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April 10, 2009 8:30 AM

A Long Journey for Boeing's Lawyers in Case Against NASA

Posted by Zach Lowe

In the nine years it took the U.S. Court of Federal Claims to decide a patent infringement case Boeing filed against NASA, Keith Nowak and Arthur Lieberman, the lead lawyers for Boeing, went from heading up an IP boutique to getting swallowed up by Dickstein Shapiro, and, finally, to retiring (in Lieberman's case) and a partnership spot at Carter, Ledyard & Milburn.

So we can understand if they want to celebrate now that a federal judge has ruled that the U.S. government should pay Boeing what will amount to at least $40 million for NASA's infringement. Actually, the court' s conclusion that NASA had infringed came four years ago. Since then, the primary argument in the matter has been over damages, which led to additional discovery, briefings, and closing arguments. Still, four years?

"You're suing the government," Nowak says. "It's a slow process."

A brief summary of the case: In the early 1990s, Boeing created an aluminum-lithium hybrid that could be used in a framing device around an exterior gas tank on space shuttles and other aircraft, court records show. The material was so light it saved gas costs and allowed shuttles to carry more cargo--something the U.S. badly wanted as it prepared the International Space Station in the late 1980s and early 1990s. 

Boeing licensed the technology to several partners, but not to Lockheed Martin, which was partnering with NASA to build a similar material. Then Boeing got wind that Lockheed was infringing on its patent and offered Lockheed a licensing deal; Lockheed told Boeing to take it up with NASA, In 2000, the space agency denied it was infringing. 

The court found otherwise. There were two main issues in the damaging hearing: First, what percentage should the court use to calculate royalties from sales Boeing had lost out on? Boeing argued for a 3.5 percent rate; NASA preferred the 1.25 percent Boeing had charged its friendly customers. Second: In calculating how much sales revenue Boeing had wrongfully been denied, should the court consider the sale of only the framing device Boeing had patented, or the entire fuel tank? Boeing argued that the fuel tanks NASA built would essentially not have existed without the framing material, and that, as a result, the court should count sales of the entire fuel tank--increasing the damages pool by about four times, from about $330 million to $1.2 billion.

The judge split the proverbial baby, ruling for Boeing on the damages pool but favoring NASA on the royalties percentage. Take 1.25 percent of $1.2 billion, add in some infringement damages, and Boeing's initial award comes to about $16 million. 

But that doesn't include interest, and Nowak says interest payments will be "significantly higher" than the $16 million damages figure. (He cannot yet disclose the precise number, he says.)

Nowak says he's happy with the outcome and has enjoyed the journey.

"It was certainly a long case," he says. "But it was very interesting."

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