Opinion ID: 2744538
Heading Depth: 3
Heading Rank: 1

Heading: Sale

Text: 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., 550 U.S. 437, 441 (2007) (“It is the general rule under United States patent law that no infringement occurs when a patented product is made and sold in another country.”). We first consider whether the products that Pulse manufactured, shipped, and delivered to buyers abroad were sold within the United States for purposes of § 271(a). 10 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 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., 35 F.3d 1576 (Fed. Cir. 1994), a case involving domestic sales by defendants who shipped products from Texas and California free on board (f.o.b.) to buyers in Illinois, and concerning whether a trial court in Illinois had personal jurisdiction over the defendants, we held that patent infringement occurs where the infringing sales are made. Id. at 1577–79 (citing Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1570–71 (Fed. Cir. 1994)). We stated that: [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, 471 U.S. 462, 478–79 (1985)). And we held that the sale in that case occurred in Illinois where the buyer was located, but “not necessarily only there.” Id. Thus, under North American Philips, a sale may occur at multiple locations, including the location of the buyer, for purposes of personal jurisdiction. 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 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 11 sale occurred based on factors that included places of contracting and performance. Litecubes, LLC v. N. Light Prods., Inc., 523 F.3d 1353, 1370 (Fed. Cir. 2008); MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1377 (Fed. Cir. 2005). Although the place of contracting may be one of several possible locations of a sale to confer personal jurisdiction, we have not deemed a sale to have occurred within the United States for purposes of liability under § 271(a) based solely on negotiation and contracting activities in the United States when the vast majority of activities underlying the sales transaction occurred wholly outside the United States. For such a sale, one must examine whether the activities in the United States are sufficient to constitute a “sale” under § 271(a), recognizing that a strong policy against extraterritorial liability exists in the patent law. See Microsoft, 550 U.S. at 455 (“The traditional understanding that our patent law operate[s] only domestically and do[es] not extend to foreign activities is embedded in the Patent Act itself.” (alterations in original) (citation and quotation marks omitted)); MEMC, 420 F.3d at 1375–76 (“[T]he reach of section 271(a) is limited to infringing activities that occur within the United States.”). 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., 418 F.3d 1282, 1319 (Fed. Cir. 2005). Indeed, Article 2 of the Uniform Commercial Code, which is recognized as a persuasive authority on the sale of goods, provides that “[a] ‘sale’ consists in the passing of title from the seller to the buyer for a price.” U.C.C. § 2-106; see also Black’s Law Dictionary 1364 (8th ed. 2004) (defining “sales” as “[t]he transfer of property or title for a price”). Section 2-106 separately defines a “contract for sale” as including “both a present sale of goods and a contract to sell goods at a future time.” 12 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. While we have held that a sale is “not limited to the transfer of tangible property” but may also be determined by “the agreement by which such a transfer takes place,” Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617 F.3d 1296, 1311 (Fed. Cir. 2010) (citing NTP, 418 F.3d at 1319), the location of actual or anticipated performance under a “contract for sale” remains pertinent to the transfer of title or property from a seller to a buyer, see id. at 1310 (considering the location of delivery and performance under a contract). Consistent with all of our precedent, we conclude that, when substantial activities of a sales transaction, including the final formation of a contract for sale encompassing all essential terms as well as the delivery and performance under that sales contract, occur entirely outside the United States, pricing and contracting negotiations in the United States alone do not constitute or transform those extraterritorial activities into a sale within the United States for purposes of § 271(a). On undisputed facts, the products under discussion here were manufactured, shipped, and delivered to buyers abroad. Halo, 810 F. Supp. 2d at 1207 (“All accused products [at issue] were at no point, in transit or otherwise, in the United States.”). In addition, Pulse received the actual purchase orders for those products abroad. Although Pulse and Cisco had a general business agreement, that agreement did not refer to, and was not a contract to sell, any specific product. J.A. 15135–37. While Pulse and Cisco engaged in quarterly pricing negotiations for specific products, the negotiated price and projected demand did not constitute a firm agreement to buy and sell, binding on both Cisco and Pulse. Instead, Pulse received purchase orders from Cisco’s foreign contract manufacturers, which then firmly established the essential terms including price and quantity of binding contracts to buy and sell. Moreover, Pulse was paid abroad by those contract manufacturers, not by Cisco, HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 13 upon fulfillment of the purchase orders. Thus, substantial activities of the sales transactions at issue, in addition to manufacturing and delivery, occurred outside the United States. Although Halo did present evidence that pricing negotiations and certain contracting and marketing activities took place in the United States, which purportedly resulted in the purchase orders and sales overseas, as indicated, such pricing and contracting negotiations alone are insufficient to constitute a “sale” within the United States. 1 Any doubt as to whether Pulse’s contracting activities in the United States constituted a sale within the United States under § 271(a) is resolved by the presumption against extraterritorial application of United States laws. “The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law.” Microsoft, 550 U.S. at 454–55. As the Supreme Court has stated on multiple occasions, “[o]ur patent system makes no claim to extraterritorial effect; these acts of Congress do not, and were not intended to, operate beyond the limits of the United States, and we correspondingly reject the claims of others to such control over our markets.” Id. at 444 (quoting Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 531 (1972) (quoting Brown v. Duchesne, 60 U.S. (19 How.) 183, 195 (1857))) (internal citation and quotation marks omitted). 1 On these facts, we need not reach Halo’s argument that the place where a contract for sale is legally formed can itself be determinative as to whether a sale has occurred in the United States because we agree with the district court here that the pricing negotiations and contracting activities in the United States to which Halo points did not constitute the final formation of a definitive, binding contract for sale. 14 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. “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 (alteration in original) (quoting Brief for United States as Amicus Curiae 28). As the Supreme Court has stated, if one desires to prevent the selling of its patented invention in foreign countries, its proper remedy lies in obtaining and enforcing foreign patents. See Deepsouth, 406 U.S. at 531 (“To the degree that the inventor needs protection in markets other than those of this country, the wording of 35 U.S.C. §§ 154 and 271 reveals a congressional intent to have him seek it abroad through patents secured in countries where his goods are being used.”). 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, 35 F.3d at 1579 (“[T]he statute on its face clearly suggests the conception that the ‘tort’ of patent infringement occurs where the offending act is committed and not where the injury is felt.”). Moreover, Halo recovered damages for products that Pulse delivered outside the United States but were ultimately imported into the United States in finished end products based on a theory of inducement. 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. HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 15 Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348, 1371– 72 (Fed. Cir. 2013) (“[T]he entirely extraterritorial production, use, or sale of an invention patented in the United States is an independent, intervening act that, under almost all circumstances, cuts off the chain of causation initiated by an act of domestic infringement.”) (citing Morrison v. Nat’l Austl. Bank Ltd., 561 U.S. 247, 266 (2010) (“But the presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case.” (emphasis in original))). 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.