Lead Opinion
Opinion for the court filed by Circuit Judge LOURIE. Concurring opinion filed by Circuit Judge O’MALLEY, with whom Circuit Judge HUGHES joins.
Halo Electronics, Inc. (“Halo”) appeals from the decisions of the United States District Court for the District of Nevada (1) granting summary judgment that Pulse Electronics, Inc. and Pulse Electronics Corp. (collectively “Pulse”) did not sell or offer to sell within the United States the accused products that Pulse manufactured, shipped, and delivered to buyers outside the United States, and thus that Pulse did not directly infringe Halo’s U.S. Patents 5,656,985 (the “'985 patent”), 6,297,720 (the “'720 patent”), and 6,344,785 (the “'785 patent”) (collectively “the Halo patents”); and (2) holding that Pulse’s infringement of the Halo patents with respect to certain accused products that Pulse sold and delivered in the United States was not willful. See Halo Elecs., Inc. v. Pulse Eng’g, Inc.,
Pulse cross-appeals from the court’s decisions (1) construing the claim limitation “electronic surface mount package” in the Halo patents; (2) construing the claim limitation “contour element” in Pulse’s U.S. Patent 6,116,963 (the “'963 patent”) that Pulse asserted in its counterclaim; and (3) holding that the asserted claims of the Halo patents were not invalid for obviousness. See Halo Elecs., Inc. v. Pulse Eng., Inc.,
Because we conclude that Pulse did not sell or offer to sell within the United States those accused products that Pulse manufactured, shipped, and delivered outside the United States, we affirm the summary judgment of no direct infringement of the Halo patents by those products. In addition, we find Halo’s argument on appeal concerning the issue of willfulness unpersuasive and accordingly affirm the judgment of no willful infringement of the Halo patents with respect to products that were delivered in the United States. On the cross-appeal, because we find no reversible error in the contested claim constructions, we affirm the judgment of direct infringement of the Halo patents with respect to products that Pulse delivered in the United States and the judgment of inducement with respect to products that Pulse delivered outside the United States but were ultimately imported into the United States by others, as well as the judgment of noninfringement of Pulse’s '963 patent. We also affirm the judgment that the asserted claims of the Halo patents were not invalid for obviousness.
BACKGROUND
Halo is a supplier of electronic components and owns the '985, '720, and '785 patents directed to surface mount electronic packages containing transformers for mounting on a printed circuit board inside electronic devices such as computers and internet routers. The Halo patents are all derived from an application filed on August 10, 1995. At issue here are claims 6-8 and 16 of the '985 patent, claims 1 and 6 of the '720 patent, and claims 40 and 48 of the '785 patent (collectively “the asserted
6. An electronic surface mount package for mounting on a printed circuit board in an electronic device, said electronic surface mount package comprising:
a one piece construction package having a side wall and an open bottom,
a plurality of toroid transformers carried within said package by a soft silicone material, said toroid transformers each having wires wrapped thereon,
a plurality of terminal pins molded within and extending from the bottom of said package, each of said pins extending through a bottom of said side wall and having a notched post upon which said wires from said transformers are wrapped and soldered thereon, respectively.
'985 patent col. 4 ll.19-38.
Pulse, another supplier of electronic components, designs and sells surface mount electronic packages and manufactures those products in Asia. Some of Pulse’s products were delivered by Pulse to customers in the United States, but the majority of them were delivered outside the United States, for example, to contract manufacturers for companies such as Cisco. Those contract manufacturers incorporated the electronic packages supplied by Pulse into end products overseas, including internet routers manufactured for Cisco, which were then sold and shipped to consumers around the world.
For those products that Pulse delivered abroad, all purchase orders were received at Pulse’s sales offices abroad. Halo,
Although Cisco outsourced its manufacturing activities to foreign contract manufacturers, Cisco negotiated with its component suppliers the prices that its contract manufacturers would pay when purchasing component parts. As one of Cisco’s component suppliers, Pulse executed a general agreement with Cisco that set forth manufacturing capacity, low price warranty, and lead time terms. J.A. 15135-37. However, that general agreement did not refer to any specific Pulse product or price. Cisco typically sent a request for quote to its component suppliers and Pulse responded with the proposed price and minimum quantity for each product as identified by its part number. After further negotiation, Cisco issued the agreed-upon price, projected demand, and percentage allocation to Pulse for each product for the upcoming quarter. The percentage allocation divided Cisco’s projected quarterly demand among its suppliers. Cisco then communicated the price and allocation to its contract manufacturers in Asia, and the contract manufacturers were expected to apply the Cisco price and allocation when ordering components from Pulse and other suppliers.
Upon receipt of purchase orders abroad, Pulse delivered the electronic package products from its manufacturing facility in Asia to Cisco contract manufacturers, also located in Asia, which then paid Pulse. After assembling the end products, the contract manufacturers submitted invoices to Cisco that itemized the cost of Pulse products and other components that were
Pulse allegedly knew of the Halo patents as early as 1998. In 2002, Halo sent Pulse two letters offering licenses to its patents, but did not accuse Pulse of infringement in those letters. J.A. 5953-54. The president of Pulse contacted a Pulse engineer, who spent about two hours reviewing the Halo patents and concluded that they were invalid in view of prior Pulse products. Pulse did not seek an opinion of counsel on the validity of the Halo patents at that time and continued to sell its surface mount electronic package products. A Pulse witness later testified that she was “not aware of anyone in the company ... that made a conscious decision” that “it was permissible to continue selling” those products. J.A. 2245.
In 2007, Halo sued Pulse for patent infringement. Pulse denied infringement and challenged the validity of the Halo patents based on obviousness and other grounds. Pulse also counterclaimed that Halo infringed Pulse’s '963 patent directed to microelectronic connectors.
The district court first construed the disputed claim limitations in the Halo patents and Pulse’s '963 patent. Relevant to this appeal, the court construed “electronic surface mount package” in the preamble of the Halo patent claims as non-limiting. Halo,
Pulse moved for summary judgment that it did not directly infringe the Halo patents by selling or offering to sell products that Pulse manufactured, shipped, and delivered outside the United States. The district court granted the motion, holding that those products were sold and offered for sale outside the United States and beyond the scope of § 271(a). Halo,
The parties next proceeded to trial on Halo’s claims of (1) direct infringement by products that Pulse shipped into the United States and (2) inducement of infringement by products that Pulse shipped outside the United States but were incorporated into end products that were ultimately imported into the United States. The jury found that: (1) Pulse directly infringed the Halo patents with products that it shipped into the United States; (2) it induced others to infringe the Halo patents with products that it delivered outside the United States but ultimately were imported into the United States in finished end products; (3) it was highly probable that Pulse’s infringement was willful; and (4) the asserted claims of the Halo patents were not invalid for obviousness. Halo,
In response to Pulse’s post-trial motion, the district court concluded that the objective component of a willfulness inquiry was not satisfied because Pulse “reasonably relied on at least its obviousness defense” and Pulse’s unsuccessful obviousness defense was not “objectively baseless.”
Pulse also moved for JMOL of invalidity for alleged obviousness of the Halo patent claims, which the district court denied. Halo,
Halo timely appealed and Pulse timely cross-appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
Disoussion
I. Sale and Offer for Sale
We review the district court’s grant or denial of summary judgment under the law of the regional circuit, here the Ninth Circuit. Lexion Med., LLC v. Northgate Techs., Inc.,
Halo argues that the district court erred in granting summary judgment of no direct infringement with respect to products that Pulse delivered abroad. Halo contends that those products were sold and offered for sale within the United States because negotiations and contracting activities occurred within the United States, which resulted in binding contracts that set specific terms for price and quantity. Halo argues that the location of the sale or offer for sale should not be limited to the location of delivery. Halo also argues that it suffered economic harm in the United States as a result of Pulse’s sales.
Pulse responds that the products at issue were sold or offered for sale outside the United States because those products were manufactured, ordered, invoiced, shipped, and delivered abroad. Pulse maintains that its pricing discussions with Cisco in the United States were merely forecasts and were not a guarantee that Pulse would receive any actual order from any of Cisco’s contract manufacturers. Pulse also responds that the district court’s holding is consistent with our case law and the presumption against extraterritorial application of United States laws. Pulse contends that Halo improperly sought to expand the geographical scope of § 271(a) to reach activities outside the United States.
We agree with Pulse 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.
Section 271(a) of the patent statute provides in relevant part that “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States ... infringes the patent.” 35 U.S.C. § 271(a) (emphases added); Microsoft Corp. v. AT & T Corp.,
Our earlier cases addressing the issue of the location of a sale arose in the context of personal jurisdiction. In North American Philips Corp. v. American Vending Sales, Inc.,
[T]he “selling” of an infringing article has both a physical and a conceptual dimension to it. That is to say, it is possible to define the situs of the tort of infringement-by-sale either in real terms as including the location of the seller and the buyer and perhaps the points along the shipment route in between, or in formal terms as the single point at which some legally operative act took place, such as the place where the sales transaction would be deemed' to have occurred as a matter of commercial law.
Id. at 1579. We rejected the defendants’ argument that the location of the sale was limited to “the place where legal title passe[d] rather than the more familiar places of contracting and performance.” Id. (citing Burger King Corp. v. Rudzewicz,
In subsequent cases in which we addressed the issue of liability under § 271(a) rather than personal jurisdiction, we applied similar analyses to determine where a sale occurred based on factors that included places of contracting and performance. Litecubes, LLC v. N. Light Prods., Inc.,
The patent statute does not define the meaning of a “sale” within the United States for purposes of § 271(a). We have stated that “the ordinary meaning of a sale includes the concept of a transfer of title or property.” NTP, Inc. v. Research In Motion, Ltd.,
On undisputed facts, the products under discussion hére were manufactured, shipped, and delivered to buyers abroad. Halo,
“Foreign conduct is [generally] the domain of foreign law,” and in patent cases, foreign law “may embody different policy judgments about the relative rights of inventors, competitors, and the public in patented inventions.” Id. at 455,
We also reject Halo’s argument that the sales at issue occurred in the United States simply because Halo suffered economic harm as a result of those sales. The incurring of harm alone does not control the infringement inquiry. As indicated, Pulse’s activities in the United States were insufficient to constitute a sale within the United States to support direct infringement. See N. Am. Philips,
Following Halo’s logic, a foreign sale of goods covered by a U.S. patent that harms the business interest of a U.S. patent holder would incur infringement liability under § 271(a). 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. See, e.g., Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc.,
We therefore hold that the district court did not err in granting summary judgment that Pulse did not sell within the United States those products that Pulse manufactured, shipped, and delivered abroad.
B. Offer for Sale
We next consider whether Pulse offered to sell within the United States those products that Pulse manufactured, shipped, and delivered abroad. An “offer to sell” generally occurs when one “eommunicate[s] a manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” MEMO,
More importantly, we have held that “the location of the contemplated sale controls whether there is an offer to sell within the United States.” Transocean,
The case now before us involves the opposite situation, where the negotiations occurred in the United States, but the contemplated sale occurred outside the United States. We adopt the reasoning of Transocean and conclude here that Pulse did not directly infringe the Halo patents under the “offer to sell” provision by offering to sell in the United States the products at issue, because the locations of the contemplated sales were outside the United States. Cisco outsourced all of its manufacturing activities to foreign countries, and it is undisputed that the locations of the contemplated sales were outside the United States. Likewise, with respect to other Pulse, customers, there is no evidence that the products at issue were contemplated to be sold within the United States.
An offer to sell, in order to be an infringement, must be an offer contemplating sale in the United States. Otherwise, the presumption against extraterritoriality would be breached. If a sale outside the United States is not an infringement of a U.S. patent, an offer to sell, even if made in the United States, when the sale would occur outside the United States, similarly would not be an infringement of a U.S. patent. We therefore hold that Pulse did not offer to sell the products at issue within the United States for purposes of § 271(a).
For the foregoing reasons, we affirm the summary judgment of no direct infringement with respect to those products that Pulse manufactured, shipped, and delivered abroad.
II. Willfulness
Establishing willful infringement of a valid patent requires a two-prong analysis entailing an objective and a sub
The district court held here that the objective prong was not met because it concluded that the obviousness defense that Pulse presented at trial was not objectively baseless. Halo challenges that holding mainly by arguing that Pulse did not actually rely on any invalidity defense pre-suit when selling the accused products because Pulse’s obviousness defense was developed after the lawsuit was filed in 2007. Halo also contends that after Pulse received Halo’s notice letters in 2002, the Pulse engineer only performed a cursory review of the Halo patents and Pulse did not rely on that analysis to assess whether it was infringing a valid patent. Halo asserts that the court erred in holding that the objective prong was not met simply because Pulse raised a non-frivolous obviousness defense.
Pulse responds that the district court properly considered Pulse’s post-suit obviousness defense to evaluate the objective risk of infringement of a valid patent. Pulse also responds that Pulse did not act recklessly pre-suit because Halo did not accuse Pulse of infringement in the 2002 letters and, upon receipt of those letters, Pulse asked its engineer to review the Halo patents, who concluded that the patents were invalid in view of prior Pulse products. Pulse also maintains that its obviousness defense presented at trial raised a substantial question of invalidity and thus was objectively reasonable.
We agree with Pulse that the district court did not err in holding that the objective prong of the willfulness inquiry was not satisfied. “Seagate’s first prong is objective, and ‘[t]he state of mind of the accused infringer is not relevant to this objective inquiry.’” DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc.,
The record shows that although Pulse was ultimately unsuccessful in challenging the validity of the Halo patents, Pulse did raise a substantial question as to the obviousness of the Halo patents. Spine Solutions, Inc. v. Medtronic Sofamór Danek USA, Inc.,
Accordingly, having considered all of Halo’s arguments on appeal concerning willfulness and found them unpersuasive, we affirm the district court’s judgment that Pulse’s infringement of the Halo patents was not willful.
III. Cross-Appeal
Pulse cross-appeals from the district court’s construction of the claim limitations “electronic surface mount package” in the Halo patents and “contour element” in Pulse’s '963 patent and the resulting judgments of infringement of the Halo patents and noninfringement of Pulse’s '963 patent. We have considered Pulse’s arguments but find no reversible error in those judgments. We therefore affirm the judgment of direct infringement with respect to products that Pulse delivered in the United States and the judgment of inducement with respect to products that Pulse dehvered outside the United States but ultimately were imported into the United States in finished end products, as well as the judgment of noninfringement of Pulse’s '963 patent.
In addition, Pulse cross-appeals from the judgment that the asserted claims of the Halo patents were not invalid for obviousness. It is true that the record evidence indisputably shows that almost all the limitations in the asserted claims were known elements of electronic- packages that existed in the prior art. However, Pulse did not file a motion during trial under Fed.R.Civ.P. 50(a) on the issue of obviousness before that issue was submitted to the jury and thus waived its right to challenge the jury’s implicit factual findings underlying the nonobviousness general verdict. The district court thus correctly presumed that the jury resolved all factual disputes relating to the scope and content of the prior art and secondary considerations in Halo’s favor. Based upon those presumed factual findings, the court did not err in reaching the ultimate legal conclusion that the asserted claims were not invalid for obviousness. We therefore affirm the judgment that the asserted claims of the Halo patents were not invalid for obviousness.
ConClusion
We have considered the parties’ remaining arguments and conclude that they are without merit. For the foregoing reasons, we affirm the judgment that Pulse did not directly infringe the Halo patents by selling or offering to sell within the United States those accused products that Pulse manufactured, shipped, and delivered outside the United States. We also affirm the judgment that Pulse’s infringement was not willful. On the cross-appeal, because we discern no reversible error in the contested claim constructions, we affirm the judgment of direct infringement with respect to products that Pulse delivered in the United States and the judgment of inducement with respect to products that Pulse delivered outside the United States but were imported into the United States by others, as well as the judgment of noninfringement of Pulse’s '963 patent. We also affirm the judgment that the asserted claims of the Halo patents were not shown to be invalid for obviousness.
AFFIRMED.
Notes
. On these facts, we need not reach Halo’s argument that the place where a contract for
Concurrence Opinion
concurring, with whom HUGHES, Circuit Judge, joins.
I agree with the majority’s thoughtful conclusion that we should affirm all as
Our current two-prong, objective/subjective test for willful infringement set out in In re Seagate Technology, LLC,
As such, our standard for the award of enhanced damages under § 284 has closely mirrored our standard for the award of attorneys’ fees under § 285. See, e.g., Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc.,
The Supreme Court has now told us that our reading of PRE was wrong. In Octane Fitness, the Court explained that the PRE standard was crafted as a very narrow exception for “sham” litigation to avoid chilling the exercise of the First Amendment right to petition the government for redress of grievances with the threat of antitrust liability. This narrow test required that a “sham” litigation be “objectively baseless” and “brought in an attempt to thwart the competition.” Oc
Because we now know that we were reading PRE too broadly, and have been told to focus on the governing statutory authorization to determine what standards should govern an award of attorneys’ fees, we should reconsider whether those same interpretative errors have led us astray in our application of the authority granted to district courts under § 284. Just as “the PRE standard finds no roots in the text of § 285,” id., there is nothing in the text of § 284 that justifies the use of the PRE narrow standard. In rejecting the rigid two-prong, subjective/objective test for § 285 under Brooks Furniture, the Supreme Court told us to employ a flexible totality of the circumstances test. Id. at 1756. We should now assess whether a similar flexible test is appropriate for an award of enhanced damages.
The substantive test is not the only part of our willfulness jurisprudence that requires our attention. In Octane Fitness, the Supreme Court also rejected the requirement that patent litigants establish their entitlement to attorneys’ fees under § 285 by “clear and convincing evidence.” Id. at 1758. As we used to do for attorneys’ fees, we currently require patentees to prove willfulness by clear and convincing evidence. See Seagate,
The Supreme Court also rejected de novo review of a fee award under § 285. Highmark,
Finally, under the plain language of §§ 284 and 285, “the court” is the entity that decides whether the remedy is appropriate. 35 U.S.C. § 284 (“[T]he court may increase the damages.... ” (emphasis added)); 35 U.S.C. § 285 (“The court in exceptional cases may award reasonable attorney fees to the prevailing party.” (emphasis added)). While we allowed the court to determine whether to award attorneys’ fees under Brooks Furniture, we have long held that a willfulness determination contains issues of fact that should be submitted to a jury. See Bard,
For the following reasons, although we are bound by Seagate and Bard as a panel, I urge the full court to reevaluate our willfulness jurisprudence in light of the Supreme Court’s decisions in Highmark and Octane Fitness.