 14(b)(1) states that "[t]he court, on motion or on its own, may notify any person with the legal capacity to sue or be sued who is alleged to have an interest in the subject matter of the suit." Within 42 days of service, a person notified under this rule "may file an appropriate pleading setting forth the person's interest in the subject matter of the litigation." RCFC 14(c). If a third party receiving notice under RCFC 14(b) decides to file a pleading under RCFC 14(c), "that third party has standing to seek adjudication of the claims at issue in the suit." Uusi, LLC v. United States, 110 Fed. Cl. 604, 610 (2013) (citing USHIP Intellectual Props., LLC v. United States, 98 Fed. Cl. 396, 405 (2011)). This rule is separate from the provisions for intervention under RCFC 24, in which a party can move to intervene of right in a pending action (RCFC 24(a)) or request the court's permission to intervene (RCFC 24(b)). However, both RCFC 14(b), and RCFC 24(a) refer somewhat similarly to a person "who is alleged to have an interest in the subject matter of the suit," RCFC 14(b)(1), and a person who "claims an interest relating to the property or transaction that is the subject of the action," RCFC 24(a)(2).
This court and its predecessor, the United States Court of Claims, have construed the "alleged interest" requirement of RCFC 14(b)(1) broadly, stating that "an apparent interest is sufficient for notice to issue `[e]ven in those situations where an alleged third party interest in the suit is uncertain.'" Uusi, 110 Fed. Cl. at 609 (quoting Allied Oil & Supply, Inc. v. United States, 60 Fed. Cl. 223, 225-26 (2004) (in turn quoting Del-Rio Drilling Programs, Inc. v. United States, 17 Cl. Ct. 844, 849 (1989))). The "interest" at issue generally involves a pecuniary interest, whether a "direct pecuniary interest" or a "potential pecuniary interest." Pacific Gas & Elec. Co. v. United States, 98 Fed. Cl. 699, 701 (2011) (citing Bowser, Inc. v. United States, 420 F.2d 1057, 1060 (Ct. Cl. 1970); Allied Oil, 60 Fed. Cl. at 228; Bird v. United States, 51 Fed. Cl. 536, 541-42 (2002)).
The distinction between the Twombly/Iqbal plausibility standard and the "nonfrivolous" standard employed by this court under Carrier and its progeny for notice under RCFC 14(b) is significant. As plaintiffs would have it, the plausibility standard applies and requires either an admission by the government that the third parties are selling infringing security alarm systems to the government or are selling component parts with "no substantial non-infringing uses." See, e.g., Pls.' Second Resp. at 5 (asserting that only contractors who are selling infringing alarm systems have an interest under RCFC 14(b) and stating that "[i]f the [g]overnment properly alleges that [the third party] sells to the [g]overnment, or has sold the [g]overnment, an infringing system, [p]laintiffs will withdraw [their] opposition"); Pls.' First Resp. at 2, 4 n.5 (stating that a contractor "must be . . . providing services that have no substantial non-infringing uses before it can be liable" for infringement). For this position, plaintiffs rely on the statute governing private-party patent infringement, 35 U.S.C. § 271, which establishes "three possible types of infringement: (1) direct infringement, where a party is proven to practice each and every element of a given claim in a patent; (2) indirect infringement, where a party induces others to infringe with knowledge of the patent and knowledge that his or her activities would lead to the infringement of the patent; and (3) indirect infringement by parties who sell component parts that have no substantial non-infringing uses." Pls.' Second Resp. at 3-4.
Plaintiffs' reliance on 35 U.S.C. § 271 is misplaced. Although the statutory framework for private-party patent infringement in 35 U.S.C. § 271 is "similar" and "parallel" to that applied by this court to patent infringement claims under 28 U.S.C. § 1498(a), it is not the same. Zoltek Corp. v. United States, 672 F.3d 1309, 1321 (Fed. Cir. 2012) (quoting Motorola, Inc. v. United States, 729 F.2d 765, 768 (Fed. Cir. 1984)). Under Section 1498, infringement occurs "[w]henever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same." 28 U.S.C. § 1498(a) (emphasis added). This framework ties the government and contractors together, such that liability for the contractor's "use and manufacture" of an infringing item is assigned to the government. See Penda Corp. v. United States, 44 F.3d 967, 970 (Fed. Cir. 1994) (commenting that "no judgment has been or could be entered" against a government contractor in a patent infringement suit against the government under Section 1498); Decca, 640 F.2d at 1167 (A "contractor's activity is deemed under [S]ection 1498 to be for the [g]overnment.") Accordingly, the extent of the contractor's contribution to the "use or manufacture" of an infringing item is not relevant to establishing the government's liability for infringement under Section 1498.
Plaintiffs also improperly frame the question of "interest" under RCFC 14(b) as whether the named entities could be found to be infringing plaintiff's patents, rather than whether the entities could be required to indemnify the government if the government was found liable for infringement. The two questions are not the same. Under the indemnity clause in FAR § 52.212-4(h), a contractor agrees to indemnify the government for any patent infringement "arising out of the performance of th[e] contract." Similarly, the patent indemnity clause in FAR § 52.227-3 requires the contractor to indemnify the government for patent infringement "arising out of the manufacture or delivery of supplies, the performance of services, or the construction, alteration, modification, or repair of real property . . . under this contract." This court does not have jurisdiction to determine the extent of a contractor's obligations to indemnify the government under these clauses, as these would be governmental claims against third parties. Penda Corp., 44 F.3d at 970 (citing Carrier Corp., 534 F.2d at 251). That said, the language of these clauses demonstrates that a contractor could very well have a pecuniary interest in the outcome of a patent infringement suit against the government by virtue of these indemnification provisions, even if the contractor is not directly manufacturing or selling devices or materials that would themselves infringe.
Plaintiffs make much of the fact that they have affirmatively stated that many of the entities the government seeks to notify are not infringing their patents, or at least do not appear to be infringing their patents based on presently available information. See Pls.' Second Resp. at 2 (characterizing the government's position as "even when a patent owner disavows infringement by [a contractor], this [c]ourt must grant a Rule 14(b) [m]otion if the [g]overnment `merely alleges' that it could be entitled to indemnification"); see also Pls.' First Resp. at 2 (stating that "publicly available" information suggests that Indigo Vision and Datawatch are not directly infringing plaintiffs' patents); Pls.' Second Resp. at 6-8 (stating that Tyco and Diebold appear to sell "antiquated system[s]" that would not be considered infringing, and that Paragraph 79 of the amended complaint states that "Vidsys does not appear to be infringing"); Pls.' Third Resp. at 8 (stating that the information provided for Tactical Micro does not establish that it is infringing plaintiffs' patents). Plaintiffs suggest that because they do not presently claim that the entities are infringing their patents, these entities do not have a valid interest in the subject proceeding. The plaintiffs' arguments in this respect fail to take into account the early stage of the present proceedings, which is dictated in part by the requirement in Rule 14(b) that the government file its motions for notice no later than the date of its answer, absent good cause for a later filing. RCFC 14(b)(2)(B)(ii).
Simply stated, the government is requesting that the court formally notify third parties that might otherwise be prejudiced by the outcome of the present proceedings and allow those parties to have standing to participate in the proceedings. Uusi, 110 Fed. Cl. at 610. As a result, the standard for an alleged interest under RCFC 14(b) must be no higher, and may well be lower, than the standard for intervention of right under RCFC 24(a), where a party need only show an interest in the subject of the proceeding such that "disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest." RCFC 24(a)(2) (emphasis added).
Accordingly, to allege an interest in the present case for the purposes of a motion under RCFC 14(b), the government must make a nonfrivolous claim that the entities to whom notice would be given could be required to indemnify the government if it was found liable to plaintiffs for patent infringement, or that these entities otherwise have a pecuniary interest in the outcome of the case. Carrier Corp., 534 F.2d at 251; Pacific Gas, 98 Fed. Cl. at 701.
Applying the "nonfrivolous claim of a pecuniary interest" standard to the government's motions, the court concludes that the government has alleged a sufficient interest for all eight named entities in the subject proceeding.
The government has provided evidence, in the form of Federal Supply Schedule Lists, that both Indigo Vision and Datawatch are engaged in activities on behalf of the government that involve the manufacture and sale of security systems, or components of them, that appear related to the subject matter of the present patent infringement suit. See Def.'s First Mot. at Ex. A & B; see also Am. Compl. ¶ 105 (stating that Indigo Vision advertises a potentially infringing security system, and Datawatch "offers many of the same services"). The government has also provided evidence that its contracts with Indigo Vision and Datawatch contain the standard indemnity clause set out in FAR § 52.212-4(h). Def.'s First Mot. at Ex. C & D. Accordingly, the government has made a nonfrivolous claim that Indigo Vision and Datawatch, through these indemnity provisions, have a pecuniary interest in the subject proceeding.
The government has provided its contracts (or portions of them) with Tyco and Diebold showing that these companies are involved in the manufacture, sale, maintenance, and operation of security systems on behalf of the United States Marshals Service. Def.'s Second Mot. Ex. B & C. It has also provided portions of its contract with Vidsys sufficient to establish that this company provides software to the United States Navy to enable its "video surveillance system." Id. Ex. D. The government similarly provided portions of its contract with EFW showing that this company is engaged in providing "goods and services" to U.S. Customs and Border Protection in support of a "border surveillance system." Id. at 7 & Exs. E & G; Reply in Support of Def.'s Second Mot. Ex. All four contracts contain either the indemnity clause stated in FAR § 52.212-4(h) or that set out in FAR § 52.227-3. Accordingly, the government has made a nonfrivolous claim that Tyco, Diebold, Vidsys, and EFW have a pecuniary interest in the subject proceeding.
The government has provided portions of its contracts with Tactical Micro and ICx sufficient to show that both companies are engaged in providing to U.S. Customs and Border Protection goods and services for mobile surveillance systems along the U.S. border. Def.'s Third Mot. Ex. A & C. These contracts contain either the indemnity clause stated in FAR § 52.212-4(h) or that set out in FAR § 52.227-3. Accordingly, the government has made a nonfrivolous claim that Tactical Micro and ICx have a pecuniary interest in the subject proceeding.
For the reasons stated, the government's motions to authorize notice to the eight named entities pursuant to Rule 14(b) are GRANTED. The clerk shall issue notice to each entity, as specified in RCFC 14(b)(3). Service of the notices shall be accomplished in accord with the provisions of RCFC 14(b)(4).
It is so
Additionally, the standard indemnity clause in the FAR related to intellectual property, FAR § 52.212-4(h), sets out an apparent condition on application of the indemnity, expressed in the form of a proviso: "provided the Contractor is reasonably notified of such claims and proceedings." See supra, at 4 (quoting FAR § 52.212-4(h) in full). The government's motion for notice to be given pursuant to RCFC 14(b) would ostensibly serve to implement this proviso.
