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United States v. Terrapower, LLC

United States District Court, D. Idaho

October 10, 2018





         This is a False Claims Act (“FCA”) case. As is typical in FCA cases, an individual, Douglas Toomer (“Toomer”), has asserted FCA claims against Defendants TerraPower, LLC (“TerraPower”) and Battelle Energy Alliance, LLC (“BEA”) on behalf of the United States government. As required by the FCA, Toomer has only served the Complaint on the government. The FCA does not permit Toomer to serve the Complaint on the Defendants until the government decides what course of action to take. Usually, the government chooses to either intervene or permit the whistleblower to proceed on his own. In this case, the government has moved for dismissal. That motion is currently pending before the Court (Dkt. 14), as is Toomer's Motion for an Evidentiary Hearing and to Unseal the Case. Dkt. 23.

         The Court heard oral argument on these Motions on September 13, 2018. For the reasons outlined below, the Court GRANTS the Motion to Dismiss and DISMISSES all claims except Toomer's retaliation claim. The Court also DENIES in PART and GRANTS in PART Toomer's Motion for an Evidentiary Hearing and to Unseal the Case. While the Court will not hold an evidentiary hearing, it will unseal the case.


         The United States Department of Energy (“DOE”) owns Idaho National Laboratory (“INL”), which is located in Idaho Falls, Idaho. INL is a Federally Funded Research and Development Center operated under Federal Acquisition Regulation Part 35. See 48 C.F.R. § 35.000 et seq. INL conducts nuclear energy research and development.

         BEA is the management and operating contractor of INL, as laid out in government contract number DE-AC07-05ID14517 (“the Management Contract”). DOE acquisition regulations require that management and operating contractors be legal entities created for the purpose of “performing a specific management and operating contract.” 48 C.F.R. § 970.0970-1. BEA was formed for the purpose of performing the Management Contract.

         Toomer is the “relator” in this FCA case. Toomer worked for BEA during the relevant timeframe as a Relationship Manager. One of his major responsibilities was to work with TerraPower.

         TerraPower is a private company that focuses on nuclear energy and science innovation. In September 2011, and then again in July 2012, TerraPower entered into Cooperative Research and Development Agreements (“CRADA”)[1] with BEA for work at the INL.

         The CRADAs contain a multitude of contractual obligations for both BEA and TerraPower. Significant to this litigation are the obligations surrounding “Subject Invention[s], ” which the CRADAs define as “any invention of [BEA] or [TerraPower] conceived or first actually reduced to practice in the performance of work under th[e] CRADA.” Dkt. 1-3, at 2. The parties are required to disclose to the government any and all Subject Inventions. Id. at 8, 10. However, BEA or TerraPower may still “elect to retain title” to any Subject Inventions made by its employees and the “Inventing Party” has the “first opportunity to file U.S. and foreign Patent applications” on any Subject Inventions. Id. at 10, 11. Nevertheless, the United States “retains a nonexclusive, nontransferable, irrevocable, paid-up license to practice or to have practiced for or on behalf of the United States every Subject Invention . . . throughout the world.” Id. at 10. DOE may obtain title to or seek to patent a Subject Invention only if the Inventing Party declines to do so. Id.

         The CRADAs also contain obligations regarding “Generated Information, ” defined as “information produced in the performance of [a] CRADA.” Id. at 2. The CRADAs state that the parties “have no obligations of nondisclosure or limitations on their use of, and the Government shall have unlimited rights in, all Generated Information produced and information provided by the Parties, ” with certain exceptions including information that has been properly marked as “Protected CRADA Information.” Id. at 7.

         Each CRADA contains a “Statement of Work” describing the purpose and objectives of the CRADA. The 2011 CRADA involved “the development and testing of metallic fuel irradiation behavior, fabrication and fast reactor structural materials, all related to nuclear energy.” Dkt. 10, at 7. The 2012 CRADA “allow[ed] for the further development and irradiation testing of variants of ‘barrier coatings' in nuclear fuel rods.” Id. at 8. The 2012 CRADA committed DOE to over $17 million in in-kind contributions. Id. In August 2014, BEA entered into a modification of the 2012 CRADA that committed DOE to an additional $5.6 million. Id.

         Toomer alleges that TerraPower developed a “duplex liner” (also called a “barrier coating”) [2] under the 2012 CRADA (thus making it a “Subject Invention”) and failed to disclose it to the government as required by the 2012 CRADA. Toomer further alleges that TerraPower applied for a patent for the duplex liner and, in the application, failed to provide a sworn statement discussing the relation of the invention to a CRADA as required under 42 U.S.C. § 2182.

         TerraPower filed a provisional patent application for the duplex liner in December 2012. It then filed a nonprovisional application in March 2013. The U.S. Patent and Trademark Office (“USPTO”) rejected TerraPower's patent application in December 2015. TerraPower filed a Request for Continued Examination with the USPTO, but the USPTO issued a final rejection of the patent application in August 2017. TerraPower has filed a notice of appeal.

         Toomer also alleges that TerraPower improperly claimed some key Generated Information associated with the CRADA and the Subject Inventions was proprietary information. Finally, Toomer maintains that TerraPower concealed the duplex liner so that it could manufacture and market the invention outside of the United States, in direct violation of the 2012 CRADA.

         The status of the duplex liner first became an issue in early 2014, when TerraPower disclosed the duplex liner as “background intellectual property, ” not a Subject Invention, in the process of negotiating a new CRADA. BEA investigated the development of the duplex liner and TerraPower provided information on its development that supported its position that the duplex liner was not a Subject Invention. BEA forwarded this material to DOE.

         According to Toomer, BEA determined that the duplex liner was a Subject Invention and TerraPower's claimed proprietary information was in fact Generated Information that was not proprietary. BEA informed TerraPower of these findings; TerraPower, in turn, maintained its position that the duplex liner was not a Subject Invention and the at-issue information was proprietary. BEA prepared a white paper on the dispute, but did not recommend that any specific action be taken.

         According to the government, DOE was aware of this dispute all along and decided to defer its Subject Invention inquiry until after the conclusion of the patent prosecution of the duplex liner because the outcome of those proceedings would affect the inquiry.

         Toomer was involved in BEA's investigation of the duplex liner and took steps to notify BEA and TerraPower of TerraPower's alleged violations of the CRADA and to take corrective measures. Dkt. 10, at 14. According to Toomer, “Terrapower became increasingly upset with Toomer's efforts” and “applied pressure to Toomer's senior management at BEA to back off and change its position on the matter, and also have Toomer removed from any involvement with TerraPower and the CRADAs.” Id. TerraPower was successful in these endeavors. Id. Still, Toomer “insisted that BEA formally request that DOE become involved in the matter.” Id. at 15. BEA's legal counsel and management allegedly became hostile towards Toomer. They “stripped [him] of all of his responsibilities and effectively told [him] to ‘find work elsewhere' at BEA.” Id. Toomer claims that he became ...

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