By Steve Wilfong
Pricing and Contract Negotiations within United States not Sufficient to Constitute “Sale Within” the United States
The United States Court of Appeals for the Federal Circuit in Halo Electronics, Inc. v. Pulse Electronics, Inc., 13-1472 (Fed. Cir. October 22, 2014), affirmed the United States District Court for the District of Nevada’s ruling that Pulse did not directly infringe three of Halo’s patents related to surface mount electronic packages (U.S. Patents #5,656,985, 6,297,720, and 6,344,785), because the accused products were not sold, shipped, manufactured or delivered within the United States. Halo at 2. Halo argued that because negotiations and demand projections between Pulse and a buyer occurred in the United States, the accused products were “sold within” the United States as defined in Section 271(a) of the patent statute. Id. at 9. The Federal Circuit rejected this argument, holding that pricing and contract negotiations do not constitute a sale within the United States “when substantial activities of [the] sales transaction, including the final formation of a contract for sale . . . [and] delivery and performance under that sales contract, occur entirely outside the United States.” Id. at 12. The Federal Circuit stated that the “presumption against extraterritorial application of United States laws” supports this decision. Id. at 13. The Federal Circuit also concluded that the fact that Halo suffered economic harm from Pulse’s actions was not sufficient to establish infringement, id. at 14, and upheld the District Court’s judgment that Pulse’s infringement was not willful, id. at 19. Law360 provides a discussion of the ruling.
Examining Electronic Passports Does Not Constitute Infringement
The United States Court of Appeals for the Federal Circuit in Iris Corporation v. Japan Airline Corporation, 10-1051 (Fed. Cir. October 21, 2014), affirmed the United States District Court for the Eastern District of New York’s ruling that Japan Airlines Corporation did not infringe Iris Corporation’s patent on secure identification document production (U.S. Patent #6,111,506). Iris at 2. Iris argued that Japan Airlines examines passports that are made using methods claimed in the patent, and that this process constitutes patent infringement. Id. at 3. The Federal Circuit rejected this argument, affirming the District Court’s finding that the infringing acts are carried out “for the United States” as described in 28 U.S.C. §1498(a), and that as a result Iris’s only remedy would be an “action against the United States.” Id. at 4, citing 28 U.S.C. §1498(a). The court concluded that Japan Airlines’ passport examination was both “conducted ‘for the government’” and “conducted ‘with the authorization or consent of the government,” and that as a result the United States had assumed liability for the infringing activities. Id. In support of this conclusion, the court stated that Japan Airlines could not comply with United States laws without examining passports, id., and that the actions benefited the government by improving national security, id. at 5-6.
Divided Court of Appeals Denies Bristol-Myers Rehearing Petition
The United States Court of Appeals for the Federal Circuit in Bristol-Myers Squibb Company v. Teva Pharmaceuticals USA, Inc., 13-1306 (Fed. Cir. October 20, 2014), denied Bristol-Myers’ combined petition for panel rehearing and rehearing en banc. Bristol-Myers at 3. The panel held that a Bristol-Myers patent for a compound used to treat hepatitis B was invalid due to obviousness, because it was based on a prior-art compound. Id. at 2 (Taranto, dissenting). The panel concluded that the fact that the prior-art compound was found to be toxic after Bristol-Myers filed their patent should not influence the finding of obviousness. Id. The Federal Circuit affirmed the panel’s position, holding that the toxic nature of the prior compound should not be considered in this case under 35 U.S.C. §103, because “an invention is not patentable if it ‘would have been obvious before the effective filing date . . . to a person having ordinary skill in the art to which the claimed invention pertains.” Id. at 1 (Dyk, concurring), citing 35 U.S.C. §103 (emphasis in original). The opinion included two dissents, which raised concerns that the majority’s ruling would make the process of establishing patentability of new products unduly difficult. See, e.g., id. at 3 (Newman, dissenting). Law360 provides an in-depth discussion of the ruling.