Extraterritorial Patent Infringement Liability After. NTP, Inc. v. Research In Motion, Ltd. Jason R. Dinges

Transcription

1 Extraterritorial Patent Infringement Liability After NTP, Inc. v. Research In Motion, Ltd. Jason R. Dinges I. INTRODUCTION II. BACKGROUND A. Territorial Nature of Patent Laws Limits on Extraterritorial Application of U.S. Patent Law Role of International Treaties in Specifying the Territorial Limits of Patent Laws International Comity B. Patent Infringement Liability Infringing Activities Under 35 U.S.C. 271(a) Infringing Activities Under 35 U.S.C. 271(f) and 271(g) The Special Problem of Network Inventions C. Background of the NTP v. Research In Motion Litigation The Technology at Issue Procedural History III. ANALYSIS A. Holding of the NTP v. Research In Motion Case The Court s Consideration of NTP s System Claims The Court s Consideration of NTP s Method Claims Applicability of 271(f) and 271(g) B. Consistency with Statutory Language and Supreme Court Precedent C. Consistency with International Patent Treaties and Foreign Relations IV. RECOMMENDATIONS A. Amend Infringement Liability Provisions B. Reciprocal Trade Agreements C. Careful Claim Drafting

2 218 The Journal of Corporation Law [Fall V. CONCLUSION I. INTRODUCTION Conventional wisdom supposes that patent law is territorial. 1 Since individual countries grant patent rights to inventions, those rights are necessarily enforceable only in that country. 2 New technologies involving computer and telecommunications networks challenge a basic assumption of territoriality: that patent-eligible subject matter is geographically discrete. For example, a patented machine in a factory has only one location: the factory. On the other hand, components of a patented communications system may not even be on the same continent, let alone in the same building. An invention that is not situated in one place may make it difficult to show patent infringement against a single user when applying current law. This Note will analyze the recent Court of Appeals for the Federal Circuit (CAFC) decision in NTP, Inc. v. Research In Motion, Ltd., 3 which challenges the traditional notions of patent law territoriality. The case examined whether Research In Motion (RIM), the maker of the BlackBerry handheld system, could be held liable for patent infringement in the United States even though some of the components of that system were located in Canada. 4 The CAFC held that there could be patent infringement, and applied the control and beneficial use test: as long as the control and beneficial use of the system occurs within the United States, then there may be infringement regardless of any one component s location. 5 Thus, liability for patent infringement may extend to some activities outside the territorial bounds of the United States. Expanding the territorial application of U.S. patent law poses an interesting policy conflict. On the one hand, it may be desirable to allow U.S. patentees the right to recover from infringers operating partly inside and partly outside the United States. If the alleged infringer simply attempts to subvert the rights of the patent holder by moving some operations across the border, then perhaps those activities should be reachable under U.S. law. This policy would find support in the idea that, in order to provide the constitutional incentive for progress in the useful arts, 6 inventors should be accorded fair protection for their inventions. On the other hand, the United States must engage other countries in business and trade matters. Proper international relations and trade policy would seem to suggest that activities within other countries should be beyond the reach of U.S. law. Moreover, the participation of the United States in various intellectual property treaties may militate against the unilateral imposition of U.S. law on foreign activities. These 1. See generally 5 DONALD S. CHISUM, CHISUM ON PATENTS (2005) (discussing the territorial scope of patent rights). 2. ROGER E. SCHECHTER & JOHN R. THOMAS, INTELLECTUAL PROPERTY: THE LAW OF COPYRIGHTS, PATENTS, AND TRADEMARKS 287 (2003) F.3d 1282 (Fed. Cir. 2005), cert. denied, 126 S. Ct (2006). 4. Id. at Decca, Ltd. v. United States, 544 F.2d 1070, 1083 (Ct. Cl. 1976). 6. U.S. CONST. art. I, 8, cl. 8.

3 2006] Extraterritorial Patent Infringement Liability 219 policy tensions might not be easily resolved by the courts under current U.S. law. This Note will explore how the CAFC s ruling in NTP affects the territorial application of U.S. patent law. Part II introduces the notion of territoriality and its limits and goes on to indicate why the facts of NTP, Inc. v. Research In Motion, Ltd. challenged these traditional notions. Part III will examine the NTP opinion itself and point out the potential negative effects that might result from the court s holding. Part IV will offer some recommendations designed to address the policy concerns of network inventions and territoriality, yet avoid the potential harmful consequences of the test adopted in NTP. Specifically, this Note proposes three solutions to the problems created by the NTP decision: (1) amend the Patent Act to account for transnational infringement, (2) enter international trade agreements regarding liability for transnational patent infringement, and (3) require patentees to draft patent claims that avoid any transnational infringement problem. Together, these solutions seek to strike the appropriate balance between the interest of U.S. patentees and the interests of other countries. II. BACKGROUND A patent is a form of intellectual property that gives a patentee the right to exclude others from engaging in certain activities with regard to the invention during the patent term. 7 Like real property, a patent has defined boundaries that are specified in patent claims. 8 While the patent claim defines the scope of the invention, the scope of the rights granted to the patentee are specified by statute. 9 In defining the scope of patent rights, Congress has sought to balance its constitutional commitment 10 to provide incentives for new inventions against the harm to the public created by granting exclusive rights to a patentee. 11 At the same time, the rights of U.S. patentees must be balanced against the interests of other countries, so as not to intrude on the sovereignty of foreign nations. 12 This Part will survey this policy balance by explaining the nature of patent rights and introducing the concept of territoriality. A. Territorial Nature of Patent Laws Generally, U.S. laws are to be interpreted as not having extraterritorial effect unless 7. See 35 U.S.C. 271(a) (2000) (indicating the types of activities constituting infringement of patent rights). Specific infringing activities will be discussed in Part II.B, infra. 8. Like the description of land in a deed, patent claims describe the invention in formal terms by particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention. 35 U.S.C U.S.C. 271 (describing the patentee s rights in the event of infringement). 10. U.S. CONST. art. I, 8, cl. 8 (granting Congress the power to promote the Progress of Science and useful Arts ). 11. See SCHECHTER & THOMAS, supra note 2, at (indicating that the exclusive rights provided by patents encourage individuals to invest in research, while critics argue that patents bring about high social costs); see also F.M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 622 (3d ed. 1990) (indicating the incentive comes from the fact inventors can charge prices for patented products in excess of marginal cost, thereby both recovering expenditures and receiving profits). 12. See Curtis A. Bradley, Territorial Intellectual Property Rights in an Age of Globalism, 37 VA. J. INT L L. 505, 515 (1997) (describing the doctrine of international comity, where deference is given to foreign interests).

4 220 The Journal of Corporation Law [Fall there is a clear intent from Congress to the contrary. 13 Likewise, patent rights are thought to be territorial. 14 In other words, a patent granted in the United States is effective only in the United States. 15 For example, a U.S. patent cannot be enforced in Japan, nor can a Japanese patent be enforced in the United States. The limits on extraterritoriality are derived from three sources: (1) the Supreme Court s interpretations of the Patent Act, (2) the United States obligations under international treaties and (3) principles of international comity. 1. Limits on Extraterritorial Application of U.S. Patent Law Recognizing the territorial limitations within the Patent Act, the Supreme Court has refused to give extraterritorial effect to U.S. patents. 16 In Deepsouth Packing Co. v. Laitram Corp., 17 the Court indicated that the patent laws are to be given no extraterritorial effect. 18 This case involved patents to a machine used to process shrimp. 19 Deepsouth, the alleged infringer, manufactured all of the components of the patented machine in the U.S. and then exported them outside the United States where they were assembled into the patented device. 20 Since the making of the components did not constitute a making of the patented device, the Court held that Deepsouth was not liable for patent infringement. The Court stated that, in general, [o]ur patent system makes no claim to extraterritorial effect. 21 Congress observed that this ruling allowed entities to avoid infringement too easily and responded to Deepsouth by enacting 35 U.S.C. 271(f). 22 Despite the fact that the case was superseded by statute on the export issue, Deepsouth still stands for the proposition that any interpretation of the Patent Act that would give extraterritorial effect to patent rights is disfavored EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 248 (1991) ( It is a longstanding principle of American law that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States. (quoting Foley Bros., Inc. v. Filardo, 336 U.S. 281, 285 (1949))). 14. See GRAEME DINWOODIE, INTERNATIONAL AND COMPARATIVE PATENT LAW 30 (2002) (noting that patent rights are national in scope even if the national laws of a particular country are significantly shaped by the obligations of that country under international intellectual property law ); see also RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS LAW OF THE UNITED STATES 415 cmt. i. (1987) (stating that [p]atents are considered territorial, having legal effect only in the territory of the issuing state ). 15. See generally 4 JOHN GLADSTONE MILLS III ET AL., PATENT LAW FUNDAMENTALS 21:4 (2d ed. 2006) ( Under ordinary circumstances, United States courts will decline to adjudicate claims alleging the infringement of foreign patents, even though the alleged infringers are subject to the jurisdiction of a United States court. ). 16. For early cases addressing extraterritorial application of the U.S. patent laws, see, e.g., Dowagiac Mfg. Co. v. Minn. Plow Co., 235 U.S. 641, 650 (1915) ( The right conferred by a patent under our law is confined to the United States and its territories.... ); Brown v. Duchesne, 60 U.S. (19 How.) 183, 195 (1857) (stating that the patent laws do not, and were not intended to, operate beyond the limits of the United States; and as the patentee s right of property and exclusive use is derived from [the patent laws], they cannot extend beyond the limits to which the law itself is confined ). 17. Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972), superseded by statute, Patent Law Amendments Act of 1984, Pub. L. No , 98 Stat (1984). 18. Id. at 531 ( Our patent system makes no claim to extraterritorial effect. ). 19. Id. at Id. at Id. at See Part II.B.2, infra. 23. Deepsouth Packing, 406 U.S. at 531.

5 2006] Extraterritorial Patent Infringement Liability Role of International Treaties in Specifying the Territorial Limits of Patent Laws In addition to the presumption against extraterritoriality, United States treaty obligations also restrain the extraterritorial effect of U.S. patents. While the agreements themselves do not directly address the issue of extraterritoriality, the Paris Convention and the TRIPs agreement impliedly place limits on the scope and effect of each individual country s patent laws. This Part will briefly examine these two agreements. The Paris Convention was one of the first international agreements with regard to patent rights. 24 The goal of the Convention was not to create an international patent system, but rather to serve as an inducement to individual countries to create patent regimes that are national in scope. 25 Consistent with the idea that patent regimes are national, the Paris Convention endorses the principle of independence that patent rights in one country are independent of patent rights in other countries. 26 Therefore, it recognized that signatory nations would implement their own patent regimes. 27 With the exception of the importation of products manufactured by a patented process, the Paris Convention does not recognize the extraterritorial enforcement of patent rights. 28 Many of the ideas of the Paris Convention with regard to national treatment of patent rights were also included in the TRIPs Agreement. 29 TRIPs requires WTOmember nations to adopt minimum standards of intellectual property protection, but allows each member nation to adopt stricter standards if they choose. 30 The fact that signatory nations agreed that patent laws would be specified by each member country necessarily implies that those laws would be restricted to national scope. 31 Like the Paris Convention, TRIPs only recognizes extraterritorial enforcement of patent rights with regard to the importation of products made by a patented process International Comity The Paris Convention and TRIPs recognize jurisdictional zones for each country where patent rights are granted and enforced. Nevertheless, these agreements do not explicitly prohibit transnational enforcement of patent rights. Rather, that restriction is found in the principle of comity. The principle of comity requires that sovereign nations 24. See NUNO PIRES DE CARVALHO, THE TRIPS REGIME OF PATENT RIGHTS (2d ed. 2005) (discussing that the 1883 adoption of the Paris Convention was the result of stolen inventions that were exhibited at world s fairs). 25. Id. at Paris Convention for the Protection of Industrial Property art. 4(1), Mar. 20, 1883, 21 U.S.T. 1583, 828 U.N.T.S. 305 [hereinafter Paris Convention] ( Patents applied for in the various countries... shall be independent of patents... in other countries. ). 27. Id. art. 2(1) (requiring that signatory nations treat citizens of other signatory nations equally to their own citizens). 28. Id. art. 5quater. 29. Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, 33 I.L.M. 81 [hereinafter TRIPs]. 30. Id. art. 3(1) (stating that [e]ach Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals ). 31. Id. pmbl. (stating that one of the purposes of TRIPs is to provide effective and appropriate means for the enforcement of trade-related intellectual property rights, taking into account differences in national legal systems ). 32. Id. art. 28(1)(b).

6 222 The Journal of Corporation Law [Fall respect each other s jurisdiction by limiting the reach of their laws with particular emphasis on avoiding any conflict. 33 Comity is not an absolute requirement. The Restatement (Third) of Foreign Relations Law establishes a balancing test for determining when it is unreasonable to reach activities in another jurisdiction. 34 The test for reasonableness requires evaluating, among other things, the character of the activity to be regulated, the importance of regulation to the regulating state, the extent to which other states regulate such activities, and the degree to which the desirability of such regulation is generally accepted. 35 This test provides a useful standard for establishing when it is appropriate to give U.S. laws extraterritorial effect, taking account of both the United States interests and those of the foreign jurisdiction. 36 The next Part will examine the United States patent infringement laws and the situations in which those laws have been applied extraterritorially. B. Patent Infringement Liability When another person engages in an activity contrary to the patentee s exclusive right, he is said to have infringed the claims of the patent. 37 Civil actions for patent infringement are within the exclusive subject matter jurisdiction of the federal courts. 38 This Part will examine the types of activities that constitute patent infringement and suggest that network and communications inventions pose particular problems under the current enforcement provisions of the Patent Act. 1. Infringing Activities Under 35 U.S.C. 271(a) A person may be liable for patent infringement if he or she makes, uses, offers to sell, or sells any patented invention, within the United States. 39 The Court of Claims elaborated on the territorial scope of patent infringement liability in Decca Limited v. United States. 40 The court addressed whether a navigation system, with components located in Norway, was within the United States for the purposes of patent infringement liability. 41 The system required the placement of transmitting stations around the world so navigation signals could be triangulated. 42 Despite its physical location, the court pointed out that the Norway station was continuously monitored from the United States, and the use of the station was made possible because of synchronization activities that were based in the United States. 43 Considering all of these facts, the Decca court found for the plaintiff and held that the defendant U.S. government s placement of the stations 33. Hartford Fire Ins. Co. v. California, 509 U.S. 764, 817 (1993) (Scalia, J., dissenting). 34. RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW 403(2) (1987). 35. Id. 36. Id CHISUM, supra note 1, U.S.C. 1338(a) (2000) U.S.C. 271(a) (emphasis added) F.2d 1070 (Ct. Cl. 1976). 41. Id. at More particularly, the cause of action in this case was allowed under 28 U.S.C. 1498, which waives sovereign immunity with regard to the direct infringement of patent claims by the federal government. 42. Decca, 544 F.2d at Id. at

7 2006] Extraterritorial Patent Infringement Liability 223 in Norway did not relieve it of patent infringement liability. 44 The court articulated the control and beneficial use test, whereby the control of the equipment from the United States and... the actual beneficial use of the system within the United States were important factors for determining patent infringement liability for systems located partially outside of the U.S. 45 Very few cases have elaborated on the control and beneficial use test and it was not applied by the CAFC until NTP Infringing Activities Under 35 U.S.C. 271(f) and 271(g) In contrast to 271(a), two other sections of the Patent Act expressly recognize that some extraterritorial activities may constitute infringment under U.S. law. In response to the Deepsouth case, discussed in Part II.A.1, Congress enacted 35 U.S.C. 271(f). 47 Subsection (1) of this provision prohibits the exportation of components of patented inventions from the United States so as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States. 48 Thus, this provision bans the export of components, where the next logical step in the manufacturing process would be assembly into the patented device outside the U.S. 49 Subsection (2) of 271(f) prohibits the exportation of any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial non-infringing use. 50 This provision makes it illegal to export material components that are meant for use only in a patented device. 51 If the parts are so unique as to only be useful in the patented machine, then the exporter may be liable for infringement of the patented device under U.S. law. 52 Section 271(g) is also meant to reach certain activities occurring outside the United 44. Id. at Id. at See, e.g., Hughes Aircraft v. United States, 29 Fed. Cl. 197, 243 (1993) (finding no patent infringement liability when the control component of the system was located outside the United States); Freedom Wireless, Inc. v. Boston Commc ns Group, Inc., 198 F. Supp. 2d 11, 17 (D. Mass. 2002) (holding that an alleged infringer was not liable for patent infringement because its database located within the United States was not a control point). 47. See Donald S. Chisum, Normative and Empirical Territoriality in Intellectual Property: Lessons from Patent Law, 37 VA. J. INT L L. 603, (1997) (stating that Congress was concerned about foreign activity that harms a patent owner s interest in deriving full economic advantage from the U.S. market for the patented invention ) U.S.C. 271(f)(1) (2000). For a recent discussion of 271(f), see Andrew F. Knight, Software, Components, and Bad Logic: Recent Interpretations of Section 271(f), 87 J. PAT. TRADEMARK OFF. SOC Y 493 (2005). 49. See Chisum, supra note 47, at (noting that 271(f)(1) rel[ies] on some domestic act as a hook to reach foreign-based economic activity and in this way serves as an incentive to drive U.S. manufacturing abroad); see also Eolas Tech., Inc. v. Microsoft Corp., 399 F.3d 1325, 1338 (Fed. Cir. 2005) (holding that master disks used to copy software on computers sold abroad were components of a patented invention ); AT&T Corp. v. Microsoft Corp., 414 F.3d 1366, 1369 (Fed. Cir. 2005) (holding that software to be installed on computers sold abroad was a component of a patented invention) U.S.C. 271(f)(2). 51. Knight, supra note 48, at Id.

8 224 The Journal of Corporation Law [Fall States. This provision prohibits the importation of a product which is made by a process patented in the United States. 53 For example, a plaintiff may own a U.S. patent on the method for making a widget. The defendant, located in a foreign jurisdiction, makes widgets by the patented process and then imports them into the United States. Since the patented method was not performed in the United States, there is no infringement liability under 271(a), but this action would constitute liability under 271(g). 54 Sections 271(f) and 271(g) evince Congress s intent to reach a subset of activities occurring outside the borders of the United States. While Congress s power to reach these activities may be questioned, it is outside the scope of this Note to address the issue. Rather, 271(f) and 271(g) provide an important contrast to 271(a), which, by its terms, is directed only to activities within the United States The Special Problem of Network Inventions 56 Network inventions, such as computer or communications systems, possess features that are not dealt with by current infringement provisions. 57 Network communications and computer systems, by their very nature, are designed to span large distances. The situation can arise where some components of the patented network invention may be used, or steps in the patented network process may be performed, in two or more locales by different entities. Even if a patent to a network invention is obtained in every country, the situation may arise where the invention as a whole is not practiced in any single jurisdiction. Despite valid patents, there could therefore be no infringement in any single country because the invention as a whole is not practiced in any one of them. 58 Lemley et al. note that patent claims to network inventions may be divided or distributed. 59 Because network inventions do not have to be confined to a discrete physical location, various components that comprise the patented invention may be located separately. 60 However, infringement liability requires that one entity must possess all of the components of the patented invention if a system is claimed or perform all of the steps in a process if a method is claimed. 61 In other words, if any element of the claimed invention is missing from the accused device or process, there can be no U.S.C. 271(g). 54. See supra notes 28 & 32 and accompanying text (remarking that the Paris Convention and TRIPs recognize extraterritorial infringement with regard to importation of products made by a patented process) U.S.C. 271(a). 56. This Note will use the term network inventions to mean types of computer, communications, or other electronic systems whose components are capable of functioning at geographically remote locations, linked by the internet, wireless technology, or other means. 57. See Mark A. Lemley et al., Divided Infringement Claims, 33 AIPLA Q.J. 255, 256 (2005) (noting that U.S. patent laws typically only prevent infringement by a single actor in a single country and the distributed nature of network inventions creates challenges in patent cases). 58. Id. at Id. at 256. (Under this nomenclature, divided claims are those where multiple actors possess or carry out the claimed invention and distributed claims are those where elements of the claimed invention are infringed in multiple jurisdictions.). 60. Id. at See 5A DONALD S. CHISUM, CHISUM ON PATENTS 18.03[4][a] (2005) (describing the all elements rule ).

9 2006] Extraterritorial Patent Infringement Liability 225 infringement. 62 The problem with distributed or divided patent claims is that infringement can only occur by aggregating the conduct of more than one actor or conduct that occurs in more than one country. 63 The CAFC in NTP addressed the issue of infringement of distributed claims when the components of the alleged infringing device span international borders. C. Background of the NTP v. Research In Motion Litigation This Part will review some of the technical and procedural aspects of the NTP case. While the technology at issue in the case was somewhat complex, NTP had to prove all of the elements of a standard patent infringement action: (1) that NTP possessed one or more valid, enforceable patent claims; 64 (2) that RIM s accused device or process possessed all of the elements of the claimed invention; 65 and (3) RIM made, used, sold, or offered to sell the patented invention within the United States. 66 The discussion below elaborates on the basis for NTP s patent infringement claim. 1. The Technology at Issue NTP is the owner of four patents involving wireless technology. 67 One of NTP s patents claims an electronic mail system with RF [radio frequency] communications to mobile processors and method[s] of operation. 68 The patents cover the components and processes necessary for integrating and wireless technology. 69 RIM s accused system relays information over a wireless network to BlackBerry handheld devices. 70 The similarity between the claims of NTP s patents and RIM s BlackBerry system led the jury to conclude that NTP s patents were infringed. 71 As discussed in Part II, the claims of a patent define the metes and bounds of the property right. 72 The claims of the NTP patents, which were being asserted against RIM, were of two types: system claims and method claims. 73 To ascertain infringement, each 62. See Lantech, Inc. v. Keip Mach. Co., 32 F.3d 542, 547 (Fed. Cir. 1994) ( For literal infringement, each limitation of the claim must be met by the accused device exactly, any deviation from the claim precluding a finding of infringement. ). 63. Lemley et al., supra note 57, at There is a statutory presumption of validity for issued patents. 35 U.S.C. 282 (2000) A CHISUM, supra note 61, 18.03[4][a] U.S.C. 271(a). 67. See U.S. Patent No. 5,436,960 (filed May 20, 1991); U.S. Patent No. 5,625,670 (filed May 18, 1995); U.S. Patent No. 6,067,451 (filed Sept. 28, 1998); U.S. Patent No. 6,317,592 B1 (filed Dec. 6, 1999). 68. U.S. Patent No. 5,436,960 (filed May 20, 1991). 69. Id.; U.S. Patent No. 5,625,670 (filed May 18, 1995); U.S. Patent No. 6,067,451 (filed Sept. 28, 1998); U.S. Patent No. 6,317,592 B1 (filed Dec. 6, 1999). 70. Research In Motion, (last visited Sept. 14, 2006). 71. NTP, Inc. v. Research In Motion, Ltd., No. 3:01CV767, 2003 WL , at *1 (E.D. Va. Aug. 5, 2003). 72. See supra note Patent law makes an important distinction between system (or product) and method (or process) claims. System claims typically cover tangible things, whereas method claims involve a series of acts performed in order to produce a given result. SCHECHTER & THOMAS, supra note 2, at

10 226 The Journal of Corporation Law [Fall patent claim must be compared independently to the accused system. 74 NTP s various system claims cover an system comprised of an originating processor, a gateway switch for receiving the information, an RF network for transmission of the information, and an interface switch connecting the gateway switch to the RF network. 75 At trial, the jury found that RIM s BlackBerry system possessed all of the claimed elements of NTP s system claims, and therefore, the jury found RIM liable for infringement of these claims. Except for RIM s relay component, which was located in Ontario, Canada, all other elements of NTP s claims were present within the United States. 76 NTP s method claims describe a method for transmitting originated information in an electronic mail system, comprising numerous steps of transmitting information from one component to another using an RF network. 77 The jury found that the operation of the BlackBerry was accomplished according to the process described in NTP s method claims. 78 Thus, the jury found RIM liable for infringement of the method claims. 2. Procedural History NTP sued RIM for infringement of the patents described above. 79 RIM sought summary judgment based on the fact that the relay component of the BlackBerry system, located in Canada, put RIM s allegedly infringing conduct outside the reach of 271(a) because this provision requires infringement to occur within the United States. 80 The district court denied summary judgment and entered judgment in favor of the plaintiff following a jury trial, awarding damages of approximately $53 million. 81 RIM appealed to the Court of Appeals for the Federal Circuit. 82 On the issues relating to the topic of this Note, 83 the panel affirmed the decision of the district court. 84 After RIM petitioned for rehearing and rehearing en banc, the original panel vacated its previous opinion and elaborated on the extraterritoriality issue but maintained its affirmance of the lower court decision. 85 This following Part reviews the court s ruling with regard to the 74. 5A CHISUM, supra note 1, n NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282, 1294 (Fed. Cir. 2005), cert. denied, 126 S. Ct (2006). 76. Id. at Id. at See id. at 1291 (summarizing the verdict: the jury found in favor of the plaintiff, NTP. The jury found direct, induced, and contributory, infringement by RIM on all asserted claims of the patents in suit. The jury also found infringement was willful. It rejected every defense proposed by RIM ). 79. Id. 80. NTP, 418 F.3d at NTP, Inc. v. Research In Motion, Ltd., No. 3:01CV767, 2003 WL , at *1 (E.D. Va. Aug. 5, 2003). 82. The Court of Appeals for the Federal Circuit has jurisdiction over most patent appeals from federal district courts based on 28 U.S.C (2000). 83. The NTP case involved three issues on appeal: (1) whether the district court s finding regarding the construction of the patent claims was proper; (2) whether the jury verdict lacked substantial evidence; and (3) whether the defendant RIM could be held liable for infringement as a matter of law, even though some of the alleged infringing activities took place in Canada. NTP, 418 F.3d at 1282, This Note will only address the third issue. 84. NTP, Inc. v. Research In Motion, Ltd., 392 F.3d 1336 (Fed. Cir. 2004), withdrawn, 418 F.3d 1282 (Fed. Cir. 2005). 85. NTP, 418 F.3d at 1282, 1287.

11 2006] Extraterritorial Patent Infringement Liability 227 extraterritoriality and the policy implications of that holding. III. ANALYSIS A. Holding of the NTP v. Research In Motion Case The CAFC began its analysis of the extraterritoriality issue in the NTP case by acknowledging that 271(a) is only actionable against patent infringement that occurs within the United States. 86 Moreover, [t]he situs of the infringement is wherever an offending act [of infringement] is committed. 87 Thus, the CAFC laid out the uncontroversial proposition that infringement liability requires that an individual commit one of the acts specified in 271(a) inside the United States. Next, the CAFC recognized that the BlackBerry system adds complexity to the analysis for many of the reasons described in Part II.B.3 with regard to network inventions in general. 88 The difficulty with the application of 271(a), the court noted, was that the relay component of RIM s system, which is the equivalent of the interface or interface switch limitations of NTP s patents, is in Canada, outside the borders of the United States. 89 The court framed the issue as one of statutory interpretation: whether the words within the United States of 271(a) limit[s] direct infringement where the location of at least a part of the patented invention is not the same as the location of the infringing act. 90 In proceeding to examine this issue, the CAFC dismissed the applicability of Deepsouth, indicating that Deepsouth dealt with the export of components where the operable invention was wholly outside the United States. 91 This case could therefore be distinguished because the operable assembly is partly within and partly outside the United States. 92 Based on the facts in Deepsouth, the Supreme Court had concluded that acts of infringement occurring outside of the United States could not be reached without a clear signal from Congress. 93 By rejecting Deepsouth, the CAFC appeared more willing to extend patent infringement liability to activities occurring outside the United States than the Supreme Court. Next, the CAFC examined what types of activities under 271(a) would be prohibited even if they occurred outside the United States. The court found the Decca case instructive on this point. 94 Similar to the facts of the NTP case, Decca involved an invention which, as an operable assembly, simply is not to be found solely within the 86. Id. at Id. at 1316 (quoting N. Am. Philips Corp. v. Am. Vending Sales, Inc., 35 F.3d 1576, 1579 (Fed. Cir. 1994)). 88. Id. at 1313 (stating that two features add to the complexity: (1) the patented invention is not one single device, but rather a system comprising multiple distinct components or a method with multiple distinct steps; and (2) the nature of those components or steps permits their function and use to be separated from their physical location ). 89. Id. 90. NTP, 418 F.3d at Id. 92. Id. 93. Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 531 (1972). 94. NTP, 418 F.3d at 1315.

12 228 The Journal of Corporation Law [Fall territorial limits of this country. 95 The court, without much elaboration, seemed to accept the basic proposition of Decca: the system had been used in the United States even though one of the claim limitations was only met by including a component located [outside the country]. 96 The Decca court based its conclusion largely on the idea that the equipment was controlled from the United States and the beneficial use of the equipment was in the United States, not Norway. 97 A fact important to the Decca court, but completely ignored by the CAFC, was that the infringing equipment was owned by the United States government. 98 Even though it appeared to adopt the Decca test readily, the NTP court acknowledged that the application of the control and beneficial use test may differ depending on whether system or method claims are at issue and on the type of infringing act the defendant committed (i.e., making, using, selling, etc). The court then went on to analyze the control and beneficial use issue separately for the two kinds of claims and types of infringing acts The Court s Consideration of NTP s System Claims System claims, also known as product or apparatus claims, refer to tangible objects, rather than steps in a process. 100 The CAFC stated that when analyzing infringement under the use prohibition of 271(a), the term use was to be given a broad construction. 101 The court looked to the dictionary for guidance of the ordinary meaning of the term use and determined that, consistent with its dictionary definition, the use of a patented system means to put into action or service. 102 Thus, for the purpose of 271(a), [t]he use of a claimed [invention] is the place at which the system as a whole is put into service, i.e., the place where [the] control of the system is exercised and [the] beneficial use of the system obtained. 103 The court concluded that under this test, it was proper for the jury to find infringement of NTP s system claims because RIM s customers located within the United States controlled the transmission of the originated information and also benefited from such an exchange of information [with the relay in Canada]. 104 In contrast to the system claims, the CAFC took a different approach with regard to NTP s method claims. The next Part examines the CAFC s analysis of infringement of these claims. 2. The Court s Consideration of NTP s Method Claims In analyzing infringement under 271(a), the CAFC treated method claims differently than system claims. As described in Part II.B.3, network inventions pose a problem to traditional infringement analysis because they may not be located in one 95. Id. at 1316 (citation omitted). 96. Id. 97. Id.; Decca Ltd. v. United States, 544 F.2d 1070, 1083 (Ct. Cl. 1976). 98. Decca, 544 F.2d at 1083 (placing particular emphasis on the ownership of the equipment by the United States ). 99. Id See supra note NTP, 418 F.3d at Id. at 1317 (quoting WEBSTER S THIRD NEW INTERNATIONAL DICTIONARY 2523 (1993)) Id Id.

13 2006] Extraterritorial Patent Infringement Liability 229 place. While this may be a new problem for network inventions, the problem has always existed for method claims. Conceptually, the steps in a process are easier to separate temporally and spatially than are the physical components of a device. 105 On the issue of use of the claimed method of transmitting information on an RF network, the CAFC noted that the concept of use of a patented method or process is fundamentally different from the use of a patented system or device. 106 While a system consists of tangible components, a method is a series of acts or steps. 107 The court stated that in order to use a patented method, each of the steps must be performed within the United States. 108 In contrast to a system, it is difficult to envision how the control and beneficial use test would apply to method claims, and the court properly refused to apply it here. 109 While it may be possible to control various components of a system at a distance, especially when those components are part of a network device, infringing use of a process requires the user to control each step of the process within the United States, which would not be possible if one of those steps were to be performed in Canada. Accordingly, the CAFC held as a matter of law that there could be no infringement of a patented method when one of the steps in that method occurs outside of the United States. 110 RIM, therefore, could not be held liable for infringement of the method claims in NTP s patents. 111 In reaching the conclusion that a patented method could not be used for the purpose of 271(a) liability unless all the steps of the invention occurred within the United States, the CAFC went on to analyze whether it was possible for RIM, by selling its product to customers, to infringe the method under the sell or offers to sell prohibitions of 271(a). 112 Because the term sale is not defined in the Patent Act, the court assume[d] that Congress intended to give the term its ordinary meaning as that term is understood from dictionaries and the Uniform Commercial Code. 113 From these sources, the court reasoned that a sale consists of four elements: (1) parties competent to contract, (2) mutual assent, (3) a thing capable of being transferred, and (4) a price in money paid or promised. 114 The court focused on the third element and pointed out that sale of a method is not conceptually possible because nothing is transferred. 115 The court noted that this interpretation is consistent with Congress s intent that not all of the 105. For example, consider a simple claim for a method of making cookies, comprising the steps of (1) mixing the ingredients to make a dough, (2) rolling the dough, and (3) baking the dough until lightly browned. It is conceivable that each step in this process could be carried out by a different person, possibly in a different jurisdiction NTP, 418 F.3d at Id. (citing In re Kollar, 286 F.3d 1326, 1332 (Fed. Cir. 2002)) Id. at 1318; see Zoltek Corp. v. United States, 51 Fed. Cl. 829, 836 (2002) (stating that if a private party practiced even one step of a patented process outside of the United States, it avoided infringement liability, as the patent statute was limited to acts committed within the United States ) NTP, 418 F.3d at Id Id Id Id. at NTP, 418 F.3d at Id.

14 230 The Journal of Corporation Law [Fall infringing acts of 271(a) should apply to method claims. 116 Moreover, the court cited the United States participation in the TRIPs Agreement to bolster the argument that method claims can only be infringed through use of the method. 117 The CAFC pointed out that it had previously held that an offer to perform a method may serve as a bar to obtaining patent rights. 118 Nevertheless, the court noted that the scope of the on sale activity presenting a bar to patentability under 102(b) is not coterminus with sells or offer to sell under 271(a). 119 Thus, the sale of the BlackBerry to customers and the ongoing service provided by RIM cannot be said to have infringed NTP s method claims as an improper sale or offer for sale within the meaning of 271(a). 120 Finally, the CAFC applied the same rationale that method claims are fundamentally different from system claims to conclude that NTP s method claims were not infringed under the imports prohibition of 271(a). 121 The court found it conceptually difficult to envision how one could import the steps of a process into the United States. Consequently, there was no infringement of NTP s method claims based on any of the activities prohibited by 271(a) due to the location of RIM s relay in Canada. 3. Applicability of 271(f) and 271(g) The CAFC discussed whether RIM could be held liable for infringement under 271(f) and/or 271(g), the provisions of the Patent Act that allow for extraterritorial application. The court did not consider whether NTP s system claims were infringed under 271(f) since it had already found infringement under 271(a). Rather, the court examined only NTP s method claims in light of these statutory provisions. Section 271(f) prohibits the export of the components of a patented invention. 122 Even if the steps of the patented method are thought of as components for the purpose of 271(f), the court pointed out that simply providing equipment to U.S. customers was not sufficient for RIM to be liable for infringement of NTP s method claims under 271(f) Id. (referencing the Senate and House reports relating to the Process Patents Amendments Act of 1987) Id. at Id.; see 35 U.S.C. 102(b) (2000) (prohibiting patentability if the invention was patented or described in a printed publication... or in public use or on sale in this country, more than one year prior to the date of the application for patent... ) NTP, 418 F.3d at 1320 ( [W]e have previously decline[d] to import the authority construing the on sale bar of 102(b) into the offer to sell provision of 271(a). (quoting 3D Sys., Inc. v. Aerotech Labs., Inc., 160 F.3d 1373, 1379 n.4 (Fed. Cir. 1998))) Id. at (limiting the holding to the facts of this case stating, We need not and do not hold that method claims may not be infringed under the sells and offers to sell prongs of section 271(a). Rather, we conclude only that RIM s performance of at least some of the recited steps of the asserted method claims as a service for its customers cannot be considered to be selling or offering to sell the invention covered by the asserted method claims.). Id Id. at U.S.C. 271(f)(1) NTP, 418 F.3d at The court stated that

15 2006] Extraterritorial Patent Infringement Liability 231 Section 271(g) prohibits the importation into the United States of products made by a patented process. 124 NTP argued that the product produced by its patented process was information, 125 and that transmission of this information into the United States constituted infringement under 271(g). However, the court said that 271(g) requires a physical product made by a patented process, and consequently, there could be no infringement of the method claims based on this provision since information is not tangible. 126 There are many policy consequences that follow from the CAFC s decision in NTP. The next two Parts will examine the potential implications of the court s holding, focusing especially on the finding of infringement of the system claims under the use prohibition of 271(a). B. Consistency with Statutory Language and Supreme Court Precedent This Part will analyze whether the CAFC s adoption of the Decca control and beneficial use test was consistent with a reasonable interpretation of 271(a) and Supreme Court precedent. Section 271(a) states that whoever... uses... any patented invention, within the United States infringes the patent. 127 The grammatical structure of this provision indicates that the use of the patented invention must occur within this country. Supreme Court precedent has held that the patented invention includes the invention as a whole, i.e. each and every claim limitation. 128 Therefore, based on the plain language of the statute, use would require that all components of the patented invention be located within the United States. For the accused BlackBerry system, not all of the components were within the United States because the relay was located in Canada. Thus, the invention as a whole was not used within the United States. To overcome this plain statutory language, the CAFC had to fashion an exception, and borrowed the control and beneficial use test from Decca, stating that an invention was used where it was put into service. 129 In doing so, it ignored Supreme Court precedent and applied a misbegotten test. First, the CAFC ignored the as a whole requirement of the patented invention from Deepsouth. 130 The Supreme Court made it clear that the invention comprises the totality of the elements and a device lacking any one element or limitation is not infringing. 131 The CAFC itself has consistently followed this idea, also known as the all [b]y merely supplying products to its customers in the United States, RIM is not supplying or causing to be supplied in this country any steps of a patented process invention for combination outside the United States and cannot infringe NTP s asserted method claims under section 271(f) as a matter of law. Id U.S.C. 271(g) NTP, 418 F.3d at 1323 (using information to describe packets of data) Id. at U.S.C. 271(a) See Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 528 (1972) (stating that a patent on a combination is a patent on the assembled or functioning whole, not on the separate parts (quoting Mercoid Corp. v. Minneapolis-Honeywell Regulator Co., 320 U.S. 680, 684 (1944) (quotations omitted))) NTP, 418 F.3d at Id Id. (quoting Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 344 (1961)).

16 232 The Journal of Corporation Law [Fall elements rule. 132 Thus, for the invention as a whole to be used within the United States, all of the components must be located within this country. Second, the CAFC ignored the Supreme Court s admonitions in Brown and Deepsouth that U.S. patent law is not to be construed as having extraterritorial effect without a clear signal from Congress. 133 The fact that Congress responded to the holding of Deepsouth by enacting 271(f) indicates a specific intent to carve out an exception to the general proposition that there is to be no extraterritorial application of U.S. patent law. Based on a canon of statutory contruction expressio unius est exclusio alterius 134 a court should presume that Congress s provision for extraterritorial application in 271(f) and 271(g) precludes recognizing any extraterritorial effect in 271(a). The ruling in NTP is at odds with this presumption. In concluding that RIM s activities in Canada may be aggregated with U.S. activities for 271(a) purposes, the CAFC contrived an extraterritorial application that was not authorized by the statute. Finally, the CAFC ignored the Federal Court of Claims important caveat to the control and beneficial use test. 135 The Decca court said that the matter is not free from doubt and its finding of liability under the control and beneficial use test was based on the particular circumstances present in that case. 136 In particular, the Court of Claims indicated that an important fact was that the accused infringing devices were owned by the United States government. 137 Thus, the unsure and cautionary application of the control and beneficial use test by the Decca court was completely disregarded by the CAFC, who adopted it whole-heartedly, with little explanation, and seemingly with no factual limits to its application. The next Part goes on to examine why the extraterritorial application of 271(a) is inconsistent with intellectual property treaties and international policy. C. Consistency with International Patent Treaties and Foreign Relations Any interests U.S. patentees have in protecting their intellectual property rights must be balanced against the interests of foreign firms to manage their own intellectual property and business interests within their home countries. The NTP case appears to favor the rights of U.S. patentees rather than Canadian interests when it comes to patents on network inventions spanning international borders. This Part will examine the extent to which the CAFC s NTP holding is inconsistent with the basic principles of foreign relations law and the United States obligations under international treaties. The Paris Convention and the TRIPs agreement both recognize that patent laws are national in scope. 138 These agreements are to be given the same effect under domestic CHISUM, supra note 1, 18.03[4][a] See Deepsouth, 406 U.S. at 531; Brown v. Duchesne, 60 U.S. (19 How.) 183, 195 (1857) To express or include one thing implies the exclusion of the other. BLACK S LAW DICTIONARY 620 (8th ed. 2004) See Daniel P. Homiller, From the Deepsouth to the Great White North: The Extraterritorial Reach of United States Patent Law After Research In Motion, 2005 DUKE L. & TECH. REV. 17 (2005) (critiquing the application of the Decca control and beneficial use test by the CAFC) Decca Ltd. v. United States, 544 F.2d 1070, 1083 (Ct. Cl. 1976) Id See supra Part II.A.2.