A U.S. patent is infringed when a third party, without permission of the patent holder, makes, uses, sells, offers to sell, or imports the patented invention within the U.S. If a third party performs any of those acts with the patented invention outside the U.S., the U.S. patent will not be infringed. Seems pretty straightforward, right?
Not so fast. What if the component parts that make up the patented invention are made in the U.S. but the parts are shipped outside the U.S. for final assembly? Or, where is a sale deemed to physically take place if some of the negotiations and contracting occur in the U.S. while the rest occur outside the U.S.?
These questions and more have been addressed by U.S. federal courts, as described below.
Evolving Territorial Boundaries
In the case of Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972), the U.S. Supreme Court held that making components of a patented product in the U.S. and then shipping those components abroad for assembly did not constitute patent infringement.
In the Court’s view, a patented product is only “made” upon final assembly, and since final assembly in that case had been performed outside the U.S., the Court found no patent infringement.
Expanded international trade and the globalization of manufacturing and production processes resulted in industry pressure on the U.S. Congress to override Deepsouth through legislative action. As a result, the U.S. Patent Act was amended such that infringement cannot be avoided by shipping U.S.-made components of a patented invention abroad for assembly.
However, the components must represent “all or a substantial portion” of the components of the patented invention, or the supplied components must be “especially made or especially adapted” for use in the invention and not “a staple article of commerce.”
A little over a decade later, Congress further amended the Patent Act to make it an infringing act to import into the U.S. a product made by a process covered by a U.S. patent. However, any product that is materially changed or that becomes a non-essential component of another product is not considered to be made by the patented process.
Federal Courts Provide Further Clarification
With respect to where a sale is deemed to physically take place, the U.S. Court of Appeals for the Federal Circuit has consistently avoided a rigid approach that defines a sale in terms of a single place where a particular act takes place.
In contrast, the Federal Circuit has used a standard by which the “substantial activities” of a sale are used to determine whether the sale occurred in the U.S.. Those substantial activities include negotiations, contracting, shipment and delivery.
For negotiations, on the one hand, the Federal Circuit has held that negotiations in the U.S. are not sufficient for infringement when all other substantial activities occur outside the U.S. (Halo Elecs., Inc. v. Pulse Elecs., Inc., 831 F.3d 1369 (Fed. Cir. 2016)).
On the other hand, the Federal Circuit has also held that in some cases, negotiations alone can be enough to determine the location of a sale, such as if the negotiations consist of the buyer selecting a design that was designed and presented to the buyer in the U.S. (Cal. Inst. of Tech. v. Broadcom Ltd., 25 F.4th 976 (Fed. Cir. 2022)). It all depends on the nature and role of the negotiations in the overall sale.
For contracting, when orders and deliveries for a U.S.-patented product are both received abroad by a contract manufacturer, the Federal Circuit also held in Halo that the subsequent inclusion of the product into another item that eventually makes its way to the U.S. does not constitute infringement.
By contrast, where a contract for sale of a U.S.-patented product is entered into outside of the U.S. to sell, deliver, and use the product within the U.S., such a contract constitutes an offer to sell within the U.S. (Transocean Offshore Deepwater Drilling, Inc. v. Maersk Construction U.S.A, Inc., 617 F.3d 1296 (Fed. Cir. 2010)).
For shipment and delivery, the Federal Circuit rejected the argument that products shipped from abroad to the U.S. using a method in which legal title is transferred as soon as the product is shipped still constitutes a sale abroad (Litecubes, LLC v. N. Light Prods., 523 F.3d 1353 (Fed. Cir. 2008)).
The Federal Circuit has also held that a non-U.S. company is not liable for infringement when it sells a product to a non-U.S. packaging company that sells the product in the U.S., so long as the packaging company controls every step of the purchase (MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1373 (Fed. Cir. 2005)).
The territorial limitations of U.S. patent infringement continue to evolve. Although a nexus of some activity in the U.S. is required, infringement may be found even when some activities happen outside the U.S. Determining what constitutes infringement when some acts occur in the U.S. and some occur abroad requires detailed legal analysis.
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Whether you need help determining the territorial scope of your U.S. patent, or protecting your other valuable intellectual property, the attorneys at METROLEX IP can provide you with high-quality counseling, advice and work product. Contact METROLEX IP today.