What will happen if my Electronic Passport fails at a port-of-entry?
The chip in the passport is just one of the many security features of the new passport. If the chip fails, the passport remains a valid travel document until its expiration date. You will continue to be processed by the port-of-entry officer as if you had a passport without a chip.
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quoted from http://travel.state.gov/passport/passport_2788.html#One
What will happen if my Electronic Passport fails at a port-of-entry?
The chip in the passport is just one of the many security features of the new passport. If the chip fails, the passport remains a valid travel document until its expiration date. You will continue to be processed by the port-of-entry officer as if you had a passport without a chip.