Sale and Offer for Sale Determined by Where “Substantial Activities of the Sales Transactions” Occur

In Halo Electronics, Inc. v. Pulse Electronics, Inc., [2013-1472, 2013-1656](August 5, 2016), on remand from the Supreme Court, which held that 35 USC 284 gives district courts the discretion to award enhanced damages in egregious cases of misconduct beyond typical infringement, the Federal Circuit vacated the district court’s unenhanced damages award with respect to products that were delivered in the United States, and remand for further proceedings consistent with the Supreme Court’s opinion on enhanced damages. The Federal Circuit otherwise adopted its prior opinion on all other issues in the appeal.

In particular the Federal Circuit again agreed that the district court did not err in granting summary judgment of no direct infringement with respect to those products that Pulse manufactured, shipped, and delivered outside the United States because those products were neither sold nor offered for sale by Pulse within the United States.

The Federal Circuit said that although the place of contracting may be one of several possible locations of a sale to confer personal jurisdiction, it has not deemed a sale to have occurred within the United States for purposes of liability under §271(a) based solely on negotiation and contracting activities in the United States when the vast majority of activities underlying the sales transaction
occurred wholly outside the United States. For such a sale, one must examine whether the activities in the United States are sufficient to constitute a “sale” under §271(a), recognizing that a strong policy against extraterritorial
liability exists in the patent law.

The Federal Circuit noted that the patent statute does not define “sale” for purposes of §271(a).  The Federal Circuit pointed out that the ordinary meaning of a sale includes the concept of a transfer or title or property, and that Article 2 of the Uniform Commercial Code, which is recognized as persuasive authority on the sale of goods, provides that a sale consists in the passing of title from the seller to the buyer for a price.

The Federal Circuit found that substantial activities of the sales transactions at issue, in addition to manufacturing and delivery, occurred outside the United States. While Halo did present evidence that pricing negotiations and certain contracting and marketing activities took place in the United States, which
purportedly resulted in the purchase orders and sales overseas, such pricing and contracting negotiations alone are insufficient to constitute a “sale” within the United States.  Any doubt as to whether Pulse’s contracting activities in the United States constituted a sale within the United States under § 271(a) was resolved by the presumption against extraterritorial application of United States laws.

The Federal Circuit also affirmed there was no offer for sale, noting that in order for an offer to sell to constitute infringement, the offer must be to sell a patented
invention within the United States.

 

An Infringement, Divided, May Stand After All

In Mankes v. Vivid Seats Ltd., [2015-1500, 2015-1501, 2015-1909] (April 22, 2016), the Federal Circuit vacated judgment on the pleadings against Mankes, and remanded for further proceedings in light of Akamai IV.

The case involved U.S. Patent No. 6,477,503 on methods for managing a reservation system that divides inventory between a local server and a remote Internet server.  It was stipulated that no none person performed all of the steps of any single claim of the patent.  However, the defendants; arguments of non-infringement, and the district court’s determination were before the most rececent version of Akamai (Akamai IV).  The Federal Circuit said that:

“We need not say how much broadening occurred in Akamai IV. In the present cases, the district court’s rulings and the arguments of Fandango and Vivid Seats to the district court were squarely based on the earlier, narrower standard.”

The Federal Circuit vacated and remanded the case, and rejected defendants’ appeal of the denial of attorneys fees for good measure.

 

 

 

Belief in Invalidity Does Not Prevent Liability for Inducement, Lack of Infringement Does

In Commil USA, LLC v. Cisco Systems, Inc., [2012-1042] (December 28, 2015), the Federal Circuit considered the case after the Supreme Court held that belief that the patent is invalid does not negate intent to induce infringement.  Because it reversed and was remanding the case for a new trial on damages, the Federal Circuit chose not to address Cisco’s arguments that U.S. Patent No. 6,430,395 was not infringed.  Because the Supreme Court decision eliminated the need for a new trial, the Federal Circuit address Cisco’s non-infringement argument, finding them persuasive.

The district court construed the claims as requiring “for each connection of a mobile unit with a Base Station, running at the Base Station a copy of the low-level protocol supportingonly that connection and running at the Switch a corresponding separate copy of the high level protocol supporting only that connection.  The Federal Circuit was persuaded that Cisco’s system employs a single copy of the protocol to support all the connected devices. In view of this, the Federal Circuit found that a reasonable jury could not have found that Cisco’s devices run a separate copy of the protocol for each connected device, precluding liability under either direct or inducement theories.

While Cisco’s belief that the patent was invalid did not save it from liability for inducement, the fact that it was not infringing in the first place, did.

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