Infringing?: Offers (made in the US) to Sell (abroad)

by Dennis Crouch

Texas Advanced Optoelectronic Solutions, Inc., (TAOS) v. Renesas Electronics America, Inc., fka Intersil Corporation (Supreme Court 2018)

This case focuses on TAOS’ patented photodiode array ambient light sensor that is now widely used in smartphones to adjust display brightness.  U.S. Patent No. 6,596,981.  Following failed merger negotiations with TAOS, Intersil developed a competing product and Apple signed-on as a client. However, a jury found Intersil liable for patent infringement, trade secret misappropriation, breach of contract, and tortious interference with prospective business (finding that Intersil had improperly used confidential information from the merger talks).

A tough aspect of the patent case against Intersil itself is that 98.8% of its products are manufactured, packaged, and tested abroad — then delivered to customers abroad. U.S. patent law is territorial and almost none of the products were made, used, or sold “within the United States.” 35 U.S.C. 271(a).  In its new petition for writ of certiorari, TAOS argues that the infringer should still be liable becase it made “offers to sell” the invention within the US.

Here, the evidence shows that an offer was made in California by Intersil to sell the accused sensors to Apple at $.035 each.  Although the offer was made in California, delivery was set outside the U.S.  The delivery location is critical under the leading Federal Circuit decision in Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617 F.3d 1296 (Fed. Cir. 2010).  In Transocean, the court held that “offers to sell . . . within the United States” are limited to offers where – if accepted – the sale will occur in the United States.   Now TAOS raises the following question to the Supreme Court:

Whether an “offer[] to sell” occurs where the offer is actually made or where the offer contemplates that the proposed sale will take place.

[Petition].  Linguistically — the basic question is whether “within the United States” clause modifies “offers” or “sell” (or perhaps both). In the context of the statute’s list of bad actions it is pretty clear that the focal point is “offers.”

[W]hoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.

35 U.S.C. 271(a). There is really no Congressional guidance on what was intended when the law was implemented as part of the Uruguay Round Agreements Act (1994).

In Transocean, the offer was made in Scandinavia to but for delivery in the US — the court held this as infringing because the sale was going to take place in the US. “In order for an offer to sell to constitute infringement, the offer must be to sell a patented invention within the United States. The focus should not be on the location of the offer, but rather the location of the future sale that would occur pursuant to the offer.”  Id. The Supreme Court called for views of the Solicitor General in that case, but the parties settled prior to resolution.   Now the court has another chance to consider the issues.

= = = =

The importance of this case is much greater following the Supreme Court’s recent decision in WesternGeco LLC v. ION Geophysical Corp.  In that case, the court indicated that foreign consequential damages are available to compensate for U.S. acts of infringement.   Here, that could mean that TAOS could collect damages for the foreign made products that stemmed from the US originated offer.

= = = =

One way to look at this case is through a simple two-by-two table of activities showing the location of the offer as well as the location of the proposed sale.  Everyone agrees that box-1 is infringing where both the offer and eventual sale are in the US; we all also agree that box-4 is not infringing where neither the offer nor the eventual sale are in the US.  The debate is then over boxes 2 and 3.  In Transocean, the Federal Circuit held that box-3 is also infringing — focusing on the location of the eventual sale.  Here, the patentee is arguing that the statute focuses on the location of the offer and thus that boxes 1 and 2 are the actionable situations.  I can also conceive of a court saying that of the four, only box 1 is infringing or alternatively that 1, 2, and 3 are all infringing..

 

36 thoughts on “Infringing?: Offers (made in the US) to Sell (abroad)

  1. 6

    I addressed this issue from the perspective of the policies underlying the on sale bar in William C. Rooklidge, The On Sale and Public Use Bars to Patentability: The Policies Reexamined, 1 Fed. Cir. B. J. 7, 28-33 (1991), an analysis that is largely of historical interest because it predated the recent Federal Circuit case law. After examining the relevant history of the “in this country” provision and its underlying policies, as well as the policy underlying the on sale bar and the then-extant (largely non-precedential) case law on the issue (including Gayler v. Wilder, Gandy v. Main Belting, Hunt v. Fibra, Cataphote v. Desoto, Robbins v. Lawrence, Caveney, Trend v. Metro, Synair v. American Industrial, Western Marine), my article concluded that “Where the offeror or seller is the inventor, or one to whom the inventor has disclosed the invention, the offeror or sell’s mere situs in the United States should be enough to satisfy the ‘in this country’ limitation,” but “offers or sales by one other than the inventor, or one to whom the inventor has disclosed the invention, must be of a nature that could create detrimental public reliance in the United States. That is, to satisfy the ‘in this country’ limitation, a third party sale or offer must disclose the invention to someone in the United States.” While the Federal Circuit has long ago abandoned a policy-based approach, this section of the article may be worth a read to anyone seriously investigating this issue, if only to take advantage of the research I did back then.

    1. 6.1

      I am curious as to how you view the separability of “sale” and “offer for sale” given your research predates even the change in law (by Congress) to make the offer (in and of itself) an act of infringement.

      Given the separateness, it stands to reason that the only “situs” necessary for the separate “offer” is the location in which the act of “offer” itself occurs.

      That’s not to say that I don’t “get” the stretch being attempted. I just don’t see the “necessary” aspect related to any actual sale when one is considering the (separate) act of offer. Offers alone (and without any reciprocation) do not create a relationship in which there may be detrimental reliance.

      I may make an extremely generous offer, but without more, there is no reliance (let alone detrimental reliance) between me and anyone else.

      There has to be acceptance (and thus the — separate — actual sale) for that detrimental reliance to arrive.

  2. 5

    Largely off topic, but the CAFC ruled today in Arista Networks v. Cisco Sys. that assignor estoppel does not apply in IPRs. This seems like another one that could be headed for the Court (especially given the thought in some quarters that Lear eviscerated the assignor estoppel doctrine sub silentio).

    1. 5.1

      Thanks Greg. Assignor estoppel always seemed somewhat rare and maybe unnecessary to me anyway. Could not the assignor be at risk for a fraudulent sale accusation if he, she or it now drags out invalidity assertions against the patent they sold against the party they sold it to? Note that even if it still makes some sense for some non-infringement assertions by sellers that does not apply to an IPR.

      1. 5.1.1

        Could not the assignor be at risk for a fraudulent sale accusation if he, she or it now drags out invalidity assertions against the patent they sold against the party they sold it to?

        Theoretically there is a risk of fraud.

        But theoretically there is also the possibility that the assignor became aware of some relevant art or there was a change in the law (or assignor’s understanding of the law) that affects the patent’s validity. At that point, the assignor is just doing the public a service by tanking the junk patent. And I don’t think you can contract around this circumstance.

  3. 4

    From the cert Question Presented: “Under 35 U.S.C. § 271(a), a person directly infringes a patent whenever she “offers to sell” a patented invention “within the United States.”
    It is important to note that “offers to sell” was an addition to the scope of 271 that only became effective after 1/1/96. Thus, there is not nearly extent of judicial interpretation that is available to other parts of 271.
    My recollection from 1996, which may be wrong, was that the intent was to enable patent owners to get an early injunction against intended-attempted-infringers. [It is hard to calculate infringement damages when no infringing product has yet been sold.] Has anyone dug up the legislative history or decisions directly on “offers to sell” damages?

    1. 4.1

      Paul,

      Your recollection coincides with my point below vis a vis the separateness of “sell” and “offer to sell.”

    2. 4.2

      Your recollection is probably correct, Paul, because it makes sense.

      At least, it makes sense when the actual sale is in the US. Otherwise there’s a bit of a First Amendment issue there.

      Always fun, btw, to see the glibertarian taking a stand for … “freedom”. LOL. True colors etc

      1. 4.2.1

        So Accuse Others of you Malcolm to use the denigration “glib,” while you yourself remain absolutely glib in not providing ANY cogency to your asserted First Amendment position (on multiple concurrent threads at that).

  4. 3

    I can also conceive of a court saying that of the four, only box 1 is infringing or alternatively that 1, 2, and 3 are all infringing.

    That “alternate” court would be wrong, given that 3 is clearly infringement.

    While perhaps “lacking” directly, it is worth noting that “sale” preceded “offer for sale” on a stand alone basis, which indicates that “offer for sale” is itself a stand alone basis item.

    The offense of offer is separate from the consumation of actual sale, so the insertion of just where any consumation — if there be one at all — should have no bearing on the later added item of “offer for sale.” Further, the government was more than capable of adding the more limiting language of “offer for sale for sales consumated domestically.”

    1. 3.1

      Constitution doesn’t care what government was “more than capable of.”

      1. 3.1.1

        Your statement is true.

        But what exactly is your “Constitution” issue?

        (and please, if you want to make a First Amendment case, do more than merely spout conclusions)

  5. 2

    Box 2 is directed to speech within the U.S. with no physical activity occurring in the U.S. It would seem that the first amendment would be a prohibition against an action that is only speech within the U.S.

    1. 2.1

      I was thinking about this issue — it would probably make a good law review article.

      1. 2.1.1

        First Amendment protected speech? What about this U.S. “offer for sale:”
        “For sale: Genuine University of Missouri School of Law law degrees – mail $999.00 to Box 1313 … [rogue country].

    2. 2.2

      That’s an interesting angle. The action being offered (overseas sale) is legal so the government has no legitimate (or no substantial) interest in preventing the communication of the offer.

      There goes the Good Ship AIA! blub blub blub! (LOL – just kidding)

      1. 2.2.1

        The action being offered (overseas sale) is legal so the government has no legitimate (or no substantial) interest

        That’s a point to be proven – not a conclusion that serves as a starting point.

        You might want to realize that “offer to sell” is not simply some inocuous “expression” or “unattached” statement of which full First Amendment protection may easily apply to. Rather, it is a particular statement to engage in a particular action (whether or not that action is completed).

        While not a perfect analogy, conpare making a casual comment while in a crowded venue that a fire would be devastating with yelling (in that same venue): “FIRE!

    3. 2.3

      First amendment is not about unlimited speech (even in regards to what may be legal fiction things outside of the US).

      As to “compelling interest,” that is a fair challenge, but one in which the recent case of extra-territorial damages (as noted in the article) leans towards a finding that such interest exists.

      1. 2.3.1

        Sorry for the miss on the auto-correct: not sure where “fiction” came from.

      2. 2.3.2

        the recent case of extra-territorial damages (as noted in the article) leans towards a finding that such interest exists

        There are no “extra-territorial damages” in the scenario we’re discussing. All of the acts contemplated in the offer are perfectly legal.

        1. 2.3.2.1

          Please read more closely: that other case that DID find extraterritorial damages lends credence to the notion of finding “compelling interest” in the law as being suggested to be read.

          Once you understand how the law is to be read,

          THEN

          apply it to the present case.

          You seem to have jumped right past understanding the law in the first instance in your hurry to reach a particularly desired Ends.

          1. 2.3.2.1.1

            It’s not relevant at all because the facts are completely different.

            You stink at this. Remember?

            1. 2.3.2.1.1.1

              Try again: get the le down first.

              1. 2.3.2.1.1.1.1

                “le” == “law”

  6. 1

    Seems like boxes 1, 2 and 3 contain infringing acts but the damages for 2 should be minimal.

    1. 1.1

      Like the cost of a plane ticket to someplace outside the US.

      1. 1.1.1

        Right – the next best alternative in the hypothetical negotiation would be to leave the US to make the deal.

    2. 1.2

      Damage should not be confused with Infringer cost.

      Let’s not pretend that the desired state of the Efficient Infringer is already the Law of the Land.

      1. 1.2.1

        Let’s not pretend that the desired state of the Efficient Infringer is already the Law of the Land.

        Efficient infringers are everywhere, they have always been everywhere, and they will continue to be everywhere, forever. Amazing that this has to be explained to anyone in 2018 but we live in an annoying timeline.

        Maybe try focusing your weak ineffective energies on getting rid of the efficient patent tr0llers instead. You might have better luck.

        1. 1.2.1.1

          Whether or not they exist is quite apart from what I actually stated.

          Again — you seem to be in far too much of a hurry.

          Stop.
          Read.
          THINK.
          then type a response.

          1. 1.2.1.1.1

            Efficient infringement is legal in the same sense that driving three miles over the speed limit is legal. That’s why complaining about it is so silly.

            The key word is “efficient”. The “desired state” has always been achievable (depending on circumstances) and always will be.

            Come up with better propaganda. That’s today’s lesson for you and your cohorts. What plays well in your sandbox doesn’t necessarily play well in the wider world where 99.99% of people don’t own patents and never will.

            1. 1.2.1.1.1.1

              You absolutely miss the boat on the entire anti-patent Efficient Infringement issue.

              Perhaps it is on purpose.

              Perhaps not.

              Either way though, your prosletyzing the way that you do shows that you clearly have no “protect innovator” mindset. That you so emphatically stress this mindset, at the same time that you profess to have real clients for which you champion their ability to obtain patents sets up the dichotomy that screams out your cognitive dissonance.

              Get into a line of work in which you can believe in the work product produced. Your views on Efficient Infringement show that obtaining patents for innovators is NOT that line of work for you.

            2. 1.2.1.1.1.2

              Reply still stuck in filter…

      2. 1.2.2

        Damage should not be confused with Infringer cost.

        Except when the damages are calculated by looking at the infringer’s cost.

        Please try to keep up, Billy.

        1. 1.2.2.1

          Keep up? As you are going in reverse?

          No thanks.

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