Where value is law. © 2012 Hodgson Russ LLP PATENT PIRACY: WHEN IS OFFSHORE ACTIVITY INFRINGEMENT? Jody Galvin Melissa Subjeck July 31, 2013

Jodyann Galvin is partner with Hodgson Russ LLP in Buffalo, NY, Ms. Galvin's practice is focused on complex intellectual property matters, including patent and trademark litigation, and the misappropriation of trade secrets, ideas, and concepts. She is the President of the Western District of New York Chapter of the Federal Bar Association, as well as an adjunct professor at the University at Buffalo School of Law. -

PATENT – THE BASICS  Exclusionary  Territorial

SECTION 271(A) – The Principal Infringement Statute  § 271. Infringement of patent (a) Except as otherwise provided in this title... whoever 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.

Acts of Infringement  Make  Use  Offer to Sell  Sell

“Make” and “Use”  Easy Interpretation  “Make” or “Use” a patented invention in the United States Act of Infringement

“Offer to Sell” and “Sale”  Difficult interpretation when any step in the process is conducted offshore  Caselaw not well-developed  Fact specific  Split of authority

The New Trend  Make the product offshore in some country where the patentee does not have patent rights  Market and sell to customers located in the United States Is this infringement under the United States patent laws?

Extraterritorial Activities  Section 271 does not provide express guidance  What we know:  Infringement only for activities that take place within the borders of the United States  Thus, offer to sell or sale must be “within the United States”  What we need to determine:  Location of the offer to sell and sale

Where is the sale located?  Not a “single point where some legally operative act look place”  Transocean Offshore Deepwater Drilling v. Maersk Contractors USA, 617 F.3d 1296, (Fed. Cir. 2010)  MEMC Electronic Materials v. Mitsubishi Materials Silicon, 420 F.3d 1369, (Fed. Cir. 2005).

 Multi-factor analysis  Passage of title  Place of performance  Delivery  Sales negotiations  Payment  Receipt of sales proceeds  Wing Shing Products, Ltd. v. Simatelex Manufactory Co., Ltd., 479 F. Supp. 2d 388, 403 (S.D.N.Y. 2007)  Fellowes, Inc. v. Michilin Prosperity Co., Ltd., 491 F.Supp.2d 571, (E.D. Va. 2007)  Ensign-Bickford Co. v. ICI Explosives USA, Inc., 817 F. Supp. 1018, (D. Conn. 1993). 12

When is an offer to sell infringement?  A communication is an “offer to sell” when:  Description of product  Purchase price  Biometrics, LLC v. New Womyn, Inc., 112 F. Supp. 2d 869, 873 (E.D. Mo. 2000)  Traditional marketing: letters, postcards, brochures  New trend: website

 Infringement when completed sale is to a United States customer.  Transocean, 617 F.3d at  Split of authority when contemplated sale is outside the U.S.

What about Method Patents?  Federal Circuit has Declined to decide this Issue  District Courts are Divided  Yes: Section 271(a) applies to method patents OptiGen, LLC v. International Genetics, Inc., 777 F. Supp. 2d 390 (N.D.N.Y. 2011) Western Geco LLC. V. Ion Geophysical Corp., 2012 U.S. Dist. LEXIS 67776, at *13 (S.D. Tex. May 15, 2012)

 No: Section 271(a) does not apply to method patents W.L. Gore & Assocs., Inc. v. Medtronic, Inc., 2012 U.S. Dist. LEXIS 84222, at *45 (E.D. Va. June 18, 2012) 16

Section 271(g): Manufacturing Outside the U.S.  Reaches outside of boundaries of U.S. to protect patentees’ processes – primary purpose is to prevent competitors from avoiding patent by moving manufacturing offshore  Making according to a patented process in a foreign country does not insulate from liability 17

Section 271(g): Manufacturing Outside the U.S.  Importation of product, sale, offer to sell  Creative Compounds, LLC v. Starmark Labs, 651 F.3d 1303 (Fed. Cir. 2011)  Presumption that a product is made by patented process under Section

 Does it apply to methods? No. “Section 271(g) does not cover every patented process and its purported result.”  NTP, Inc. v. Research in Motion, 418 F.3d 1282 (Fed. Circ. 2005)  Production of “information” not enough.  Phillip M. Adams & Assocs., LLC v. Dell Computer Corp., 2013 U.S. App. LEXIS 5294 (Fed. Cir. Mar. 8, 2013)  McRO, Inc. v. Namco Bandai Games Am., Inc., 2013 U.S. Dist. LEXIS (C.D. Cal. July 11, 2013) 19

The Future of Information  Developing caselaw  Congressional action 20

Damages  Sale:  Lost profits  Reasonable royalties  Injunction  Offer to sell  Injunction  Damages related to offer  Price erosion  Marketing costs