- Small Business Administration concludes that the continuation rule changes “are likely to have a significant economic impact on a substantial number of small entities, including small businesses and small independent inventors.”
- AIPLA’s also opposes the proposed changes.
- Five law firms support the rule change — interestingly, those firms all sent in the same form letter (or at least derivative works). [Matt Buchanan has more]. CORRECTION: The fifth letter — from Quine IP Group — is a recent addition and actually opposes the change.
April 2006
Supreme Court Moves Toward Hearing AT&T v. Microsoft Software Export Case
When can a U.S. patent be used to recover damages for infringement occurring abroad? The answer is actually quite often. Over the past couple of years, plaintiffs have recovered huge damages (or settlements) in U.S. courts for activities that at least partially occurred abroad. In NTP v. RIM, RIM’s BlackBerry system was considered to be used “in the United States” because the e-mail exchange was being controlled by and for the beneficial use of U.S. customers. In Eolas v. Microsoft and AT&T v. Microsoft, the Court of Appeals for the Federal Circuit (CAFC) agreed that the transmittal of computer code could create liability under 271(f) a “component” of a patented invention “supplied” from the U.S. In Shell v. Union Carbide the court further clarified that method claims could have components as well — in this case, the component was a compound used in the patented chemical process. To now, each of these cases have stalled after the CAFC decision when the Supreme Court failed to accept them on petition for certiorari. The lone remaining case is AT&T v. Microsoft. In that case, the Supreme Court has asked the U.S. Solicitor General for the views of the U.S. Government before the Court makes its decision on certiorari. As a historical note, the Supreme Court has not addressed the issue of extraterritorial infringement since the DeepSouth Packing case of 1972, which prompted Congress to pass Section 271(f).
AT&T v. Microsoft (on petition for certiorari).
This issue is huge for Microsoft and for U.S. software developers. Microsoft develops much of its software in the U.S., and ships the code around the world. In the Eolas case, of the half-billion dollar verdict, $330 million was premised on exported code.
In the AT&T case, the CAFC essentially held that Microsoft’s act of shipping its code to a foreign office constitutes patent infringement and any consequential sales or licensing of the shipped code will create patent infringement damages.
The software here involves enhancing the sound quality of synthesized speech while maintaining a high data compression.
In its petition, Microsoft asks two questions:
1) Whether digital software code – an intangible sequence of “1’s” and “0’s” – may be considered a “component[] of a patented invention” within the meaning of Section 271(f)(1); and, if so
2) Whether copies of such a “component[]” made in a foreign country are “supplie[d] . . . from the United States.”
The petition attempts to show that the CAFC has gone astray by interpreting the statute in a manner “appropriate to the technology at issue” rather than according to its “plain meaning and legislative history” as required by Supreme Court precedent.
The petition also impliedly argues that software itself should not be patentable.
The decision below is premised on a commonly held misunderstanding of the nature, and thus the patentability, of software.
Noted attorney Ted Olson and his able team (including Matthew McGill) are handling the appeal.
AT&T’s Opposition
AT&T quickly notes that Microsoft has already appealed this identical issue in the Eolas case, and lost there as well. In addition, AT&T discusses Microsoft’s highly public (but yet unsuccessful) lobbying for patent reform in Congress as evidence that this is an issue that has been considered and rejected by the lawmaking body. Of course, AT&T also argues that the lower court decision does nothing to “expand the extraterritorial reach of U.S. patent laws.
Petitioner’s extraterritoriality argument is a red-herring. Years before . . . the court defined the limits of section 271(f) in order to avoid “the appearance of ‘giving extraterritorial effect to United States patent protection.’”
Waymark (looking only to activity within the U.S. when adjudging infringement).
Amicus in Support of Petitioner by the Software & Information Industry Association (SIIA).
The SIIA is a trade group with over 750 corporate members argued that the CAFC’s new rule upsets settled expectations.
SIIA makes what I see as an important distinction that in Microsoft’s case, the code supplied from the U.S. is not actually incorporated into the infringing products. Rather, the code shipped abroad, copied, and then the copies are installed in the foreign country. They argue that the act was never intended to capture millions of infringing acts based on the supply of only a single component.
Next Steps:
The SG is expected to take several months to provide its input, and this case will not be heard until 4th Quarter 2006. It is currently too-late for parties to file amici briefs. However, the SG will accept input from the public on this important issue.
Documents:
- Microsoft Petition
- AT&T Opposition
- SIIA Amicus Brief
- Microsoft Reply
- AT&T Supplemental Opposition
- Microsoft Supplemental Reply
- Microsoft Appendix
- CAFC Decision
- District Court Decision (Pauley S.D.N.Y.) [Thanks to Arun Chandra at Hogan Hartson for the heads-up].
Links:
- NTP v. Research in Motion, (271(f) “component” does not apply to method claims).
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AT&T v. Microsoft, 414 F.3d 1366 (Fed. Cir. Jul. 13,2005) (271(f) “component” applies to method claims and software being sold abroad);
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Eolas v. Microsoft, 399 F.3d 1325 (Fed. Cir. Mar. 2,2005) (271(f) “component” applies to method claims);
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Pellegrini v. Analog Devices, 375 F.3d 1113 (Fed. Cir. 2004) (271(f) “component” does not cover export of plans/instructions of patented item to be manufactured abroad);
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Bayer v. Housey Pharms, 340 F.3d 1367 (Fed. Cir. 2003) (271(g) “component” does not apply to importation of ‘intangible information’).
Notes:
** 35 U.S.C. 271(f)
(1) Whoever without authority supplies . . . from the United States . . . a substantial portion of the components of a patented invention . . . in such manner 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, shall be liable as an infringer.
(2) Whoever without authority supplies . . . from the United States any component of a patented invention that is especially made . . . for use in the invention and not a staple article . . . suitable for substantial noninfringing use. . . , knowing that such component is so made . . . and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.
CAFC’s Jurisdiction Extends to Settlement Disputes Where Settlement References the Patent Act
Parental Guide of Texas v. Thomson (Fed. Cir. 2006).
The most interesting aspect of this case is that the CAFC was willing to decide it. In a post-settlement dispute over damages, Parental Guide originally appealed to the Fifth Circuit. On motion, the Fifth Circuit transferred the case to the CAFC because the settlement agreement “expressly refers to the patent statute, 35 U.S.C. § 284.”
Because it was “at least plausible” that a determination of Section 284 would be necessary to decide the case, the appellate panel felt compelled to hear the appeal.
Judge Linn Dissent: File Wrapper Should Not Serve as Prior Art
Bruckelmyer v. Ground Heaters (Fed. Cir. 2006).
The majority held that an unpublished patent application that eventually issued as a Canadian patent was a “printed publication” under 35 U.S.C. § 102(b). Judge Linn dissented:
[T]he text of an issued patent does not generally serve to guide researchers to the file history for a more expansive disclosure of the described invention, and it certainly does not lead researchers to the file history for disclosure of subject matter not described in the issued text. . . . The fact that an additional drawing, disclosing additional structure, is present in the application file is a matter of sheer happenstance nowhere indicated in the issued patent. For this reason, it is my view that, as in Cronyn, the anticipatory drawings at issue in this case are “not accessible to the public because they have not been cataloged or indexed in a meaningful way.” . . . In this case, in addition to not being meaningfully indexed, as discussed above, no copies were known to have been made or distributed during the critical period, and the ’119 application was available for viewing only at the Canadian Patent Office in Hull, Quebec.
Unpublished Foreign Patent Application Invalidates Later Filed Patent
Bruckelmyer v. Ground Heaters (Fed. Cir. 2006).
Bruckelmyer has two patents on methods of thawing frozen ground so that a layer of concrete can be laid on top of the ground. The trial court found Bruckelmyer’s patents obviated by a Canadian patent application and decided the case on summary judgment.
Interestingly, the Canadian patent application included two important figures that were cancelled during prosecution. Those figures were reportedly required for a finding of obviousness.
On appeal, Bruckelmyer argued that the unpublished Canadian patent application was not a “printed publication” under 35 U.S.C. Section 102(b) and thus, was not prior art.
The CAFC found that the original application was “publicly accessible,” and thus a prior art “printed publication” because the Canadian prosecution file was open to the public more than a year before Bruckelmyer filed his application.
A given reference is “publicly accessible”
upon a satisfactory showing that such document has been disseminated . . . to the extent that persons interested and ordinarily skilled in the subject matter . . . exercising reasonable diligence, can locate it and recognize and comprehend therefrom the essentials of the claimed invention without need of further research or experimentation.
In re Wyer, 655 F.2d 221, 226 (CCPA 1981).
Here, the Court found that this particular application could be located because the related patent discussed a solution for the same problem addressed by Bruckelmyer’s patents.
Thus, the application was found to be prior art even though there was no evidence that it was actually disseminated.
LiveBlogging The Blog Law Conference
Day one of our blog law conference has been a great success. Cathy Kirkman of Wilson Sonsini and I are co-hosts of this LSI conference that has been billed as the first CLE covering the “law of blogs.”
- Joe Gratz has a synopsis and photos.
- Denise Howell brings her own insight and notes that “[t]omorrow should be particularly exciting, featuring among other things EFF’s Kurt Opsahl, fresh off today’s oral argument in Apple v. Does.”
- Veteran David Maizenberg noted his highlight — he met blog diva Denise Howell in person. (Tomorrow I get to moderate a panel with Denise, Bennet Koren, and Greg Kopta).
- Cathy Kirkman gives some links.
- Kevin O’Keefe gave very well received talk and has some notes at his blog.
- Some discussion today of Robert Scoble and his disruptive book Naked Conversations (with Shel Israel).
In Lava Trading Dissent, Judge Mayer Laments de Novo Review
Lava Trading v. Sonic Trading Management (Fed. Cir. 2006, 05–1177)
The majority overturned a lower court claim construction, but Judge Mayer dissented:
The decision today is yet another example of the unfortunate consequences of Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc), Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc), and Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), which cemented this court’s jurisprudence with respect to claim construction as being purely a matter of law subject to de novo review. Because claim construction is treated as a matter of law chimerically devoid of underlying factual determinations, there are no “facts” on the record to prevent parties from presenting claim construction one way in the trial court and in an entirely different way in this court. By not dismissing this case, we issue a decision based on an undeveloped record. We set ourselves up to have to decide claim construction again later, which could well differ from the ruling today. Furthermore, allowance of an appeal of the trial court’s perfunctory, offhand ruling from the bench, for all intents and purposes allows an interlocutory appeal of claim construction, which portends chaos in process.
Claims Should be Construed within the Context of the Accused Device
Lava Trading v. Sonic Trading Management (Fed. Cir. 2006, 05–1177)
In today’s case of Lava Trading, the CAFC again found that knowledge of the accused product is import for providing “a proper context for an accurate claim construction. . . . Without the vital contextual knowledge of the accused products or processes, this appeal takes on the attributes of something akin to an advisory opinion on the [patent] scope. ”
This decision falls in line with the recent Wilson Sporting Goods case that held “while a claim is not to be construed in light of the accused device, in an infringement case, it must inevitably be construed in context of the accused device.”
After Winning Jury Verdict, RealNetwork Speaks-Out for Patent Reform
RealNetworks last week won their patent case against the Boston company Ethos Technologies. [Article] Ethos had asserted that Real infringed two of Ethos’ patents related to downloading technology. According to reports, the jury returned a “unanimous verdict finding that Real did not infringe on any of the 10 claims asserted against in the suit, which was filed in 2002 and sought over $200 million in damages. Moreover, the jury invalidated 7 of the 10 claims.”
In a recent interview, I asked Dave Stewart, Real’s VP and Deputy General Counsel, whether this case altered Real’s position on patent reform:
[Dave Stewart] Our experience in the Ethos litigation confirms our longstanding position on patent reform. We believe the patent system is in need of reform to improve both the quality of the patents issued as well as the time it takes to issue a patent. As a general matter, we have been supportive of most of the Business Software Alliance‘s patent reform efforts. One important step in this regard would be to ensure that all fees paid by inventors be specifically designated for use by the USPTO, which is significantly under funded.
Dave’s response is probably representative of many of the leading technology companies — reform is needed to improve quality and reduce pendency.
Constitutionality of Andrew Corp. v. Beverly Mfg.
By Jeff Steck
In a recent district court decision, Andrew Corp. v. Beverly Mfg. Co., (N.D. Ill. Feb. 16, 2006), already summarized in these pages, the court excluded a non-infringement opinion from evidence when opinion counsel—because of a conflict of interest—ought never to have provided the opinion in the first place. (The opining law firm found itself representing both the patentee and the accused infringer.) The case, then, will be tried under the fiction that the accused infringer, Beverly, knew of the relevant patent but failed to obtain legal advice. Beverly, of course, will be at much greater risk of enhanced damages for willful infringement. The court appreciated that Beverly may be guilty of nothing worse than an unfortunate selection of counsel, and it recognized that choosing a remedy was “unpleasant,” but the court did not take into account the possibility that any resulting award of enhanced damages may well be unconstitutional.
Enhanced damages in an infringement action are a form of punitive damages, and the award of punitive damages is subject to substantive Due Process restrictions. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003). Consistent with Due Process, the Supreme Court requires that “punitive damages should only be awarded if the defendant’s culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence.” Id. at 419. The “reprehensible” actions that permit an award of punitive damages must themselves be tied to the actions that gave rise to liability in the first place:
A defendant’s dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages. A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business.
538 U.S. at 422-423. It is by no means clear that the actions of Beverly’s counsel—even if they can be imputed to Beverly—were sufficiently reprehensible to warrant what (in a typical patent case) could amount to millions of dollars in enhanced damages. Even if they were, the connection between Beverly’s purported infringement and its counsel’s ethical lapse is tenuous: it would have done little good to the patentee if Beverly had retained different opinion counsel. (To the contrary, if any counsel were going to advice Beverly to cease infringement, one would think that counsel representing the patentee itself would have done so.)
Through little or no fault of its own, Beverly has been deprived of what is traditionally the most important exculpatory evidence on willfulness. The substantive effect of Due Process on enhanced damages for willful infringement is not entirely clear, but it is questionable whether punitive damages can be based on a fictitious reconstruction of an infringer’s state of mind.
Jeffrey Steck is a partner at MBHB and an experienced litigator. He was also an editor of the California Law Review at the University of California at Berkeley, where he received his JD.
Links:
Terminal Disclaimer Does Not Negate Patent Term Extension
King Pharma v. Teva, 78 USPQ2d 1237 (D.N.J. 2006).
In a pharmaceutical patent dispute, Teva argued that Wyeth’s patent on zaleplon drug products (Sonata) had expired because of a terminal disclaimer. Wyeth (and its exclusive licensee King) argued that patent’s term was ongoing because of a Patent Term Extension due to FDA regulatory review delay.
Under 35 U.S.C. 156(a), the term of a patent “shall be extended” after a series of provisions are satisfied. The district court found the language of the statute unambiguous and gives the court “no discretion.”
Thus, if the enumerated conditions are satisfied, the patentee is entitled to a term extension calculated pursuant to Section 156.
Teva’s motion to dismiss was consequently denied because “a terminally disclaimed patent is eligible for extension under [Section] 156.”
CAFC Oral Arguments Available in MP3 Format
The CAFC has announced a new program of posting digitally formatted oral arguments on its website. According to the www.cafc.uscourts.gov website,
All future argued cases will be available twenty-four hours after argument is completed. Counsel should read this notice containing guidelines for oral arguments.
The files are in MP3 format. A portion of the cases argued since January 2006 are already available. The audio files can be found through the following link:
Noninfringement Opinions Excluded Based on Attorney Conflict of Interest
Andrew Corp v. Beverly Mfg., (N.D.Ill. 2006, 04–6214:146).
Andrew Corp v. Beverly Mfg., (N.D.Ill. 2006, Andrew sued Beverly for willful infringement of Andrew’s cable-hanger patents. Beverly then brought forth three opinion letters written by its counsel in an attempt to avoid the willfulness charge.
The opinion letters provide, for instance that Beverly’s new product “does not fall within the claims of [Andrew’s] patent.”
As it turned out, Beverly’s law firm recently merged — and the merged firm represents both Andrew and Beverly.
On motion to disqualify the opinions, the firm responded that “lawyers who represented Andrew have never discussed any Beverly matter with the [lawyers] who represented Beverly and visa versa.”
District Judge Holderman, however, found a clear conflict:
[The firm’s] attorneys took positions directly adverse to its client Andrew in the [two] opinion letters on behalf of its other client Beverly, without obtaining informed consent from both Andrew and Beverly, in violation of Local Rule 83.51.7 and 83.51.10. These opinion letters advised Beverly that its products did not infringe Andrew’s patents, attacked Andrew’s patents, provided potential litigation arguments and provided a factual basis for a potential defense against future claims by Andrew of willful infringement. [The firm] possessed sufficient information to have determined that its work for Beverly was adverse to its existing client Andrew, that it would affect its relationship with Andrew and that the [firm] as a whole was disqualified under the imputed conflict rule.
Remedy: Because of the conflict, the court determined that the opinions could not, as a matter of law, be competent. As such, all opinion letters from the firm were excluded from the case.
Links:
Unpublished Opinions Will Be Citable
In the past, I’ve been given some grief for covering unpublished opinions on the blog. The Federal Circuit has even threatened sanctions against any attorney who cites those opinions in a court filing. Now however, the Supreme Court has voted to require courts to allow citation of unpublished (nonprecedential) appellate opinions.
Chief Justice John Roberts has been quoted as strongly against these hidden opinions— “A lawyer ought to be able to tell a court what it has done.”
According to a Law.com article by Tony Mauro, 9th Circuit Judge Alex Kozenski has been firmly against allowing citation of unpublished opinions:
When the people making the sausage tell you it’s not safe for human consumption, it seems strange indeed to have a committee in Washington tell people to go ahead and eat it anyway.
The rule will not be effective until January 1, 2007.
Conflicts of Interest in Patent Prosecution
Professor David Hricik is a leading Intellectual Property Ethicist. He recently posted some questions about your thoughts on patent prosecution conflicts. Do these situations create conflicts of interest:
First example: In prosecuting application for Client A, lawyer receives an office action rejecting claims over a prior art reference that is owned by Client B. Is there a conflict? [your comments].
Second Example: Is it per se unethical for a lawyer to provide a non-infringement or invalidity opinion about another client’s patent? [your comments].
Professor Hricik is also a speaking at our upcoming conference on blog law.
Hat tip to Steve Nipper.
Movie Review: Envy — an inventor’s story
Envy
Staring Ben Stiller, Jack Black and Christopher Walken
$13.99 from Amazon.com
This movie is pretty stupid. Jack Black invents the “Vapoorizer.” Jack offers his best friend Ben Stiller a 50/50 cut, but Ben refuses. Jack gets rich and Ben is green with envy. As usual, I don’t understand Christopher Walken’s role.
I’m a patent attorney, and maybe that’s the reason that I laughed throughout the movie. Of course, on occasion I was the only one in the theater laughing. Still, its much more interesting than the Federal Judicial Center’s Patent Video. And, don’t forget Christopher Walken.
CAFC: Damage Recovery for Infringing Sales Precluded Later Recovery for Infringing Use
Glenayre Electronics v. Jackson (Fed. Cir. 2006, 04–1568).
Jackson won a $12 million jury verdict for infringement. However, those damages were remitted by the court who found that “the jury’s $12,000,000 damages award reflects a whopping royalty rate of 30%, a rate five times greater than the very highest rate disclosed in any license agreement offered into evidence.” Instead, the lower court found that the maximum reasonable royalty would be 6% of sales plus a $250,000 lump-sum payment, and proposed a remittitur to $2.65 million as an alternative to a new trial. Jackson accepted the new award, but also pursued claims against Glenayre for indirect infringement based on activity of its customers. The lower court refused to allow those claims to proceed — finding that Jackson had been fully compensated by the initial verdict.
On appeal, the CAFC found that Jackson could not “double dip.”
Jackson’s theory is that he has an absolute, inviolable right to pursue an additional damages award based on Glenayre’s customers’ use of infringing products sold by Glenayre, even though he has already collected compensation for direct infringement by Glenayre because of the same sales. We disagree.
It is possible that a plaintiff could get separate damages for sales and use. However, in this case, Jackson had presented evidence of customer use during the original trial, and the CAFC found that those damages were included within the $2.65 million award calculation.
Judge Newman dissents:
The district court, today affirmed by the panel majority, incorrectly held that there cannot be contributory infringement by a direct infringer. From this ruling and its flawed premises, I respectfully dissent. . .
The panel majority departs in major ways from precedent, in holding that, as a matter of law, there is no liability for a manufacturer’s contributory infringement, or even for direct infringement by users of an infringing device, when damages have been accepted that are limited to the manufacturer’s direct infringement. See Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476 (1964) (Aro II). . .
The [Supreme] Court (in Birdsell) established that while sales by the patentee or an authorized licensee can trigger the first sale doctrine, the collection of damages for infringement does not. Payment of damages by an infringing manufacturer is not an automatic “implied license” to itself or others to continue the infringement.
Patent Advisory Committee Nominations
PTO Director Jon Dudas has opened nominations for the Patent Public Advisory Committee (PPAC). The PPAC is a group of nine individuals selected by the Commerce Secretary (on the advice of the PTO Director). The committee’s purpose is to advise the PTO Director on the management of operations of the Office. The nine-member PPAC is on a three-year rotating schedule. Each year three new members are appointed.
Nominations for this year’s appointment may be sent to PPACnominations@uspto.gov. Although formal nominations are probably required, I’m sure that the Chief of Staff would not mind receiving some informal suggestions as well.
Federal Circuit Immigration Appeal: A Modest Proposal
One portion of the immigration legislation being debated would consolidate all immigration appeals to the Court of Appeals for the Federal Circuit (CAFC).
In a recent law.com article, appellate lawyer Howard Bashman provides some background on the issue and wonders why we should stop there:
There assuredly are other categories of appeals that the regional federal appellate courts view as dry, needlessly complex, burdensome or inconsequential. Perhaps these cases, too, could be sent to the Federal Circuit, so that the regional federal appellate courts would be left to handle only the extraordinarily interesting cases that appellate judges anticipate receiving when they take their oath of office.
Mark Lemley of Stanford agrees that immigration proposal would be bad for the CAFC:
Patent lawyers ought to be concerned about this. Right now, patents are the focus of the court’s jurisdiction, and the White House has increasingly been appointing patent lawyers to the Federal Circuit. If S.2454 passes, the court will become a political battleground, and there will be strong pressure in both parties to appoint ideologues with a particular view of immigration.
The IPO has also weighed-in on this matter, and provided this letter to Senator Bill Frist.
According to a source, this section of the Bill has now been removed.
Links:
Personal Jurisdiction over Patent Holder Arises Based on Licensee’s Activities
Breckenridge Pharmaceuticals v. Metabolite Labs. (Fed. Cir. 2006, 05–1121).
Metabolite (patent holder) and PamLab (exclusive licensee) sued Breckenridge in Colorado — asking for a TRO stopping Breckenridge from selling its Folbee product, which is similar to PamLab’s FOLTX. The plaintiffs, however, dismissed their suit after their motion for TRO was denied. Their next step was to send letters to retailers warning them against selling generic equivalents of FOLTX. The letters to the retailers not name Breckenridge or threaten a lawsuit, but did include a PamLab brochure.
Breckenridge then sued Metabolite and PamLab in Florida for declaratory judgment of non-infringement and for various torts based on Florida law.
Metabolite was dismissed from the suit for lack of personal jurisdiction, and summary judgment was granted to PamLab because Metabolite, as patent holder, was an indispensable party.
On appeal, the CAFC agreed with the lower court that Federal Circuit law should be applied to determine whether personal jurisdiction would comport with due process — because even the non-patent issues were “intimately linked to patent law.”
The panel summarized its licensor due process case law:
In sum, our case law has held as follows: where a defendant has sent cease and desist letters into a forum state that primarily involve a legal dispute unrelated to the patent at issue, such as an injunction obtained for misappropriation of trade secrets, the exercise of personal jurisdiction is improper. Silent Drive, 326 F.3d at 1202. Likewise, a defendant may not be subjected to personal jurisdiction if its only additional activities in the forum state involve unsuccessful attempts to license the patent there. Hildebrand, 279 F.3d at 1356. The same is true where the defendant has successfully licensed the patent in the forum state, even to multiple non-exclusive licensees, but does not, for example, exercise control over the licensees’ sales activities and, instead, has no dealings with those licensees beyond the receipt of royalty income. Red Wing Shoe, 148 F.3d at 1357-58.
In contrast, the defendant is subject to personal jurisdiction in the forum state by virtue of its relationship with its exclusive forum state licensee if the license agreement, for example, requires the defendant-licensor, and grants the licensee the right, to litigate infringement claims. Akro, 45 F.3d at 1546. Finally, the defendant will also be subject to personal jurisdiction in the forum state if the exclusive licensee (or licensee equivalent) with which it has established a relationship is not headquartered in the forum state, but nonetheless conducts business there. Genetic Implant, 123 F.3d at 1457-59.
Thus, the crux of the due process inquiry should focus first on whether the defendant has had contact with parties in the forum state beyond the sending of cease and desist letters or mere attempts to license the patent at issue there. Where a defendant-licensor has a relationship with an exclusive licensee headquartered or doing business in the forum state, the inquiry requires close examination of the license agreement. In particular, our case law requires that the license agreement contemplate a relationship beyond royalty or cross-licensing payment, such as granting both parties the right to litigate infringement cases or granting the licensor the right to exercise control over the licensee’s sales or marketing activities.
Here, the CAFC found that the licensing relationship between Metabolite and PamLab, that PamLab’s sales activities in Florida create are sufficient to give the court jurisdiction over Metabolite.
As such, we hold that, through its relationship with PamLab, which sells products in Florida, Metabolite has purposefully availed itself to the privilege of conducting activities within Florida.
Reversed, vacated, and remanded
Notes:
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Although apparently a different patent, the patent at suit here is related to Metabolite’s method for diagnosing hyperhomocysteinemia. The validity of that patent is currently being considered by the U.S. Supreme Court in the case of LabCorp v. Metabolite.