MEMC ELECTRONIC MATERIALS, INC., Plаintiff-Appellant, v. MITSUBISHI MATERIALS SILICON CORPORATION, Mitsubishi Silicon America Corporation, Sumitomo Mitsubishi Silicon Corporation (also known as Sumco), Sumco USA Corporation (also known as Sumco USA), and Sumco USA Sales Corporation (also known as Sumco USA Sales), Defendants-Cross Appellants.
Nos. 04-1396, 04-1513.
United States Court of Appeals, Federal Circuit.
Aug. 22, 2005.
420 F.3d 1369
COSTS
Each party shall bear its own costs.
REVERSED
R. Terrance Rader, Rader, Fishman & Grauer PLLC, of Bloomfield Hills, Michigan, argued for defendants-cross appellants. With him on the brief were David T. Nikaido and Glenn E. Forbis. Of counsel were Ellen A. Efros and Lisa R. Mikalonis.
SCHALL, Circuit Judge.
MEMC Electronic Materials, Inc. (“MEMC“) is the assignee of record of U.S. Patent No. 5,919,302 (the “‘302 patent“). It brought suit in the United States District Cоurt for the Northern District of California against Mitsubishi Materials Silicon Corporation, Mitsubishi Silicon America Corporation, Sumitomo Mitsubishi Silicon Corporation (“SUMCO Corp.“), Sumco USA Corporation (“SUMCO USA“), and Sumco USA Sales Corporation (“SUMCO USA Sales“) (collectively, “defendants” or “SUMCO“). In its suit, MEMC alleged direct infringement of the ‘302 patent under
We see no error in the grant of summary judgment with respect to direct infringement. However, in view of what we think are genuine issues of material fact, we hold the district court did err in granting summary judgment with respect to inducement of infringement. Accordingly, with respect to MEMC‘s appeal, the judgment of the district court is affirmed-in-part and reversed-in-part and the case is remanded to the district court for further proceedings. On the cross-appeal, we affirm the denial of defendants’ request for attorney‘s fees.
I.
MEMC is a supplier of silicon wafers to the semiconductor industry. The ‘302 patent, entitled “Low Defect Density Vacancy Dominated Silicon,” relates to the preparation of semiconductor grade single crystal silicon, which is used, in wafer form, in the manufacture of electronic components such as integrated circuits. ‘302 patent col. 1, ll. 9-16. Prior art methods of manufacturing single crystal silicon often resulted in crystals containing large quantities of agglomerated intrinsic point defects. Id. col. 1, ll. 18-55. These defects can severely impact the yield potential of silicon wafers in complex and highly integrated circuits. Id. col. 1, ll. 53-55. The patent discloses a method of preparing single crystal silicon that is substantially free of agglomerated intrinsic point dеfects. Specifically, the ‘302 patent discloses a process specifying initial growth conditions and the temperature range of the manufacturing process. Id. col. 3, l. 62–col. 4, l. 14.
Claim 1, the only asserted independent claim of the ‘302 patent, states as follows:
1. A single crystal silicon wafer having a central axis, a front side and a back side which are generally perpendicular to the central axis, a circumferential edge, and a radius extending from the central axis to the circumferential edge of the wafer, the wafer comprising
a first axially symmetric region in which vacancies are the predominant
intrinsic point defect and which is substantially free of agglomerated vacancy intrinsic point defects wherein the first axially symmetric region comprises the central axis or has a width of at least about 15 mm.
‘302 patent col. 23, ll. 17-23.
SUMCO, like MEMC, is a supplier of silicon wafers to the semiconductor industry. It is undisputed that SUMCO‘s silicon wafers are manufactured exclusively outside of the United States at SUMCO‘s manufacturing plant in Yonezawa, Japan. Ostensibly, SUMCO sells silicon wafers to Samsung Japan Corporation (“Samsung Japan“), which then sells the wafers to Samsung Austin Semiconductor, located in Austin, Texas (“Samsung Austin“).1
On December 14, 2001, MEMC sued SUMCO in the United States District Court for the Northern District of California, claiming that SUMCO was liable for infringement and inducement of infringement of the ‘302 patent based upon SUMCO‘s alleged sale and importation of certain silicon wafers.2 MEMC asserted that SUMCO directly infringed the ‘302 patent under
II.
On December 3, 2003, SUMCO filed a motion for summary judgment of zero damages, arguing that MEMC could not prove that defendants committed the alleged acts of infringement within the United States. SUMCO argued that it did not sell the accused wafers either directly or indirectly to Samsung Austin, and that it only sold the accused wafers to Samsung Japan. SUMCO also argued that it had not engaged in any conduct that would constitute the active inducement of infringement by Samsung Austin in the United States.
MEMC responded that Samsung Japan was merely a conduit for the delivery of defendants’ accused wafers and that Samsung Austin was SUMCO‘s true customer. MEMC also argued that defendants induced Samsung Austin‘s infringement of the ‘302 patent by manufacturing wafers according to Samsung Austin‘s specifications and by providing substantial technical support to Samsung Austin.
On March 16, 2004, the district court granted defendants’ summary judgment motion. The court held that MEMC had failed to produce any evidence of sales or offers for sales of the accused wafers in the United States by defendants or any evidence of importation of the accused wafers into the United States by defendants. Summary Judgment Order, slip op. at 2. The court also held that, vis-à-vis Samsung Austin, MEMC had failed to provide any evidence of active and intentional inducement of infringement by defendants. Id. On April 22, 2004, the district court en-
MEMC appeals the district court‘s final determination of non-infringement as well as the underlying order granting SUMCO summary judgment of zero damages. SUMCO cross-appeals the district court‘s denial of its motion for attorney‘s fees, expert witness fees, and expenses. We have jurisdiction pursuant to
DISCUSSION
I.
Summary judgment is appropriate only if, when the facts are viewed in the light most favorable to the nonmoving party and all doubts are resolved against the movant, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.
The district court based its ruling of non-infringement on MEMC‘s inability to establish damages for infringement and, thus, did not address the issue of claim coverage with respect to the ‘302 patent. Accordingly, we assume for purposes of this appeal that the asserted claims of the ‘302 patеnt read on the accused wafers. We turn first to the issue of direct infringement.
II.
The following facts are not in dispute: SUMCO sells the accused silicon wafers to Samsung Japan, which then sells the wafers to Samsung Austin. As noted above, the wafers are manufactured exclusively outside of the United States at SUMCO‘s manufacturing plant in Yonezawa, Japan. SUMCO manufactures the accused wafers according to specifications provided by, and pursuant to a license from, Samsung Korea. Typically, Samsung Japan sends SUMCO an electronic purchase order specifying the number of wafers to be manufactured. At some point after the purchase order is received, SUMCO processes the order and manufactures the wafers. The wafers then are packed in boxes at thе Yonezawa plant and delivered at Yonezawa to a packaging company. SUMCO attaches a packaging label that indicates the destination of the wafers to be Austin, Texas. The packaging company, in turn, transports the boxes to its own
Beyond these undisputed facts, MEMC directs our attention to evidence in the record from the summary judgment proceedings that it contends supports finding specific contacts between SUMCO and Samsung Austin. In support of its allegation of infringement, MEMC submitted a series of e-mails between SUMCO and an engineer at Samsung Austin. These e-mails suggest that SUMCO provides Samsung Austin with detailed electronic test data on the wafers for the purpose of obtaining Samsung Austin‘s approval for shipment bеfore SUMCO turns the wafers over to the packaging company for shipment to the United States. The engineer at Samsung Austin analyzes the test data upon receipt and, if the data indicates that the wafers are acceptable, the shipment is approved. These e-mails also suggest that SUMCO and Samsung Austin communicated directly and independently of Samsung Japan in order to coordinate shipment dates and the quantity of wafers sent in each shipment, subject to Samsung Austin‘s final approval. In addition, the e-mails represent communications directly between Samsung Austin and SUMCO that address various problems Samsung Austin encountered with the wafers from time to time. These communications often resulted in adjustments made in the upstream manufacturing process at the SUMCO facility in Japаn or adjustments made in the downstream process at the Samsung Austin facility in Austin, Texas.
The e-mail correspondence between employees of SUMCO and the engineer at Samsung Austin also reveals a transaction in November and December of 2002, during which SUMCO‘s International Sales Manager, Toshihiro Awa, requested authorization from Samsung Austin for the shipment of a quantity of wafers with a modified edge-shape directly to Samsung Austin. The wafers were sent in response to certain problems with previously-supplied SUMCO wafers. Mr. Awa was granted authority from Samsung Austin‘s purchasing manager to add these wafers to an existing Samsung Japan purchase order.
Finally, MEMC presented evidence suggesting that SUMCO personnel made several on-site visits to the Samsung Austin plant after issuance of the ‘302 patent. First, MEMC pointеd to the deposition testimony of Yoshihiro Wakisawa, an engineer at SUMCO. Mr. Wakisawa testified that he took two trips to the Samsung Austin facility in 2000 and 2001. Mr. Wakisawa further testified that, during at least one of the trips, he made a technical presentation concerning the accused wafers. Second, MEMC cited the deposition testimony of Mr. Awa that he made multiple trips to the Samsung Austin facility, including one trip during 2000 or 2001 during which he made a technical presentation concerning the accused wafers.
III.
On appeal, MEMC argues that the district court erred in granting summary judgment of no direct infringement because the evidence of record demonstrates that SUMCO offers to sell and sells the accused silicon wafers to Samsung Austin in Austin, Texas. First, MEMC argues, SUMCO sells the accused wafers to Samsung Austin based on evidence that SUM-
Second, according to MEMC, the transmittal of data from defendants to Samsung Austin constitutes an “offer to sell” the accused wafers within the meaning of section 271(a). MEMC states that, “[t]hrough these e-mails, SUMCO has communicated its willingness to ship to [Samsung Austin] a certain quantity of wafers (typically some subset of the total quantity identified in the electronic purchase order) on a certain date for the previously agreed to price, such wafers having the characteristics described by the voluminous data contained in the attached spreadsheets.” MEMC states in addition that if Samsung Austin replies to the e-mail and accepts the tendered data, the bargain is concluded and SUMCO causes the wafers to be shipped to the United States. MEMC further states that SUMCO‘s e-mails generate interest in the accused wafers to the commercial detriment of MEMC—a result indicative of an infringing offer to sell.
SUMCO responds that the district court did not err in granting summary judgment that SUMCO does not directly infringe the ‘302 patent under
The question we are presented with in this case is whether SUMCO‘s activities in the United States, as would be construed by a reasonable jury, are sufficient to establish an “offer for sale” or “sale” within the meaning of
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.
We have defined liability for an “offer to sell” under section 271(a) “according to the norms of traditional contractual analysis.” Rotec Indus., 215 F.3d at 1255. Thus, the defendant must “communicate[] 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.‘” Id. at 1257 (quoting Restatement (Second) of Contracts § 24 (1979)). We considered the meaning of “offer to sell” in 3D Systems, Inc. v. Aaroflex Laboratories, Inc., 160 F.3d 1373 (Fed.Cir.1998). The defendants in 3D Systems provided potential California customers with price quotations, brochures, specification sheets, videos, and sample parts related to their product. Id. at 1379. Based on this activity, the patentee sued the defendants in the United States District Court for the Central District of California for infringement of a variety of patents, arguing that the defendants were liable for “offering to sell” the patented inventions. Id. at 1377. The defendants moved to dismiss the suit for lack of personal jurisdiction. Id. The district court granted the motion to dismiss; on appeal, this court reversed. We concluded that although the “price quotation letters state on their face that they are purportedly not offers,” the letters could be “regarded as ‘offer[s] to sell’ under section 271 based on the substance conveyed in the letters, i.e., a description of the allegedly infringing merchandise and the price at which it can be purchased.” Id. at 1379. We also noted that “[o]ne of the purposes of adding ‘offer[] to sell’ to section 271(a) was to prevent exactly the type of activity Aaroflex has engaged in, i.e., generating interest in a potential infringing product to the commercial detriment of the rightful patentee.” Id.
We do not think that MEMC has presented any relevant evidence to support its claim that SUMCO offered to sell the accused wafers to Samsung Austin in the United States. MEMC points to no evidence of negotiations occurring in the United States between SUMCO and Samsung Austin. At the same time, transmittal of e-mails containing technical data from SUMCO to Samsung Austin cannot constitute an “offer for sale.” First, unlike the price quotation letters in 3D Systems, the e-mails, while containing a description of the allegedly infringing wafers, do not contain any pricе terms. Accordingly, on their face, the e-mails cannot be construed as an “offer” which Samsung Austin could make into a binding contract by simple acceptance. See Rotec Indus., 215 F.3d at 1251. MEMC contends that the e-mails contain an implicit price term—one that has been previously agreed upon by Samsung Japan and SUMCO. However, in the circumstances of this case (where the e-mails did not incorporate a price term), any negotiations that may have occurred between Samsung Japan and SUMCO outside of the United States are irrelevant to the inquiry of whether, in the United States, SUMCO has offered to sell the accused wafers.
Turning to the question of actual sale, the undisputed evidence is as follows: (1) Samsung Japan alone controls when SUMCO receives an electrоnic purchase order and how many wafers are ordered; (2) Samsung Japan designates a third party packaging company to transport the waf-
MEMC‘s reliance on North American Philips and Beverly Hills Fan Co. is misplaced. North American Philips simply noted that in some cases the criterion for determining the location of a “sale” under section 271(a) is not necessаrily where legal title passes; the “more familiar places of contracting and performance” may take precedence over the passage of legal title. 35 F.3d at 1579. Thus, simply because an article is delivered “free on board” outside of the forum, a “sale” is not necessarily precluded from occurring in the forum. Significantly, MEMC has not presented evidence that, as far as SUMCO is concerned, “contracting and performance” took place in the United States. Similarly, Beverly Hills Fan Co. held that the situs of an injury is the location, or locations, at which the infringing activity directly impacts on the interests of the patentee, and that “[e]conomic loss occurs to the patent holder at the place where the infringing sale is made because the patеnt owner loses business there.” 21 F.3d at 1571 (emphasis added). However, as noted above, MEMC presents no evidence that SUMCO entered into any negotiations with Samsung Austin in the United States concerning the accused wafers and no evidence that title of the wafers passed directly from SUMCO to Samsung Austin. Mere knowledge that a product sold overseas will ultimately be imported into the United States is insufficient to establish liability under section 271(a). See Rotec Indus., 215 F.3d at 1251 (finding that the only activities that are relevant to direct infringement are those activities that take place within the borders of the United States). In short, MEMC has presented no evidence demonstrating that SUMCO sold the accused wafers to Samsung Austin in the United States. Based upon the foregoing, we see no error in the district court‘s grant of summary judgment of no direсt infringement under
IV.
MEMC argues next that SUMCO actively induces Samsung Austin‘s infringement of the ‘302 patent under
SUMCO responds that the district court properly granted summary judgment of non-infringement under section 271(b) because: (1) it does not supply the accused wafers to Samsung Austin; (2) there is no evidence that it enсourages Samsung Japan to ship the accused wafers to Samsung Austin; (3) post-sale technical support is insufficient to establish active inducement under section 271(b); (4) the indemnity clause in the purchase order relates only to claims under Japanese patent laws for wafers sold by Samsung in Japan; and (5) MEMC has offered no evidence of the required intent.
Under
As a preliminary matter, we do not agree with MEMC that the indemnity provision included on Samsung Japan‘s purchase order for the accused wafers establishes SUMCO‘s intent to induce infringement on the part of Samsung Japan. The provision states as follows:
Supplier herein shall indemnify the buyer for all claims of patent infringement whether direct or contributory and for all costs for defending against such claims resulting from the purchase of the above items.
As this court explained in Hewlett-Packard Co. v. Bausch & Lomb Inc., “an indemnification agreement will generally not establish an intent to induce infringement, but . . . such intent can be inferred when the primary purpose is to overcome the deterrent effect that the patent laws have on would-be infringers.” 909 F.2d 1464, 1470 (Fed.Cir.1990) (citation omitted). As in Hewlett-Packard, the indemnity provision in this case may have facilitated the sale of the accused wafers, but there is no
Nevertheless, we conclude that there are genuine issues of material fact with respect to whether SUMCO induced infringement of the ‘302 patent on the part of Samsung Austin. First, SUMCO had knowledge of MEMC‘s patent as well as knowledge of Samsung Austin‘s potentially infringing activities. In addition, there is evidence that SUMCO provides substantial technical support to Samsung Austin in the form of e-mail communications. As noted above in Part II, the series of e-mails between SUMCO and the engineer at Samsung Austin demonstrate that SUMCO works with Samsung Austin to coordinate shipment dates and the quantity of wafers sent in each shipment and that SUMCO makes adjustments in the manufacturing process in order to address problems Samsung Austin encounters with the wafers. Second, there is evidence that during November and December 2002, SUMCO sent a shipment of certain wafers directly to Samsung Austin in order to addrеss technical problems with previously-supplied SUMCO wafers. Third, there is evidence that SUMCO personnel made several on-site visits to Samsung Austin, during which technical presentations on the SUMCO wafers were made. In addition, as noted above, Dr. Coria testified that Samsung Austin will not enter into an agreement to buy wafers from a wafer supplier unless the supplier will also provide Samsung Austin with technical support for the wafers. Dr. Coria testified as follows:
Q: When Samsung Austin Semiconductor enters into an agreement to buy wafers from a wafer supplier, part of the deal is that the wafer supplier will provide technical support for those wafers and help Samsung solve problems to the extent that they come up?
A: Yes.
Q: Does Sumco provide product support for the wafer that it sells to Samsung Austin?
A: Yes.
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Q: Does Samsung Austin expect that product support as part of the sale?
A: Yes.
Q: And if Samsung Austin doesn‘t get that product support, it won‘t buy the wafers, will it?
A: Yes.
(Feb. 11, 2004 Dep. of Dr. Coria at 47-48).
In light of the above evidence of record and viewing this evidence in the light most favorable to MEMC, we are not prepared to hold that a reasonable jury could not find intent to induce infringement. “Evidence of active steps taken to encourage direct infringement, such as advertising an infringing use or instructing how to engage in an infringing use, show an affirmative intent that the product be used to infringe.” Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 125 S.Ct. 2764, 2768, 162 L.Ed.2d 781 (2005) (internal citations and alternations omitted). First, a reasonable jury could
V.
We now turn to SUMCO‘s cross-appeal. As there is no final resolution of the dispute in this case, technically there is no “prevailing party” as is required for an award of attorney fees under
With respect to its claim of an improper prefiling investigation, SUMCO asserted that “[t]he extent of MEMC‘s prefiling analysis was a ‘Competitor Analysis,’ performed in Korea, comparing defendants’ wafers, obtained in Korea, against wafers manufactured by MEMC, also in Korea. . . .” (Id. at 5.) SUMCO also asserted that there was no evidence that the wafers used in the “Competitor Analysis” were manufactured pursuant to the ‘302 patent. (Id.) SUMCO further asserted that MEMC failed to investigate whether SUMCO made, used, sold, offered for sale, or imported the accused wafers into the United States, stating: “[t]he only evidence MEMC had was information from a[] MEMC salesman in Texas who claimed to have seen boxes of wafers with defendants’ logo on them in Samsung‘s warehouse . . . in Austin, Texas.” (Id. at 7.)
The district court determined that “MEMC‘s pre-filing investigation, while not ideal, does not rise to the level of sanctionable conduct under Section 285.” Attorney‘s Fees Order, slip op. at 4. The court noted that, prior to filing suit for infringement, two lawyers for MEMC reviewed the ‘302 patent and construed the claims consistent with the standard canons of claim construction. Id., slip op. at 3. The claims of the ‘302 patent then were compared with the results of an analysis of SUMCO‘s pure silicon wafers, obtained in Korea. Id. The court noted further that the attorneys had reason to believe that the wafers analyzed were used by both Samsung Austin and Samsung Korea. Id., slip op. at 4. Thus, the court concluded:
Considering the information MEMC derived from the Competitor Analysis and what MEMC knew about the silicon wafer industry in general and about its оwn dealings with Samsung in particular, MEMC‘s belief, at the time it filed suit, that Sumco‘s pure silicon wafers infringed the ‘302 Patent cannot be characterized as frivolous or unjustified. Given this, and given that there is no evidence either (1) that the Sumco wafers that were the subject of the Competitor Analysis were materially different from the Accused Wafers or (2) that MEMC knew that the Accused Wafers were materially different from the wafers analyzed in the Competitor Analysis and proceeded with the instant suit despite this knowledge, SUMCO has failed to meet its substantial burden of showing that MEMC‘s infringement claim was “clearly and convincingly vexatious, unjustified, or frivolous.” See Forest Labs., 339 F.3d at 1330. Moreover, the record does not support a finding that an award of fees is necessary in this case to prevent a “gross injustice.” Id. at 1329.
Id., slip op. at 6. The distriсt court also concluded that MEMC‘s belief, at the time of suit, that SUMCO was performing infringing activity in the United States was
Pursuant to
Moreover, under
Any attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.
We agree with MEMC that the district court did not clearly err in finding this case not to be exceptional under section 285. As far as MEMC‘s investigation prior to filing suit for direct infringement under section 271(a) is concerned, there is evidence that MEMC‘s attorneys performed a good faith, informed comparison of the claims of the ‘302 patent against the accused wafers. We also agree with MEMC that the district court did not abuse its discretion in denying SUMCO‘s motion for sanctions under section 1927. SUMCO has failed, on appeal, to point to any evidence that MEMC‘s attorneys “unreasonably and vexatiously” multiplied the proceedings in this case. Furthermore, “[b]ecause the section authorizes sanctions only for the ‘multipli[cation of] proceedings,’ it applies only to unnecessary filings and tactics once a lawsuit has begun.” In re Keegan Mgmt. Co. Sec. Litig., 78 F.3d at 435 (emphasis added). Thus, the adequacy of MEMC‘s prefiling investigation is irrelevant to the section 1927 inquiry. Id.
CONCLUSION
We agree with the district court that, as a matter of law, SUMCO cannot be liable for direct infringement of the ‘302 patent under
COSTS
Each party shall bear its own costs.
AFFIRMED-IN-PART, REVERSED-IN-PART, and REMANDED
Notes
The Report contains various claim charts comparing the tested wafers to the ‘302 Patent. . . . The charts are crude and merely contain check marks next to each of the claims of the ‘302 patent each tested wafer allegedly infringes. The narrative accompanying the chart is also vague. For example, “[e]ach wafer is also a single crystal meeting the conventional geometric requirements of the preamble.”
Summary Judgment Order, slip op. at 30. The court concluded that the charts violated Patent Local Rule 3-1 because they did not identify each element of each claim and did not specify where each claim limitation was met in each accused wafer. Id. The court also ruled that MEMC had failed to demonstrate “good cause” under Patent Local Rule 307 sufficient to amend its infringement contentions.
We see no abuse of discretion in the district court‘s exclusion of the claims charts from Dr. Mule‘Stagno and thus decline to disturb the court‘s ruling.