by Dennis Crouch
The recent Federal Circuit decision in Caltech v. Broadcom includes an important discussion of extraterritorial damages further extending Carnegie Mellon (Fed. Cir. 2015) in finding that manufacture and delivery of a product in a foreign country can infringe a US patent if sufficient sales-activity occurred within the US.
California Institute of Technology v. Broadcom Ltd. and Apple Inc., ___ F.2d ___ (Fed. Cir. 2022).
The case involves wireless communication chip logic patented by CalTech. Broadcom makes infringing chips and they are installed in Apple devices. The Broadcom chips and Apple phones are manufactured outside of the United States, although they are largely designed in the US, and the nerve centers of marketing and sales are also in the US. Although many of these devices made their way to the US, the jury verdict apparently included damages for 1 billion chips that Broadcom manufactured abroad, and sold to Apple’s foreign suppliers outside of the US, and that were never imported into the US.
This setup raises some concern because US patents are territorial in nature, and liability under Section 271(a) requires action “within the United States” importing “into the United States.”
(a) Except as otherwise provided in this title, whoever 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 the patent.
35 U.S.C. 271(a). Still, much of the sales activities occurred within the United States. In Halo, the Federal Circuit addressed a similar situation regarding local sales activity leading to delivery and performance occurring entirely outside of the US. The court explained that in that situation, “pricing and contracting negotiations in the United States alone do not constitute or transform those extraterritorial activities into a sale within the United States for purposes of §271(a).” Halo Elecs., Inc. v. Pulse Elecs., Inc.., 831 F.3d 1369 (Fed. Cir. 2016) on remand from 579 U.S. 93 (2016).
On appeal, the Federal Circuit cabined-in its prior Halo statements and concluded the sales activity can be considered “within the United States” when the US activity extends beyond “pricing and contracting negotiations . . . alone.” A contrasting case here is Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., 807 F.3d 1283 (Fed. Cir. 2015). In CMU, the Federal Circuit explained that the location of a sale is often difficult to pinpoint, and might occur in multiple locations at once.
Places of seeming relevance include a place of inking the legal commitment to buy and sell and a place of delivery, and perhaps also a place where other substantial activities of the sales transactions.
CMU. The chip business is particularly crazy because they involve multi-year sales cycles and the chip-maker is looking for a “design win” where a particular chip is locked-in for mass production. Here, apparently the patentee provided substantial evidence that the multi-year process of designs, simulations, test, reworking, sampling, pricing, etc., all occurred within the United States. This evidence was presented to the jury, and the jury also received instructions that “sales may be found to have occurred in the United States where a substantial level of sales activity occurs here, even for products manufactured, delivered, and used entirely abroad. . . . ” (Instruction reprinted below)
On appeal, the defendants did not challenge the sufficiency of the evidence, but rather that the jury instruction was improper. The Federal Circuit though sided with the patentee and confirmed that the instructions were proper. “This was a proper and sufficient jury instruction with respect to the applicable burdens on the territoriality of the sales at issue.”
The result here is continued flexibility on what counts as “US sales” for patent infringement purposes, and this case makes it marginally easier to capture foreign activity with a US patent.
In its appeal, Broadcom also argued that the jury should have receive instructions on the presumption against extraterritorial application of US law. See WesternGeco LLC v. ION Geophysical Corp., 138 S.Ct. 2129 (2018). The Federal Circuit rejected this appeal — holding that the presumption is applied when courts interpret the law or construe a statute. Once the law is defined, then it is time for the jury to weigh the evidence and draw its conclusions — and and that the presumption is inapplicable. Here, the court told the jury that the sales must be “within the United States,” and the jury then was asked to simply weigh the evidence and determine “whether the relevant transactions … were domestic or extraterritorial in nature.” On appeal, the Federal Circuit found that the district court’s approach was again sufficient and proper.
= = =
Note – the Federal Circuit affirmed on the extraterritorial questions, but vacated the billion dollar judgment on other grounds. Thus, there will be a new trial on damages, and the new jury might reach a different result.
Off topic, but a milestone of sorts: the Ethics side of the blog has now gone six months without a post (and ten more days to go until six months after the LAST usage of that side of the blog:
link to patentlyo.com
Thinking of Caltech, another hammer blow fell today on the §315(e)(1) question today in Intuitive Surgical v. Ethicon (Judge O’Malley writing for a unanimous panel that also included Judges Cleveger & Stoll). Section 315(e)(1) provides that “[t]he petitioner in an inter partes review… that results in a final written decision… may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review” (italics added). The court held that where an IPR petitioner files multiple petitions and the PTAB institutes on more than one, once the first one finishes, the petitioner is estopped from going on with the other instituted IPRs.
This is another salutary development. Multiple petitions can be and recently have been a means, not so much of clearing away improvidently granted claims, but of harassing patentees into settling. This precedent creates a counterincentive against multiple petitions, so it is probably restoring a proper balance to the overall function of the post-grant challenge system.
Wait until the “privies” position is solidified — and this will be the end of the business model of the likes of Unified Patents.
Anon, I had pointed out the less that clear legal definition of the word “privies,” which is used in §315(e)(1), even before the AIA was enacted. I’m waiting to see a test case. But trade associations for entire industries are unlikely to fall under it.
But out of the many thousands of IPRs to date how many have actually been filed by trade associations or even mutual patent licensing defense organizations representing plural potential suit defendants?
Unified Patents does NOT fall into the category of “trade organizations.”
Please do not obfuscate.
As for how many, I know that you already have an awareness of at least a general level given as you have commented many times in relation to the weekly IPWatchdog listings.
(your Pom-poms are showing)
Since probably forgotten by now, I was referring to the previously noted 10/24/17 PTO report of the Chief APJ on plural IPR petitions, which, inter alia, notes that only 5.9% of all IPR petitioned patents had 3 IPR petitions [as here]. However, that 5.9% included all the petitions from plural defendants, so the % of 3 petitions only filed by single defendant [as here] must be significantly smaller than that.
So you are layering your own (cheerleading) supposition over and unvetted (and highly likely self-serving) political agency report, from some supposedly prior (random) report and want to be trusted?
Sure, let’s go with that.
“this will be the end of the business model of the likes of Unified Patents.”
Hopefully. There should be no place in American innovation for cancers such as UP.
Greg, thanks for noting [following Caltech] another §315(e)(1) IPR estoppel decision in Intuitive Surgical v. Ethicon Section 315(e)(1) today. Deciding that the same real party in interest [or privy] filing plural simultaneous IPR petitions [to present different prior art arguments within the 14,000 each page limits] may not request another IPR, or maintain those not decided, once one such IPR has a final written decision, against the same claim on any ground that the petitioner raised or reasonably could have raised in its decided IPR.
This will not have that much practical impact, since prior blogs here show that plural IPRs by the same defendant against the same claim for the page limit reasons argued here are actually quite rare, despite contrary non-factual assertions. Also, plural IPRs had been decreasing due to increasing discretionary denials. Also, estoppel only impacts petitioners who failed to invalidate infringed claims.
But, this decision will certainly require more condensed or less verbose IPR petitions in order for a party to present plural references against plural claims, ending a practice of separate IPRs for the different reference combinations occasionally used before now.
[P.S. This case should not be confused with the situation of plural IPRs from different multiple defendants being sued on the same patent.]
Your own assertions are to the same level as you denigrate as “non-factual.”
Put
the
pom
poms
down.
This will not have that much practical impact, since prior blogs here show that plural IPRs by the same defendant against the same claim for the page limit reasons argued here are actually quite rare, despite contrary non-factual assertions.
I expect that you are right, that the total effect on the overall IPR system will be de minimis. While multiple petitions against a single patent are a small fraction of petitions overall, however, they appear to be mostly a harassment where they occur. Precisely because it will not much disrupt the overall function of the IPR system if they were eliminated, any measure taken in that direction is more upside than downside.
This case should not be confused with the situation of plural IPRs from different multiple defendants being sued on the same patent.
Good point. Just like every dog gets one bite, every defendant gets its own chance to mount a defense. This holding does not mean that a single patent cannot be challenged by multiple parties, but merely that a single party is taking a risk if it chooses to challenge the same patent multiple times.
As I explicitly pointed out a few days ago at:
link to patentlyo.com
But Paul and Greg would rather play patti-cake…
–This is another salutary development. Multiple petitions can be and recently have been a means, not so much of clearing away improvidently granted claims, but of harassing patentees into settling. This precedent creates a counterincentive against multiple petitions, so it is probably restoring a proper balance to the overall function of the post-grant challenge system.–
Who are you and what have you done with Greg?
If no part of those particular chips were ever made in the U.S., and where sales to Apple of these chips were for installation in Apple products in China, and did thus not infringe on being imported into the U.S. by Apple, per the “first sale doctrine,” I wonder if Broadcom will try a cert petition?
Paul,
Sale and offer for sale are separate instances of what constitute infringement and need not have nexus with use or importation items of infringement.
What would be a colorable change in law to support your intimated cert petition?
I did not suggest that cert would succeed, but the amount of money involved here might well encourage it. One question I had was if Broadcom was really the “owner” of those chips from that Chinese factory, or was the factory just its licensee with a license that controlled sale prices?
Thanks – but it’s a bit of obfuscation to imply that I asked about success of cert (I did not).
Instead (and regardless on level of money involved), I asked about a viable legal theory. You need one of those regardless of money involved and regardless of chance of success of cert.
Not liking a law does not get you where you need to be.
That being said, your reply is that there may be a challengeable aspect related to “ownership” as related to any sale or offer for sale.
I don’t know the details involved in that aspect and wonder whether you do, or are just making a WAG.
Comments are closed.