US Court of Federal Claims Holds that Government Contractor Committed Taking Under Tucker Act

On August 29, 2014, The US Court of Federal Claims held that a government contractor committing a trade secret violation, triggering a proper Fifth Amendment Taking claim under the Tucker Act, 28 U.S.C. 1491.

In brief, Demodulation owned intellectual property including trade secrets and patents covering mircrowire and fine glass-coated wire used in various defense applications. The United States Department of Energy (DOE) and Demodulation initiated a Cooperative Research and Development Agreement on February 12, 2007.

During the ensuing engagement between the two entities, Demodulation disclosed “proprietary information and trade secrets” to DOE. These trade secrets included “the composition of the wire, the method for making the wire and variations in its chemistry, means for detecting the wire and proprietary signal processing technology.” In February 2009, Demodulation filed a complaint stating that the DOE disclosed the company’s proprietary technology and trade secrets to Government agencies and private entities without DOE’s consent.

Responding to Demodulation’s complaint, the US Court of Federal Claims maintained that the actions of the DOE may have triggered protections under the Tucker Act. The Tucker Act provides the Court of Federal Claims with “exclusive jurisdiction over a claim ‘founded… upon any express or implied contract with the United States…” United States Marine Inc. v. Unites States, No. 12-1678 at 11 (Fed. Cir. July 15, 2013) (quoting 28 U.S.C. Sec 1491(a)(1)).

In a case with parallels to Demodulation, in United States Marine, the United States Marine Company successful filed suit against the United States for “misappropriation of trade secrets” after discovering that the Navy had disclosed the design of a proprietary special-operations craft. Because the trade secret misappropriation was “inextricably entwined” with the government contract, the Court of Federal Claims had jurisdiction (as opposed to an action exclusively in tort). Id.

In Demodulation, the court also held that the Court had Jurisdiction over the misappropriation of trade secrets to the extent the claims arose from the agreement formed with the government. The opinion emphasized that while a trade secret misappropriation is generally characterized as a tort claim, ” If the action was chargeable to the government as an authorized action it would be a taking.” The action would be considered a tort only if it, was committed by a government agent acting ultra vires.”