## United States Court of Appeals for the Federal Circuit

04-1396, -1513

MEMC ELECTRONIC MATERIALS, INC., Plaintiff-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.

Robert M. Evans, Jr. , Senniger Powers, of St. L ouis, Missouri, argued for plaintiff-appellant. With him on the brief was Marc W. Vander Tuig . Of counsel on the brief were Duane H. Mathiowetz and Korula T. Cherian , Howrey Simon Arnold & White, LLP, of San Francisco, California. 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

. Appealed from: United States District Cour t for the Northern District of California Judge Saundra Brown Armstrong

## United States Court of Appeals for the Federal Circuit

04-1396, -1513 MEMC ELECTRONIC MATERIALS, INC., Plaintiff-Appellant,

v.

MITSUBISHI MATERIALS SILICON CORPORATION,

MITSUBISHI SILICON AMERICA CORPORATION, SUMITOMO MITSUBISHI SI LICON CORPORATION (also known as Sumco), SUMCO USA CORPORATION (also known as Sumco USA), and SUMCO USA SALES CORPORATION (also known as Sumco USA Sales), Defendant s-Cross Appellants.

__________________________ DECIDED: August 22, 2005

__________________________

Before NEWMAN, SCHALL, and DYK, Circuit Judges

. 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 t he United States District Court for the Northern District of Californ ia against Mitsubishi Materials Silicon Corporation, Mitsubishi Silic on America Corporation, Su mitomo 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 infri ngement of the ’302 pat ent under 35 U.S.C. § 271(a) and inducement of in fringement of the patent under 35 U.S.C. § 271(b). The district court eventually granted summary ju dgment in favor of defendants on t he ground that, as a matter of law, they could not be liable for either direct infringement or inducement of infringement. MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silic on Corp. , No. 4:01-CV-04925 (N.D. Cal. Mar. 16, 2004) (“ Summary Judgment Order ”). As far as direct infringement was concerned, the court ruled that there was no evidence of sales or offers for sale of accused products in the Unit ed States. As far as inducement of infringement was concerned, the court ruled that MEMC had failed to produce any evidenc e of inducement of infringement by defendants. MEMC now appeals t h at decision. At the same time, defendants cr oss- appeal the district cour t’s denial of their motion for attorney’s fees, expert witness fees, and expenses. We see no error in the grant of su mmary judgment with r e spect 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 induc ement of infringement. Accordingl y, with respect to MEMC’s a ppeal, the judgment of the district court is affirmed-in-part and reve rsed-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 supp lier of silic on wafers to the semico nductor ind u stry. The ’3 0 2 patent, entitled “Low Defect Density Vac ancy Dominated Silicon,” relates to t he preparation of semiconductor grade sin g le crystal silic on, whic h is used, in wafer form,

04-1396, -1513 2in the manufacture of electronic components such as integrated circuits. ’302 patent col. 1, ll. 9-16. Prior art methods of manufacturing single cr ystal silicon often resulted in crystals containing large quantities of agglomerated intrinsic point defects. Id. c o l

. 1 , l l

. 18-55. These defects can severely impact the yield potential of silico n wafers in complex and highly integrated circuits. Id. col. 1, ll. 53-55. T he patent disclos es a method of preparing single cry s tal silico n that is substantially fr ee of agglomerated intrinsic point defects. Specifically, the ’ 302 patent discloses a proc ess specifying initial growth conditions and t he 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 hav ing a c entral axis, a front side and a bac k side which are generally pe rpendicular to the central axis, a circumferential edge, and a radius ext ending from the central axis to the circumferential edge of the wa fer, the wafer comprising a first axially symmetric region in whic h va cancies ar e the predominant intrinsic point defe ct and whic h is s ubstantially free of agglomerated vacancy int r insic 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 s ilicon wafers to the semiconductor industry. It is undisp uted that SUMCO’s silic on waf e rs are manufactured exclus ive l y outside of the United States at SUMCO’s manufacturing plant in Yonez a wa, Japan. Ostensibly, SUMCO sells silicon wafers to Samsung Japan Corporation (“Samsung

04-1396, -1513 3Japan”), which then sells the wafers to Samsung Austin Semic onductor, located in Austin, Texas (“Samsu ng Austin”). 1 On December 14, 2001, MEMC sued SUM C O in the United Stat es District Court for the Northern District of California, clai ming that SUMCO was liable for infringement and induc ement of infringement of the ’302 patent based upon SUMCO’s alleged sale and import a tion of c e rtain silic on wafers. 2 MEMC asserted that SUMCO directly infringed the ’302 pat ent under 35 U.S.C. § 271(a) by offering to sell and selling the accused wafers to Samsung Austin. With respect to its claim of inducement of infringement under 35 U.S.C. § 271(b), ME MC asserted that SUMCO encouraged an d enabled Samsung Aus t in to use t he accused wa fers by manufacturing wafers according to Samsung Korea’s specificat ions and by providing tec hnical support to the Samsun g Austin facility.
II. On December 3, 2003, SUMCO filed a motion for summary judgment of zero damages, arguing that MEMC could not prove that def endants committed the alleged acts of infringement within the United Stat es. SUMCO argued t hat it did not sell the accused wafers either directly or indirectly to Samsung Austin, and that it only sold th e accused wafers to Samsung Japan. SUMC O also ar gued that it had not engaged in

1 Samsung Electronics Co., Ltd. (“S amsung Korea”) is the Korean parent company of Samsung Austin and Samsung Japan. 2 Mitsubishi Materials Silicon Corpor ation and Mitsubishi Silico n America Corporation were the origin al defendants. In February of 2002, SUMCO Corp. was formed as a joint venture between Mitsubishi Materials Silicon Corporation and the Sitix Divis ion of Sumitomo Metals Industries, Lt d. The complaint was thereafter amended to add SUMCO Corp., SUMCO USA, and SU MCO USA Sales as defendants.
04-1396, -1513 4any conduct that would constitute the acti v e in ducem ent of infringement by Samsung Austin in the United States. MEMC responded that Samsung Japan was me rely a conduit for the deliv ery of defendants ’ accused wafers and that Samsung Austin was SUMCO’s true customer. MEMC als o argued t hat defendants induc ed Sams ung Austin ’s infringement of the ’302 patent by manufacturing wafers according to Samsung Austin’s spec ifications and by providing substantial technica l support to Samsung Austin. On March 16, 2004, the district cour t granted defendants’ summary judgment motion. The court held that MEMC had failed to produc e any evidence of sales or offers for sales of the accused wafers in the Unit ed States by defendants or any evidence of importation of the accused waf e rs 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 evidenc e of active and intentional indu cement of infringement by defendants. Id. On April 22, 2004, the di strict court entered fina l judgment of non-infringement. Under these circumstances, the court reasoned, MEMC could not establish entitlement to any damages. Id. On May 20, 2004, SUM C O filed a motion for attorney’s fees, expert witness fees, and expenses. T he district c o urt denied this motion on July 9, 2004. MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silic on Corp. , No. 4:01-CV-04925 (N.D. Cal. July 9, 2004) (“ Attorney’s Fees Order ”). MEMC appeals the district court’ s final determination of non-infringement as well as the underlying or der granting SUMCO summary judgment of zero damages. SUMCO cross-appeals the distri ct court’s denial of its motion for atto rney’s fees, expert witness fees, and expenses. We have jurisdicti on pursuant to 28 U

. S.C. § 1295(a)(1).

04-1396, -1513 5DISCUSSI ON
I. Summary judgment is appropriat e only if, when the facts are vi ewed in the light most favorable to the nonmov ing party and all doubts are reso lved against the movant , there are no genuine issues of material fact and the moving party is entitled t o judgment as a matter of law. Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247-48 (1986); see also Caterpillar, Inc. v. Deere & Co. , 224 F.3d 1374, 1379 (Fed. Cir. 2000) (“When ruling on a motion for summary judgment, all of the nonmovant’s evidenc e is to be c r edited, and all justif iable inferences are to be drawn in the
nonmovant ’s favor.”). The movant carries the initial burden of prov ing that there are no genuine iss ues of material fact. Celote x Co rp. v. Catrett , 477 U.S. 317, 322-24 (1986). If the movant shows a prima facie case for summary judgment, then the burden of production shifts to the nonmovant to present specif ic evidenc e indicating there is a genuine is sue for trial. Anderson , 477 U.S. at 250. This court reviews de novo the district court’s finding that there i s no genuine issue as to any material fact regarding infringement. Amgen, Inc. v. Hoechst Marion Roussel, Inc. , 314 F.3d 1313, 1339 (Fed. Cir. 2003). The distric t court based its ruling of non-infringement on MEMC’s inability to establish damages for infringement and, t hus, did not address the issue of claim coverage with respect to the ’302 patent. Accord ingly, we assume for purposes of this appeal that the asserted claims of the ’302 pat ent read on the accused wafers. We turn first to the i ssue of direct infringement.

04-1396, -1513 6II. The follo wing facts are not in dis pute: SU MCO sells th e accused silic on waf e rs to Samsung J apan, which then sells the wafers to Samsung Austin. As noted above, the wafers are manufactured exclusively outs ide of the United States at SUMCO’s manufacturing plant in Yonezawa, Japan. SUMCO manufactures the accused wafer s according to specifications provided by , and pursuant to a license from, Samsung Korea. T y pically, Samsung J apan sends SUMCO an electronic purchase order specifying the number of wafers to be manufactured. A t so me point after the purchase order is received, SUMCO processes the order and manufactures the wafers. The wafers then are pack ed in boxes at the Yo nezawa plant and delivered at Yonezawa t o a packaging company. SUMCO attaches a packagi ng label that indi cates the destination of the wafers to be Austin, Texas. T he packaging company, in turn, transports the boxes to its own facility for shipment, “free on board,” 3 to Samsung Austin’s semiconductor fabrication pl ant in Austin, Texas. Beyond these undisputed facts, MEMC dire cts our at tention to evidenc e in the record from the summary judgment proceedi ngs that it contends supports finding specific contacts between SUMCO and Samsung Au s t in. 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 t hat SUMCO provides Sa msung Austin with detailed electronic test data on the wafer s for the pur pose of obtaining Samsung Austin’s approval for shipm ent before SUMCO turns the wafers over to the packaging

3 “Free on board” is a method of ship ment whereby goods are delivered at a designated location, usually a transportation depot, at which legal titl e and thus the risk of loss passes from seller to buyer. See N. Am. Philips Corp. v. Am. Vending Sa le s, Inc. , 35 F.3d 1576, 1578 n.2 (Fed. Cir. 1994).
04-1396, -1513 7company 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 al so suggest that SUMCO and Sams ung Austin communicated directly and i ndependently of Samsung Japan in order to coordinate shipment dates and t he quantity of wafers s ent in eac h shipment , subject to Samsung Austin’s final approval. In addition, th e e-mails represent communications directly between Samsung Austin and SUMC O that address v a rious problems Sams ung Austin encountered with the wafers from time to time. These comm unications often resulted in adjustments made in the upstream manufactu ring process at the SUMCO facility in Japan or a d justments made in the downstr eam process at the Samsung Austin facilit y in Austin, Tex a s. The e-mail correspondence between employ ees of SUMCO and the engineer at Samsung Austin also reveals a transaction in November and Dec e mber of 2002, during which SUMCO’s International Sales Manager , Tosh ihiro Awa, r equested authorization from Samsung Austin for the shipment of a quantity of wafers with a modified edgeshape directly to Samsung Austin. The wafers were sent in respons e to certain problems with previously-supplied SUMCO wafe rs. Mr. Awa was granted authority from Samsung Austin’s purchasing manager to add these wafers to an existing Samsung Japan purc hase order. Finally, MEMC pres ented evidence sugg esting that SUMCO personnel made several on-site visits to the Samsung Austin plant after issuance of the ’302 patent. First, MEMC pointed t o the deposition testimony of Yoshihiro Wakisawa, an engineer at SUMCO. Mr. Wakisawa testified that he took two trips to the Samsung Austin facility i n

04-1396, -1513 82000 and 2001. Mr. Wakisawa further testified that, during at least one of the trips, he made a technical presentation c oncerning the accus e d wafers. Second, M E MC cited the depos ition testimony of Mr. Awa that he made multiple tr ips to the Samsu n g Austin facility, inc l uding o n e trip durin g 2000 or 2001 during wh ich he made a technica l presentation concerning the accused wafers.
III. On appeal, MEMC argues that the distri ct court erred in granting summary judgment of no direct infringement because t he evidence of rec o rd demonstrates that SUMCO offers to sell and sells the accused silic on waf e rs to Samsung Austin in Austin, Texas. First, MEMC argues, SUMCO sells the accused wafers to Samsung Austin based on evidenc e that SUMCO: (1) manufactu res the accused wafers according to Samsung’s specifications; (2) e-mails Sams ung Austin the test data for shipment authorization, (3) packages the wafers for shipment; (4) applies a shipping label for Samsung Austin in Austin, Texa s; and (5) provides cr ucial fo llow-up technic a l support. Thus, SUMCO asserts that Samsung J apan’s “int erposition in the pur chase order process” does not c h ange the fact that Sams ung Aus t in is SUM C O’s “true” customer. MEMC cites N. Am. Philips Corp. v. Am. Vending Sale s, Inc. , 35 F.3d 1576 (Fed. Cir. 1994), and Beverly Hills Fa n Co . v. Royal Sovereig n Corp. , 21 F.3d 1558 (Fed. Cir. 1994), for the propos ition that the location of an infringing sale is ei ther where the buyer is located or where a patentee suffers economic loss. Second, according t o MEMC, the trans mittal of data from defendants to Samsung Austin constitutes an “offer to sell” the accu sed wafers within the meaning of section 271(a). MEMC states that , “[t]hrough these e-mails, SUMCO has

04-1396, -1513 9communicated its willingness to ship to [Samsung Austin] a certain quantit y of wafers (typically s o me subset of t he total quantity identifi ed in t he electronic purchas e order) on a certain date for the previous ly agreed to price, such wafe rs having the characteristics described by the voluminous data cont ained in the attached spreadsheet s.” MEMC states in addition that if Samsung Austin r eplies to the e-mail and accepts the tendered data, the bargain is c onclu ded 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 di d not err in granting summary judgment that SUMCO does not directly infringe the ’ 302 patent under 35 U.S.C. § 271(a). This is so, according to SUMCO, because MEMC pr esented no evidenc e that SUMCO sells or offers to s e ll the accused wafers in the Un ited States. SUMCO asserts that the test data it sends to Samsung Au stin is generated and sent after the accused wafers have been purc hased and manufactured in Japan. Consequently, according to SUMCO, transmittal of this data cannot constitute an “o ffer to sell.” SUMCO states that e-mailin g of this test data is done merely to allow Samsung Austin to c onfirm that the actual wafers satisfy Samsung’s specif ications, i. e., the terms of the bargain alr eady struck between Samsung Korea and SUMCO. Like wise, SUMCO asserts that the post-sale technical s upport it provides to Samsung Austin can not qualify as a “sale” or “offer to sell” within the meaning of se ction 271(a) because this support occurs after the wafers have already been purchased and manufactured.

04-1396, -1513 10The question we are presented wit h in this case is whether SUMCO’s activit i es in the United States, as would be construe d by a reasonable j u ry, are sufficient to establish an “offer for sale” or “sale” with in the m eaning of 35 U.S.C. § 271(a). Section 271(a) provides as follows: Exc ept as otherwise pr ovided in this titl e, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or impo r t s into the Unite d States any patented invention du ring the term of the patent therefor, infringes the patent. 35 U.S.C. § 271(a) (2000). It is well-establishe d that the reach of section 271(a) is limited to infringing activities that occur within the United States. See Rotec Indus. v. Mitsubishi Corp. , 215 F.3d 1246, 1251 (Fed. Cir. 2000) (“Thes e extraterritorial activ i ties however, are irrelevant to the cas e before us , because ‘[t]he right conferred by a paten t under our law is confined to t he United States and its territori es, and infringement of this right cannot be predicated of [sic] acts w holly done in a foreign country.’” (quoting Dowagiac Mfg. Co. v. Minn. Moline Low Co. , 235 U.S. 641, 650 (1915))). We have defined liability for an “offer to sell” under section 271(a) “according to the norms of traditional contractual analys is.” Rotec Indus. , 215 F.3d at 1255. Thus, the defend ant must “communica te[] a ‘manifes tation of willing ness to enter into a bargain, so made as to justif y another person in understandi ng t hat his ass ent to that bargain is invited and will conclude it.’” Id. at 1257 (quoting Res t atement (Second) of Contracts § 24 (1979)). We considered the meaning of “offer to sell” in 3D Systems, Inc. v. Aarotech Laboratories, Inc. , 160 F.3d 1373 (Fed. Cir. 1998). The defendants in 3D Systems provided potential California cust omers with price quot ations, brochures , specification sheets, videos , and sample parts related to their product. Id. at 1379.

04-1396, -1513 11Based on t h is activ i ty, the patent ee sued the defend a n ts in the Unit ed States District Court for the Central Dist rict of California for infringement of a variety of patents, arguing that the defendants were liable for “offer ing 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 dism iss; on appeal, this court reversed. We concluded that although the “pri ce quotation letters state on their face that they are purportedly not offers,” the letters coul d be “regarded as ‘offer[s] to sell’ und e r section 271 based on the substance conv eyed in the le tters, i.e., a descr iption of the allegedly infringing merchandise and the pric e at which it can be purchased.” Id. at 1379. We also noted that “[o]ne of the purposes of adding ‘offer[] to sell” t o section 271(a) was to prevent exactly the type of activity Aaroflex has engaged in, i.e., generating interest in a potentia l infringing product to the commercial detrim e nt of the rightful patentee.” Id. We do not think that MEMC has presented any relev a nt evidenc e to support its claim that SUMCO offered to sel l the accu sed wafers to Sumsung Austin in the United States. MEMC points to no evidence of n egotiations 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 c annot constitute an “offer for sale.” First, unlik e t he pric e quotation letters in 3D Systems , the e-mails, wh ile containing a description of th e allegedly infringing wafers , do not contain any pric e terms. Accordingly, on thei r face, the e-mails cannot be construed as an “ o ffer” which Samsung Austin could make into a bindin g contract by simple acceptance. See Rote c Indus. , 215 F.3d at 1251. MEMC c ontends that the e-mails c ontain an implicit pric e

04-1396, -1513 12term—one that has been previously agr eed upon by Samsung Japan and SUMCO. Howev e r, in the circumstances of this ca se (where the e-mails did not incorporate a price term), any negotiations that may have occurred between Samsung Japan and SUMCO outside of t he United States are irre levant to the inquiry of whet her, in the United States, SUMCO has offered to sell the accused wafers. Turning to the question of actual sale, the undisputed evidenc e is as follows: (1) Samsung Japan alone controls when SUM C O receives an elec tronic purchase order and how many wafers are ordered; (2) Samsung Japan designates a third party packaging company to transport the wafers to Samsung Austin; (3) Samsung Japan arranges for the packaging, labeling, and sh ipping of the wafers; and (4) Samsung Japan pay s SUMCO electronic a lly for the wafe rs after they are deliv ered by the packaging company. Significantly, as far as t he sale is concerned, MEMC points to no additional evidenc e. Thus, any “sale” of the wafers took plac e between SUMCO and Samsung Japan, and the sale occurred in Japan where all of the essential activities took place. MEMC’s relia nce on North A m erican P h ilips and Beverly Hills Fan Co. is misplaced. North American P h ilips simply noted that in some cases the criterion for determining the location of a “sale” under s e ction 271( a) is not nec essarily where legal title passe s; the “more familia r places o f contracti n g and p e rformance” may take precedenc e over the passage of legal title. 35 F.3d at 1579. Thus, simply because a n article is delivered “free on board” outside of the forum, a “sale” is not necessarily precluded from occurring in the forum. Signi f i cantly, MEMC has not presented evide n ce that, as far as SUMCO is concerned, “contra cting and performance” took place in the

04-1396, -1513 13United States. Similarly, Beverly Hills Fan Co. held t h at the sit u s of an in jury is the location, or locations, at which the infringing activity directly impac ts on the interests of the patentee, and that “[e]conom i c loss occurs to the pa tent holder at the place wher e the infringing sale is made because the patent 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 wit h Sa msun g Austin in the Unit ed States concerning the accused wafers and no ev idence that title of the wafers passed directly from SUMCO to Samsung Austin. Mere kno wledge that a product sold overseas wil l ultimately be imported into the United Stat es 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 infri ngement are those activities that take place within t he borders of the United States). In short, MEMC has presented no evidence demons trating that SUMCO sold the accused wafers to Samsung Austin in the United States. Based upo n the foregoing, we see no error in the district court’s grant of summa ry judgment of no direct infringement under 35 U.S.C. § 271(a).
IV. MEMC argues next that SUMCO actively induces Sam s ung Austin’s infringement of the ’302 patent un der 35 U. S.C. § 271(b). Accordi ng to M E MC, the district court erred in gr anting sum m ary judgm ent of no induc ement of infringement, given evidenc e that SUMCO had knowledge of t he ’302 patent and evidenc e that SUMCO knowingly supplied Samsung Austin with the accused wa fers and provide d Samsung Austin with substantial technical support. First, in add ition to the evidence noted in Par t II, supra , MEMC points to a letter dated April 17, 2000, in which MEMC advised SUMCO that i t

04-1396, -1513 14was selling a product that may be covered by the ’302 patent and in whic h it offered SUMCO a licens e to practice the inv ention. Second, MEMC points to the deposition testimony of Dr. Jose Coria, a former S a msung Austin employee, who stated that Samsung Austin will not enter into an agr eement to buy wafers from a wafer supplier , unless the supplier will also provide Sams ung Austin with technical support for the wafers. Thus, according to MEMC, the substantial product support defendants have provided to Samsung Austin has induced Sa msung Aus t in to buy and use the accused wafers and thus to infringe the ’302 patent. MEMC als o poin ts to the fact that Samsung Japan’s purchase order for the accused wafe rs inclu des an indemnity provision for patent infringement liability running from S U MCO to Sams ung Japan, thereby reducing the deterrent effect the ’302 patent w ould otherwis e have on Samsung to use the accused wafers in the United States or to import those wafers into the United States. SUMCO responds that the district cour t properly granted su mmary judgment of non-infringement under secti on 271(b) because: (1) i t does not supply the accused wafers to Samsung Austin; (2) there is no ev idence that it encour ages Samsun g Japa n to ship the accused wafers to Samsung Au stin; (3) post-sale technical support is insufficient to establish active inducem ent under section 271( b) ; (4) the indemnity clause in the purchase order relates only to claims under Japanese patent laws for wafers sold by Sam s ung in Japan; and ( 5 ) MEMC has offered no ev idence of the required int ent. Under sect ion 271(b), “[w]hoever actively induces infringement of a patent s hall be liable as an infringer.” 35 U.S.C. §271(b). “In order to succeed on a claim of inducement, the patentee must show, first that there has been direct infringement,” and

04-1396, -1513 15“second, that the alleged in fringer knowingly induc ed infringement and possessed specific intent to enc ourage another’s infringement.” Minn. Mining & Mf g. Co. v. Chemque, Inc. , 303 F

. 3d 1294, 1304-05 (F ed. Cir. 20 02) (citations omitted). 4 “While proof of intent is necessary, direct evi dence is not required; rather, circumstantial evidenc e may suffice.” Water T e chs. Corp v. Calco, Ltd. , 850 F.2d 660, 668 (Fed. Cir. 1988). As a prelim inary matter, we do not agree with MEMC that the indemnity provision included on Samsung Japan’s purchase order for the accu sed wafer s establis hes 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 whet her direct or contributory and for all costs for defending against suc h claims r e sulting from the purchase of the above items. As this c ourt explained in Hewlett-Packard Co. v. Bausch & Lomb Inc. , “an indemnific a tion agree ment will g enerally n o t es tablish an intent to induce in fringement, but . . . s u ch intent can be inf e rred when the prim ary purpos e is to ov ercome the

4 It should be noted that “there is a lack of clarity concerning whether the required intent must be merely to induce the specific acts [of infringement] or additionally to cause an infringement.” MercExchange, L.L.C. v. eBay, Inc. , 401 F.3d 1323, 1332 (Fed. Cir . 2005) (citing Insituform Techs., Inc. v. CAT Contracting, Inc. , 385 F.3d 1360, 1378 (Fed. Cir. 2004)); see Manville Sales Corp. v. Paramount Sys., Inc. , 917 F.2d 544, 553 (Fed. Cir. 1990) (“The plaintiff has the burd en of showing that the alleged inf r inger’s ac tions induc ed infringing acts and that he knew or s hould hav e known his actions would induc e actual infringements.”); but see Hewlett-Packard Co. v. Bausch & Lomb, Inc. , 909 F.2d 1464, 1469 (Fed. Cir. 1990) (“Proof of actual intent to cause the acts which constitute the infringem ent is a necessary prerequisit e to finding active inducement.”). We need not reso lve that ambiguity in this cas e , however, because it is undisputed that SUMCO had knowledge of the ’302 pate nt. Thus, assuming t hat MEMC is able to demonstrat e that SUMCO had intent to induce the specific act s constituting infringement, intent additionally to cause an infringement can be presumed.
04-1396, -1513 16deterrent effect that the pat ent laws have on would-be infr ingers.” 909 F.2d 1 4 64, 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 evidenc e that the pri m ary purpose of the agreement was to induce Samsung Japan to infringe the ’302 patent. As noted by SUM C O, given that the sale of the wafers from SUMCO to Samsung J apan occur r ed in Japan , it is more reasonable to conclude that the indemnity clause relates to claims of patent infringe ment under Japanese law. In other respects, we do not think that a claim of active induc ement of Samsung Japan by SUMCO has been properly preserved in t he district court. We th erefore need not address whether induc ing ac tivity in Japan can giv e rise to liability under United States patent laws. See Crystal Semiconductor Corp. v. Tr itech Mic r oelectronics, Int’l Inc. , 246 F.3d 1336, 1351 (Fed. Cir. 2001). Nevertheless, we conclude that there are genui ne is sues of material fact with respect to whether SUMCO induced infringem ent of the ’302 patent on the part of Samsung Austin. First, SUMCO had k nowl edge of MEMC’s patent as well as knowledge of Samsung Austin’s potentially infringing activities. In addition, there is evidenc e that SUMCO provides substantial technic a l suppor t to Samsung Austin in th e form of e- m a i l communi cati ons. As noted above i n Part II, the seri es of e-mai l s betw een SUMCO and the engineer at Samsung Austin demonstrate that SUMCO works with Samsung Austin to c oordinate s h ipment dates and the quantity of wafers sent in each shipment and that SUMCO makes adjustments in the manufacturing proces s in order to address problems Samsung Austin encounters with the wafers. Second, there is evidenc e that during November and Decem ber 2002, SUMCO sent a shipment of

04-1396, -1513 17certain waf e rs directly to Samsung Austin in order to address technical problems with previously- s upplied SUMCO wafers. Third, there is e v idence that SUMCO personne l made several on-site visits to Samsung Aus t in , during which technical presentations on the SUMCO wafers were made. In addition, as noted abov e, Dr. Coria t e stified tha t Samsung Austin will not enter into an agr eem ent to buy wafers from a wafer supplier unless the supplier will also provide Sams ung Austin with technical support for the wafers. Dr. Coria testified as follo ws: Q: When Samsung Austin Semic onductor enters into an agr eement to buy wafers from a wafer supplier , part of the deal is that the wafer supplier will provide tec h nical support for those wafers and help Samsung solve problems to the extent that they come up?
A: Yes. Q: Does Sum c o provide product support for the wafer that i t sells to Samsung Austin? A: Yes.
* * * Q: Does Samsung Austin expec t that product support as part of the sale?
A: Yes. Q: And if Sam s ung 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 evidenc e of record and viewing this evid ence in the light most favorable to MEMC, we are not prepared to hold that a reasonable jury could not find intent to induce infringem ent. “Evidenc e of active steps taken to enc ourage direc t

04-1396, -1513 18infringement, 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. , No. 04-480, slip op. at 18 (U.S. June 27, 2005) (internal citations and alt e rnations om itted). First, a reas onable jury could conclude that the e-mail communications between SUMCO and Samsung Austin in the United States represent pr oduct support which enabled Sa msung Austin to purchas e and use the accused wafers. Se e Metabolite Labs., Inc. v. Lab. Corp. of Am. Holdings , 370 F.3d 1354 (Fed. Cir. 2004) (f inding active induc e ment of infringement based on defendant’s publications describi ng and promoting use of patented method). As for the requirement of specific int ent to encourage infringement, it is undisputed that SUMCO knew of the existenc e of the ’302 patent because it received a letter concerning it. Thi s type of evidence is relevant for supporting pr oof of intent for induc ement (though not b y itself sufficient). See Fuji Photo Film Co., Ltd. v. Jazz Photo Corp. , 394 F.3d 1368, 1378 (Fed. Cir. 2005); Mentor H/S, Inc. v. M ed. Devic e Alliance, Inc. , 244 F.3d 1365, 1379 (Fed. Cir. 2001). Moreover, the series of e-mails between SUMCO and Samsung Austin prov ide sufficient circumstantial evid ence for a reasonable jury to conclude that SUMCO was not only aware of the potentially infr inging activities in the United States by Samsung Austin, but also that SUMCO in tended to encourage those activities. Se e Fuji Photo Film Co. , 394 F.3d at 1378 (“A patent ee may prove intent through circumstantial ev idenc e.”); Water Techs. , 850 F.2d at 669 (“The requisite intent to induce infringement may be inferred from all of the circumstances.”). For the foregoing reasons, we reverse the district court’s gr ant of summary judgment of non-infringement based on inducement of infri ngement under section 271(b) and remand the c a se to the

04-1396, -1513 19district court for further proc eedings on that issue. Those proceedings will, of course, involv e (i) construing the clai ms of the ’302 patent; (ii) determining whether Samsung Austin dire ctly infring e s; and (iii) determinin g whether, if there is direct infringement on the part of Samsung Austin, SUMC O induces that infri ngement. 5
V. We now turn to SUMCO’s cross-appeal. As there is no final resolution of the dispute in this case, technically t here is no “ p revailing party” as is required for an awar d of attorney fees under 35 U.S.C. § 285 and the is sue may be premature. See Medichem, S.A. v. Rolabo, S.L. , 353 F.3d 928 (Fed. Cir. 2003). Howev e r, as the issue is likely to arise again, we will address it in the interest of justice. SUMCO argues that the district court clearly e rred in denying its motion for a ttorney’s fees, expert witness fees, and expenses. SUMCO sought to recove r these fees and expenses in connection

5 MEMC als o argues on appeal that the di strict court erred in striking certain “claims charts” from the exper t report of Dr. Luciano Mule’Stagno. The report consists of the results of testing performed on sili con wafers produced during discovery by SUMCO, and compris e s seven pages of narrati ve op inion and almost 500 pages of materials relating to testing methodology and results. The district court described t h e “claims charts” as follows: The Repor t contains various c l aim chart s comparing the tested wafers to the ’302 Paten t. . . . The charts are crude and merely contain check marks next to eac h of the c l aims of the ’302 patent each tested wafe r allegedly infringes. The narrative accompany ing the chart is also vague. For example, “[e]ach wafer is also a single crystal meeting the conventional geometric require ments of the preamble.” Summary Judgment Order , slip op. at 30. T he court co ncluded that the charts violated Patent Loc al Rule 3-1 because t hey did not identify each element of each claim and did not specify where eac h claim lim itati on was met in each accused wafer. Id. The court also ruled t hat MEMC had failed t o demonstr ate “good c ause” under Patent Local Rule 307 sufficient to amend its in fringement contentions. We see no abuse of discretion in the district court’s exc l us ion of th e claims ch arts from Dr. Mule’Stagno and thus decline to disturb the court’s ruling.
04-1396, -1513 20with MEMC’s patent infringement claims. Be fore the district court, SUMCO asserted that the case was exceptiona l under 35 U. S.C. § 285 “ based on [MEMC’s] failure to conduct an adequat e prefiling investigation and for [MEMC’s] egregiou s litigatio n misconduct in the pros ecution of [its patent in fringement claims].” (Motion for Attorney’s Fees at 2). SUMCO also sought sancti ons under Fed. R. Civ . P. 11 and 28 U.S.C. § 1927, “b ased o n M E MC’s fa ilure to con duct an ad equate pre f iling inv e stigation; for [MEMC’s] maintenance of an unwarranted infrin gement claim in the face of uncontroverted evidence of the lack of subject matter jurisdiction; and for plaintiff’s counsel’s unreasonable and vexatious mu ltiplying of the proceedings.” ( Id. ) With respect to its claim of an im proper prefiling investigat ion, SUMCO asserted that “[t]he extent of MEMC’s prefiling analys is was a ‘Compet itor 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 evidenc e that the waf e rs used in the “Compe titor Analy s is” were manufactured pursuant to the ’302 patent. ( Id. ) SUM C O further asserted that MEMC failed to investigate whether SUMCO made, used, sold, offered fo r sale, or imported the accused wafers into the United States, stati ng: “[t]he only ev idence MEMC had was information from a[] MEMC salesman in T e xas who c l aimed to ha ve seen boxes of wafers with defendants’ logo on them in Samsung’s warehouse . . . i n Austin, Texas.” ( Id. at 7.) The distric t court determined that “MEMC’s pre-filing investig ation, while not ideal, does not rise to the level of sanctionable conduc t 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 paten t and construed the claims consistent with

04-1396, -1513 21the standard canons of claim construction. Id. , slip op. at 3. The claims of the ’302 patent then were compared wit h the results of an analysi s 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 us ed by both Samsung Austin and Samsung Korea. Id. , slip op. at 4. T hus, the court concluded: Considering the information MEMC derived from the Competitor Analysis a nd what MEMC knew about the silic on wafer industry in general and about its own dealings wit h Samsung in particular, MEMC’s belie f, at the time it filed suit, that Sumco’s pure s i licon wafers infringed the ’302 Patent cannot be characterized as friv olous or unjustified. Given this, and given that there is no evidence either (1) that the Sumco wafers that were the subject of the Competitor Analys is were materi ally 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 proc eeded with the instant suit despite this knowledge, SU MCO has failed to meet its substantial burden of showing that ME MC’s infringement claim was “clearly and convinc i ng ly vexatious, unjustified, or frivolous.” See F o rest Labs. , 339 F.2d at 1 330. Moreover, the record does not s upport a findi ng that an award of fees is necessary in this case to prevent a “gross injustice.” Id. at 1329. Id. , slip op. at 6. The district court also concluded that MEMC’s belief, at the time of suit, that SUMCO was performi ng infringing ac tivity in the United States was neither frivolous nor unjustified. Id. , slip op. at 7-8. With respect to SUMCO’s motion for sanctions under section 1927, t he district court found that “the record does not support a finding t hat MEMC’s conduct during this lit igation was reckless or conducted in bad faith.” Id. , slip op. at 10. Pursuant t o 35 U.S. C. § 285, a “c ourt in excep t ional cas e s may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285 (2000). A determination of whether a case is eligible for attorney fees under section 285 is a two

04-1396, -1513 22step process. Cybor Corp. v. FAS Techs., Inc. , 138 F.3d 1448, 1460 (Fed. Cir. 1998)

. First, the district court must determine whether a case is exceptional, a factual determination reviewed for clear error

. Id. (citation omitted). “A finding is clearly erroneous when, des pite some supporting evidenc e, ‘the reviewing court on the entir e evidence is left with the definite and firm conviction that a mistake has been committed.’ ” Forest Labs., Inc. v. Abbott Labs. , 339 F.3d 1324, 1328 (Fed. Cir. 2003) (citing Unit ed States v. Gypsum Co. , 333 U.S. 364, 395 (1948) ). Second, the district
court must determine whether attorney fees are appropriate, a determination that we review for an abuse of discretion. Cybor Corp. , 138 F.3d at 1460 (cit ation omitted). “ A district court abuses its di scretion when it s decis ion is base d on clearly erroneous findings of fact, is based on erroneous interp retations of the law, or is clearly unreasonable, arbitrar y or fanciful.” Id. (citati on omitted). Moreover, under 28 U.S.C. § 1927: Any attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess c o sts, expenses, and attorneys' fees reasonably incurred because of such conduct. 28 U.S.C. § 1927 (2000). We re view the district court’s deni al of SUMCO’s motion f o r sanctions under section 1927 for an abuse of discretion, under the law of the Ninth Circuit. Tr ulis v. Barton , 107 F.3d 685, 692 (9th Cir. 1995 ). The Ninth Cir c uit has held that section 1927 aut horizes sanctions only for the multiplication of procee dings, In r e Keegan Mgmt. Co. Sec. Litig. , 78 F.3d 431, 435 (9th Cir. 1996), and that section 1927 sanctions r equire a finding of recklessness or bad fait h, B.K.B. v. Maui Po lice Dep ’ t , 276 F.3d 1091, 1107 (9th Cir. 2002).

04-1396, -1513 23We agree with MEMC that the di strict court did not clearly err in finding this case not to be exceptiona l under section 285. As fa r as MEMC’s inv e stigation prior to filin g suit for dir e ct infringement under section 2 71(a) is c o ncerned, t here is evidence that MEMC’s attorneys performed a good faith, info rmed 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 deny ing SUMCO’s motion for sanctions und e r section 1927. SUM C O has failed, on appeal, to point to any evidenc e that MEMC’s attorneys “unreasonably and v e xatiously” mult iplied the proceedin g s in this case. Furthermore, “[b]ecause the sect ion authorizes sanctions only for t he ‘multipli[cation of] proceedin g s ,’ it applies only to unnecess a ry filings and tactics once a lawsuit has begun .” In re Keegan Mgmt. Co. Sec. Litig. , 78 F.3d at 435 (emphasis adde d ). Thus, the adequacy of MEMC’s pr efiling inv e stigat ion is irrelevant to the section 19 27 inquiry. Id. CONCLUS ION We agree with the dis t rict court that, as a matter of law, SUMCO cannot be liable for direct infringement of t he ’302 patent under 35 U.S. C. § 271(a). Summary judgment of non-infringement on MEMC’s direct infr ingement claim was therefore proper. Howev e r, because we conclude t here are genuine issues of material fact with regard to whether SUMCO is liable for induced infri ngement of the ’302 patent under 35 U.S.C. § 271(b), w e hold that the district court erre d in granting summary judgment i n favor of SUMCO on that claim. That part of the district court’s judgment is thus reversed, and the case is remanded to the district court for further proceedings consistent with this opinion. On the cross-appeal, we affirm t he district court’s denial of SUMCO’s

04-1396, -1513 24application for fees and expens es relating to MEMC’s claim of direct infringement and inducement of infringement. COSTS Each party shall bear its own costs.

AFFIRMED-IN-PART , R E VER SED -IN

- PAR T , and REM A NDED

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