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SecurityPoint Holdings, Inc. v. Transportation Security Administration

United States Court of Appeals, District of Columbia Circuit

August 15, 2017

SecurityPoint Holdings, Inc., Petitioner
Transportation Security Administration, Respondent

          Argued March 7, 2017

         On Petition for Review of an Order of the Transportation Security Administration Bradley C. Graveline argued the cause and filed the briefs for petitioner.

          John S. Koppel, Attorney, U.S. Department of Justice, argued the cause for respondent.

          With him on the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General at the time the brief was filed, and Mark B. Stern, Attorney.

          Before: Henderson and Srinivasan, Circuit Judges, and Ginsburg, Senior Circuit Judge.


          Senior Circuit Judge Ginsburg.

         Ginsburg, Senior Circuit Judge: SecurityPoint Holdings, Inc., which contracts with airports to participate in an advertising program established by the Transportation Security Administration, again petitions for review of the agency's decision to revise its memorandum of understanding (MOU) used with participating airports. On remand after this court's decision in SecurityPoint Holdings, Inc. v. TSA, 769 F.3d 1184 (D.C. Cir. 2014) (SPH I), the agency again declined SecurityPoint's request that it cease using the revised MO U.SecurityPoint's petition challenges the TSA's decision as arbitrary and capricious and as an act of retaliation that violates its rights under the First Amendment to the Constitution of the United States. For the reasons that follow, we deny the petition.

         I. Background

         SecurityPoint is the owner of a method patent covering, as relevant here, the practice of placing onto a cart bins that have passed through an x-ray screening machine at an airport security checkpoint and pushing the cart back to the front of the machine so the bins can be used by the next passengers to go through the checkpoint. According to SecurityPoint, the TSA uses its patented system to help screen passengers at over 400 airports throughout the United States. At about 40 of those airports, SecurityPoint participates in the TSA's "Bin Advertising Program." Under that program, an "advertising broker" such as SecurityPoint

assume[s] the costs of providing and maintaining certain checkpoint equipment - bins, wheeled carts to transport the bins, and tables - in exchange for the right to sell advertisements to be displayed inside the bins. Participating airports execute [an MOU] with
TSA; they then contract with private companies to obtain the equipment subject to the MOU's terms. Once TSA has adopted a new MOU template, it requires all participating airports entering into new contracts under the program to use that template…. The advertising revenues, though shared by the airport operators and private companies, relieve TSA of the expense of supplying the bin-related equipment.

SPH I, 769 F.3d at 1186.

         SecurityPoint concedes that, at airports where it is the advertising broker, the TSA may practice the patent through what the Company calls an "implied license" arising from its agreement with the airport. The TSA, consequently, does not have a license to practice the patent at airports that do not participate in the Bin Advertising Program with SecurityPoint.

         In 2011 the Company sued the TSA in the Court of Federal Claims, alleging patent infringement at approximately 400 U.S. airports with which SecurityPoint had not contracted to participate in the Bin Advertising Program. The parties agreed to bifurcate the liability and damages phases of the case and the TSA conditionally stipulated to infringement at ten large airports. The court then held the patent was valid, rejecting the TSA's argument that the invention was "obvious" and therefore not patentable. SecurityPoint Holdings, Inc. v. United States, 129 Fed.Cl. 25, 28 (2016). The TSA appealed that decision to the Federal Circuit, but its appeal was dismissed as premature. SecurityPoint Holdings, Inc. v. United States, No. 17-1421 (Fed. Cir. Mar. 9, 2017) (because order did not resolve TSA's liability at all U.S. airports, it was not final and reviewable). The Court of Federal Claims has not yet determined whether the TSA infringed the patent at other airports.

         This case arises from prospective changes to the MOU that the TSA made in 2012. Two additions to the MOU are relevant here. One "require[s] participating airports to indemnify TSA from all liability for intellectual property claims related to the checkpoint equipment." SPH I, 769 F.3d at 1186. The other provides that "on cancellation of an agreement between an airport and a private company [i.e., an advertising broker such as SecurityPoint], TSA would retain the right to use the checkpoint equipment as well as a license to all intellectual property necessary for such use." Id. at 1186-87.

         Unhappy with these changes, SecurityPoint asked the TSA to "cease and desist" from using the revised MOU, which it claimed the agency revised in retaliation for SecurityPoint's having sued it for patent infringement. In its letter request, SecurityPoint argued the indemnity provision was a "poison pill" that would make it "impossible" for any additional airports to enter the Bin Advertising Program. In this regard, the Company pointed out that the fewer the airports contracting with SecurityPoint to participate in the Bin Advertising Program, the less the TSA would benefit from the implied license to use SecurityPoint's patented system and from SecurityPoint's provision of free checkpoint equipment. The letter also listed four airports - St. Louis, San Jose, San Antonio, and Boston - where SecurityPoint claimed the new MOU had prevented deployment of the agency's Bin Advertising Program.

         The TSA rejected SecurityPoint's demands, stating the revisions to the MOU are based on prudent business practices to protect [the agency] from legal liability that could arise from the use of checkpoint furnishings provided by airport operators, and to ensure that agency activities are not disrupted by the ...

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