Litecubes v. Northern Light Productions (GlowProducts) (Fed. Cir. 2008).
Short Summary: (1) Subject Matter Jurisdiction is satisfied by a well pled complaint, even if the accused infringer is foreign and the infringing activity is potentially outside the US; (2) In an infringement analysis, a product may be considered “sold” in the US even though title is transferred abroad – so long as the seller deals directly with US customers and then ships the product to the US.
Litecubes are artificially illuminated pseudo-ice cubes. The company asserted both patent and copyright protection against GlowProducts of Canada. Although GlowProducts has no US facilities or assets, the company does sell and ship directly to US customers.
Subject Matter Jurisdiction: On appeal, the CAFC raised the issue of subject matter jurisdiction. Specifically the court inquired whether the limits on subject matter jurisdiction require a patent plaintiff to establish some threshold level of infringement within the US. Or, are the elements of infringement merely factual elements to be proven at trial.
Well pled complaint rule: Under the well pled complaint rule, subject matter jurisdiction is satisfied by a complaint that establishes “either that federal patent law creates the cause of action or that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law.” Here, because Lightcubes complaint pled each element of the infringement statute (35 USC 271(a)), the federal court properly has jurisdiction.
Furthermore, subject matter jurisdiction is not defeated by a failure to prove the allegations unless the allegations are “wholly insubstantial and frivolous.”
There are some prior that look at territoriality requirements as jurisdictional. However, the CAFC found that the territorial limitations of Section 271 are elements of infringement rather than requirements for subject matter jurisdiction.
“Thus, in these respects, a limitation on the extraterritorial scope of a statute is no different than any other element of a claim which must be established before relief can be granted under a particular statute.”
Thus, the district court should have rejected GlowProduct’s subject matter jurisdiction claims without even considering whether any products were actually imported into the U.S. Rather, Litecubes satisfied the SMJ requirement by alleging US infringement in the complaint:
“by alleging a violation of § 271, has properly invoked federal question jurisdiction under § 1331 and § 1338. This jurisdiction does not depend on whether Litecubes is able to succeed on the merits in proving all of the elements of patent infringement that it alleged in the complaint.”
Applying a parallel analysis, the CAFC likewise held that the issue of territoriality of copyright infringement is “properly treated as an element of the claim which must be proven before relief can be granted, not a question of subject matter jurisdiction.” Of course, foreign companies charged with infringement can still escape the court’s reach if there is a lack of personal jurisdiction. “In many such cases, the court may not have personal jurisdiction over the defendant.”
Sale in the US: GlowProducts argued that it had not made any US sales. In particular, the Canadian defendant argued that the sales were made in Canada and then shipped f.o.b.. On appeal, the CAFC found that that the location of a “sale” under Section 271 should not be limited by any formalistic rules. Citing its 1994 North American Philips case, the appellate panel held that foreign company’s “sale” may properly be considered within the US if the seller deals directly with US customers and then ships to the US — regardless of whether title to the goods was legally transferred in another country.
Interestingly, the court extensively relied on personal jurisdiction precedents interpreting constitutional law to broadly define the location of a sale. Yet, the court also argued foreign defendants should rely upon personal jurisdiction arguments to protect against constitutional due process violations — noting that those foreign companies “have substantial protection if the activity complained of took place wholly outside of the United States. In many such cases, the court may not have personal jurisdiction over the defendant.”