U.S. in Last-Ditch Effort to Thwart Suit by Hughes : Aerospace: The Pentagon allegedly stole satellite technology. A judgment up to $1.2 billion is expected in 23-year-old case.
Staring at a likely $1-billion judgment, the federal government is making an 11th-hour effort to undermine a patent infringement case brought by Hughes Aircraft 23 years ago.
A final ruling on the amount owed to Hughes by the government is expected to be handed down by the end of May by U.S. Court of Claims Judge James T. Turner, who presided over a one-year trial in 1988 and has been methodically considering a final ruling for five years.
Attorneys close to the case and outside experts predict that Turner’s ruling is likely to fall in a range of $800 million to $1.2 billion, making it the largest patent judgment in history against the federal government.
Even now in the face of the verdict, lawyers from the Justice Department are searching for a magic bullet that would deflate the Hughes case, which alleges the Pentagon stole the technology that enabled the communications satellite revolution.
Justice Department attorneys are seeking any information or theories from outsiders or experts that might blow a hole in Hughes’ case, according to several defense-industry and patent attorneys across the country.
“They are having apoplexy because they are afraid Congress is going to kill them,” said Herbert Fenster, a leading defense-industry lawyer. “They are trying to find some technical way to kill the case.”
Justice attorneys declined to be interviewed, but in response to a question about the efforts, department spokesman John Russell acknowledged: “We are always looking for evidence for bolstering our arguments.”
The last-ditch effort has amazed Hughes attorneys. “They have dredged up everything over the years,” said Sheldon Karon, a Chicago attorney who represents the company. “Some of it has been in the class of Elvis sightings. I can’t imagine what they would find at this stage.”
Hughes asserted in the case that the Pentagon infringed on an invention by Donald Williams, a brilliant young engineer at Hughes who in the early 1960s developed a simple lightweight device for controlling a communications satellite in orbit. With Williams’ concept, a spinning satellite can be controlled in every axis with just a single rocket thruster.
The Claims Court has already ruled that Hughes’ patent was valid and that the government indeed infringed upon it. The last step is the monetary ruling.
The award will depend on two parts, the royalty rate on the value of the satellites and the interest rate to compensate Hughes for the long delays in getting its money. Hughes is seeking a 15% royalty rate, while the Justice Department has argued for 1%.
And the Justice Department has also suggested that the interest accruing on those royalties should be based on short-term Treasury Department bills, while Hughes has argued that its annual return on equity would represent how it could have invested the royalties.
The judgment could be as little as $84 million if Turner fully accepts the Justice Department’s formula, according to Victor Savikas, a Hughes attorney in Los Angeles. But Savikas added that the Los Angeles-based defense contractor could realize a mind-boggling $6 billion under the company’s preferred formula.
Turner, who is widely praised for his careful rulings, is likely to throw out both positions, striving for a conservative decision that will withstand likely appeals. Experts say the most probable outcome is a 5% to 8% royalty rate and interest based on the same rate that the IRS uses to compensate taxpayers on old refunds. On that basis, the verdict would fall into a range of $800 million to $1.2 billion.
Hughes attorneys say they give Justice Department lawyers credit for stalling the patent award for so many years. “The government hasn’t paid a dime,” Karon said. “They have done a good job of staving off judgment day. John Gacy went 14 years before he took his final walk. This is even longer.”
