1. Panel: Kristyne Bullock, Lynda Calderone, Jimmie Johnson
Stretching the Boundaries of U.S. Patent Protection: How Far Does Your Patent Reach?
Panel:
Kristyne Bullock, Lynda Calderone, Jimmie Johnson

2. Stretching the Boundaries…
Extraterritoriality
Infringement
Indirect infringement
Exhaustion
Trade Secrets
ITC
Foreign Acts – alternative enforcement strategies

3. Patent Infringement – Direct Infringement
Foundation for Infringement Claims – 35 U.S.C. 271:
Direct Infringement – covers actions in the U.S.
An action can be importation of any patented invention (product? Method? Intermediate?)
271(a) “…[W]hoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States, or imports into the United States any patented invention during the term of the patent therefor, infringes….”

4. Direct Infringement
Look for acts in the U.S. – selling (even if made overseas), and be cognizant of 271(f),(g) issues
How far do damages go? Not outside the U.S. actions. This March CAFC held in Power Integrations Inc. v. Fairchild Semiconductor International, Inc., 711 F.3d 1348 (CAFC 2013)
damages flowing from U.S. actions even if “foreseeable” are not extendible to foreign sales under the “adequate to compensate” for infringement language in 35 U.S.C. 284 for damages.
Even if foreseeable, the “infringement” is a US act and does not extend to foreign exploitation of the invention. We cannot regulate foreign markets and there must be a cut-off based on the U.S. harm.

5. Direct Infringement
NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (CAFC 2005) – while Court would not apply 271(f) to the method claims, it found direct infringement of a “system” claim where a portion of the system (Relay) was in Canada –
Importantly, court focused for “use” of a system on where the system “as a whole is put into service,” and “where control of the system is exercised and beneficial use of the system is obtained.” While relay in Canada – customers were direct infringers putting the stems into action.
For method claims – “use” of a method is different than system or device. All steps have to be in U.S.

6. Direct Infringement
Still undecided (after Akamai case discussed later) whether there can be multi-party direct infringement

7. Patent Infringement – Indirect Infringement
271(b) “Whoever actively induces infringement of a patent shall be liable as an infringer.” (infringement – described in 271(a))
271(c) “Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination, or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.

8. 271(b) Developments
Global Tech Appliances, Inc. v. SEB S.A., 131, S.Ct (S. Ct. 2011) imports the same requirement of knowledge needed for contributory infringement to inducement infringement so that one needs to establish knowledge of the patent and that the part as adapted for use would infringe as well as specific intent to induce another to infringe.
Commil USA LLC v. Cisco Systems, Inc., )(CAFC June 25, 2013) – Over Newman dissent, Court held that defendants may be able to offer for consideration a good faith belief in noninfringement or invalidity in defense of the intent aspect of inducement. Considered as a factor in evaluating intent. Not extended to be an automatic defense or applicable to contributory infringement. Decision involved jury instructions and was remanded.

9. 271(b) Developments
Akamai Technologies Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (CAFC 2012) Court was supposed to review multi-party direct infringement, but instead clarified the law on inducement. It held that for a method claim, while all steps have to be performed to find induced infringement, it is no longer necessary to prove that all the steps were committed by a single entity. This overruled the earlier finding in BMC that a party is liable for induced infringement only if another single entity (or its agent) is liable for direct infringement.
Akamai did not reach whether there could be the multi-party direct infringement liability generally – only as an underlying act for 271(b).

10. 271(c) Developments
Consider imported goods that have infringing components as part of the apparatus that have no “substantial non-infringing use,” where the seller adds on components that are not really necessary that do have substantial non-infringing uses. Court held that such actions would not avoid contributory liability in Ricoh Co. v. Quanta Computer, Inc., 550 F.3d 1325 (CAFC 2008).
Court notes distinction of software (item that is “instructions”) and a process. Selling software that is instructions to infringe a patented invention is not a direct infringement under 271(a).
Optical disc drives that were adapted for infringing process do not avoid infringement because they are embedded in something that has other features that do have a substantial noninfringing use, i.e., you cannot tag on parts to avoid 271(c). Thus, importing the drives and selling them as part of something else still infringes.

11. Foreign Acts – 271(f)(1)
(f) (1) “Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.
271(f) Deals with supplying “components” and assembly overseas (supply and actively induce (intent and knowledge) foreign combination)

12. Foreign Acts 271(f)(2)
(f)(2) “Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.
271(f)(2) - supply part - knowing and intentional combination – contributory combination outside US

13. 271(f) – Components
The key case in this area is Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007). Court evaluated whether liability can be found under 271(f)(1) when software was shipped from US to a foreign manufacturer on a master disc (or electronically), copied by the foreign manufacturer for installation on computers made and sold overseas.
Court held that Microsoft does not sell the ‘copies’ of Windows installed on the foreign computers so it does not “supply” from the US. Master disc is not the copy and only the copy is installed.
The copy of Windows could be a “component.” (whatever ever is combined to make the patented invention)

14. 271(f)(1) and (2) – Process Claims
Eolas Techs. Inc. v. Microsoft Corp., 33 F.3d 1325 (CAFC 2005). Software code made in U.S. and exported on master disc can be a “component.” Components can be intangible and the component can be part of a method .
NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (CAFC 2005) – for 271(f) – suggests not applicable to method – what is a component of a method? A step (however, recall “system” liability under 271(a)).

15. 271(f)(1) and (2) – Process Claims
Union Carbide Chems. & Plastics Tech. Corp. v. Shell Oil Co., 434 F.3d 1357 (CAFC 2006) (distinguished NTP):
District Court - 271(f)(1) does not apply to process claim.
Federal Circuit held 271(f) applies to supply of catalyst as components to foreign customers to make ethylene oxide.
Just when you think you know the answer…
Cardiac Pacemakers, Inc. v. St. Jude Medical Center, Inc., 576 F.3d 1348 (CAFC 2009) – Post-AT&T: 271(f) does not apply to method claim and overruled Union Carbide and Eolas to the extent it suggested otherwise

16. Foreign Acts – 271(g)
(g) Whoever without authority imports into the United States or offers to sell, sells, or uses within the United States a product which is made by a process patented in the United States shall be liable as an infringer, if the importation, offer to sell, sale, or use of the product occurs during the term of such process patent. …. A product which is made by a patented process will, for purposes of this title, not be considered to be so made after —
(1) it is materially changed by subsequent processes; or
(2) it becomes a trivial and nonessential component of another product.

17. Foreign Acts – 271(g)
Exception Clause: …term of the patent. In an action for infringement of a process patent, no remedy may be granted for infringement on account of the noncommercial use or retail sale of a product unless there is no adequate remedy under this title for infringement on account of the importation or other use, offer to sell, or sale of that product…. (essentially blocking suit if this is your only recourse and the infringement is a retail sale (consumer) or noncommercial (personal or other use).
271(g) – tries to block infringers infringing process overseas but selling resulting product in U.S. (for method patents, product sold is usually the measure of infringement and value).

18. 271(g) Liability
There are not a lot of cases on 271(g). However, one recent case is instructive, Zoltek Corp. v. U.S., 672 F.3d 1309 (CAFC 2012).
appeal from the Court of Claims on a federal contracting liability issue.
Infringement allegations based on method claims – step of carbonizing fibers (occurs in Japan) and processing into sheets (in US). Resulting products used in fighter jets by Lockheed under government contract.
U.S. attempted to avoid liability on several grounds and most specifically by limiting the exemption of sovereign immunity in 28 USC §1498 for government patent infringement to 271(a) direct infringement and arguing liability cannot arise against US for foreign actions

19. 271(g) Liability
CAFC:
Cannot be limited to 271(a) or would eviscerate Congressional intent behind 271(g) and 1498 (which does not mention direct or indirect liability) as well as 1337 of Tariff Act (blocks importation or sale of goods made by a US process patent at ITC).
If a process is done outside US and product sold here – liability still lies even if not blocked by 271(a) (importing a patented invention in US) under 271(g) (liability for importation of products made by U.S. patented method).
While process was partly performed in Japan, the products resulting from the process “embody” the process and were imported into the U.S. or “used in” the U.S. While not exactly like statute – court applied this theory.
Argued US immune because of 1498 (c) – no liability for acts “arising in a foreign country” when part of process in Japan – only making in Japan – not “use” or “import” – US activities.

20. 271(g) Liability
This case is applicable when facing an importation or use in U.S., even if only method claims not performed in U.S., stopping products at the border (1337 ITC) or straight law suit under 271(g). Lockheed’s use and importation created liability.
Consider knock-offs made in part or completely overseas and then imported – if made by US process, can be blocked. Importance of process claims when appropriate.

21. 271(g) Liability
Contrast Zoltek with NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (CAFC 2005). In NTP, the court considered whether transmission of data in across border from Canada was “importation” of a “product”. It was not seen as a physical product and so 271(g) did not apply.

22. Trade Secrets – a New Loophole?
TianRui Group v. ITC, 661 F.3d 1322 (CAFC 2011)
In an ITC action under 19 U.S.C. §337 of the Tariff Act, ITC found that it had authority to block importation of articles imported in the U.S. that were made in China and investigate the matter as a trade secret misappropriation investigation.
Goal – to protect domestic industries from injuries arising out of unfair competition in the domestic marketplace.
No manufacturer was currently making the protected process, but injury was still found. New process being used in US and old process licensed to three Chinese manufacturers.
TianRui wanted a license, but it fell through. They hired away employees trained on the process. They knew it was proprietary
A TianRui joint venture marketed wheels from the process in the US.
Injury to domestic injury using new process even if by old process

23. Patent Exhaustion – Limits on Foreign Reach
Cannot control the disposition of a patented item after you sell it (I can sell my things at a yard sale…)
Gives end user right to repair or sell what they purchased within reason – cannot totally rebuild (reconstruct) to make a whole new item and get back in the game. Aro Manufacturing v. Convertible Top Replacement, 365 U.S. 336 (1961).
While post-sale restrictions can be employed (“single use”, “permitted use”) to avoid exhaustion, it still looms large
Bowman v. Monsanto, No (June 2013) – farmers regenerating seeds not just “repair” – they are making invention.

24. Exhaustion
Can cut against extraterritorial reach provisions if foreign entity is a purchaser who simply “repairs” – if reworking to reconstruct, consider 271(f) and (g) for imports or “use” claims
When selling a component or “incomplete” article, exhaustion arises when the component product has: (1) no reasonable noninfringing uses; and (2) has all inventive aspects of patent. See Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008)
Keurig, Inc. v. Sturm Foods, Inc., (D.Del. 2012) – if product sold embodies apparatus claim for exhaustion, method claims infringed using same apparatus also exhausted.

25. Patent Exhaustion
Under Quanta, issues of what is an authorized sale give rise to considerations of restrictions on sales. What does or doesn’t a license cover? If the sale is outside the license – it is not authorized. If within the license – is the license itself restricted?
In drafting licenses, like claims, care should be taken to consider whether sufficient restriction on downstream sales are included.
Is Copyright Exhaustion more expansive? Not any more…

26. Copyright – First Sale Exhaustion
In contrast to the narrow rules for patents, copyright protection goes further (if legitimate)
Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008), Ninth Circuit holding that first sale exhaustion does not apply when someone imports and sells unauthorized products into the U.S. from foreign sales (foreign purchaser buying in foreign country at reduced price sells at undercut price in Costco in competition). Supreme Court granted cert. but with Kagan recusing herself, split 4-4, leaving the 9th Circuit decision in place in the 9th Circuit.

27. Copyright – First Sale Exhaustion
Wiley sued Supap Kirtsaeng over the sale of foreign edition textbooks made overseas marked for sale overseas based on Kirtsaeng importation to U.S. for re-sale. He Thai relatives buy books in Thailand and ship them to him in US to sell on eBay. Wiley won in D.Ct. and Second Circuit (held “lawfully made” limits first sale “specifically and exclusively” to US law and not “foreign-manufactured works.“)
This March, Supreme Court (2013) 6-3 overturns. Kirtsaeng relied on first-sale doctrine saying he can sell in US objects legally obtained without permission. Court agreed. “Lawfully made” does not have a geographic limitation.

28. Copyright – First Sale Exhaustion
Where does that leave you?
Was the sale “authorized” and “lawful”
To block incoming sales – as with patent agreements – need restrictions on use of purchased product to make the argument sale was “unauthorized”
May want to also evaluate what is and is not a “lawful” sale overseas using local counsel in countries to see if there is a way to have the foreign action unlawful. This is much harder to do.

29. Thank you Lynda Calderone, Shareholder, Flaster/Greenberg PC
Kristyne Bullock, Shareholder, Flaster/Greenberg PC
Jimmie Johnson, Patent Counsel, Johnson Matthey Inc.