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Fed Cir. Says Infringement Must Happen 'Within' the United States

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By Mark Wilson, Esq. on October 30, 2014 3:45 PM

Halo Electronics makes electronic packages for use on printed circuit boards. It has three patents on this technology, filed in 1995. Pulse Electronics also makes electronic packages for use on printed circuit boards. Uh oh. Thankfully, though, Pulse only sells its products in Asia.

Or does it? After Pulse incorporated some of its electronics into equipment sold by Cisco in the United States, Halo sent Pulse a polite letter asking if Pulse would like to enter into a license agreement. A Pulse engineer determined that Halo's patents were not invalid. Pulse never consulted a lawyer and kept selling its products anyway.

Where Was the Product Sold?

Then the lawsuits started. Halo sued Pulse for infringement in 2007. The district court tossed some of the patent claims on the ground that Pulse didn't sell those products in the United States. On the rest of the claims, a jury found direct infringement, that Halo's patents were not invalid for obviousness, and that it was probable Pulse's conduct was willful (though the district court later found it was not).

As to the products sold outside the United States, Halo said that didn't matter: The products were negotiated for sale with a U.S. company and ended up in products ultimately sold in the United States. But the Federal Circuit said that didn't matter: The statute in question, 35 USC § 271, says patent infringement only occurs if the product is made or sold "within" the United States.

The manufacturing, shipping, and delivery of the electronic packages occurred outside the United States. The court brushes aside the relationship with Cisco, saying that their business agreement was "general" and "did not refer to, and was not a contract to sell, any specific product. And Pulse was paid abroad by contractors, not directly by Cisco. And the pricing negotiations, even though occurring with American representatives, didn't constitute a final contract.

The Trend Against Extraterritoriality

Ultimately, this was about resisting the urge to apply U.S. law throughout the world just because an American company was harmed. "Such an extension of the geographical scope of § 271(a) in effect would confer a worldwide exclusive right to a U.S. patent holder, which is contrary to the statute and case law," the court said.

Pulse also didn't offer to sell "within the United States." The sentence, said the court, means not where the offer to sell occurs, but where the contemplated sale is to take place, irrespective of where the offer occurs. Because the sale of the electronics was to take place outside the U.S., Pulse didn't infringe on an "offer to sell" theory, either.

The court also affirmed the lack of willfulness, and two judges concurred to suggest they should reevaluate enhanced damages, but the larger take away from this case is the extreme distaste for extraterritorial application of U.S. law we've seen in federal courts recently, beginning with Kiobel and going through a string of Alien Tort Statute claims. Apparently, unless the actual transaction happened in the United States, your patent infringement claim is going to fail.

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