Update on the Territorial Reach of US Patent Law:

System Claims and Method Claims

 

 

In August 2005, the United Stated Court of Appeals for the Federal Circuit issued a ruling on a lower court finding that Research in Motion, Ltd.fs (RIM) BlackBerry system infringed several of NTP Inc.fs US patents.  The case sheds light on what activities constitute infringement of patent claims claiming systems and methods.

 

 

1.    The Federal Circuit Holdings

 

The Federal Circuit ruling was multifaceted, but with respect to the infringement of system patents and process patents, the Court held that:

 

(a)    A system claimed in a US patent is used where control of the system is exercised and beneficial use of the system obtained. A process claimed in a US patent cannot be used gwithinh the US under 35 U.S.C. Section 271(a) unless each of the steps is performed within the territorial US.

 

(b)    RIMfs performance of at least some of the recited steps of NTPfs process claims is not, by itself, be gsellingh or goffering to sellh the invention under 35 U.S.C. Section 271(a). However the Federal Circuit cautioned that it was not broadly holding that method claims may not be infringed under the gsellsh or goffers to sellh grounds under Section 271 (a).

 

(c)    RIMfs performance of at least some of the recited steps of NTPfs process claims, by itself cannot be gimportingh the invention under 35 U.S.C. Section 271(a).

 

(d)    Merely by supplying products to its customers in the US, RIM did not gsupplyh or gcause to be supplied in the USh steps of a patented process invention for combination outside of the US as described under 35 U.S.C. Section 271(f).

 

(e)    RIM did not infringe NTPfs method claims by importing into the US, offering to sell, selling  or using in the US a product made by a process patented in the US as described under 35 U.S.C. Section 271(g) because email packets are simply the gtransmission of informationh and thus not a physically manufactured product. 

 

 

2.  The NTP Patents and RIMfs System

 

NTPfs patents were related to RIMfs system that integrated existing electronic mail systems with radio frequency wireless communication networks by transmitting electronic mail messages by wire to the userfs destination processor, and also via radio frequency to a portable receiver. Before this innovation, users had been required to gpullh electronic messages that had been sent to them off the server by initiating a connection with the server and download the messages.

RIM, a Canadian corporation with its principal place of business in Canada, sold the accused BlackBerry system, a system that used email technology to allow out-of-office users to send and receive electronic mail communications using a wireless device. The system incorporated a BlackBerry handheld unit, email redirecting software, and access to a nationwide wireless network.

There were several types of BlackBerry email redirector software. One was installed on the userfs personal computer, another on the userfs mail server. One type of redirector software was RIMfs gInternet solution.h RIMfs Internet solution was installed on the userfs mail server, and executed email redirector software called Internet Redirector.

When new email was detected on the server by the BlackBerry software installed on the userfs personal computer, another BlackBerry program retrieved the message from the mail server, copied, encrypted, and sent the message to the BlackBerry gRelayh component of RIMfs wireless network that was located in Canada. RIMfs system also allowed users to send e-mail messages over the wireless networks from their handheld devices by using a radio frequency transmitter and a processor integrated into the BlackBerry. The user could manipulate, view, and respond do email using the BlackBerry, and send a message with the device using a procedure that is the reverse of the process for receiving e-mail.

 

 

3.  Procedural History

 

NTP filed suit against RIM in November 2001, alleging that various BlackBerry system configurations infringed over forty system and method claims in patents owned by NTP. After the district court construed the disputed claim terms according to their plain and ordinary meaning, the case went to trial on fourteen claims of infringement.

The jury found direct, induced, and contributory infringement by RIM an all asserted claims. The jury further found that RIMfs infringement was willful, and adopting a reasonable royalty rate of 5.7%, awarded damages of approximately $23 million to NTP. The district court awarded monetary damages to NTP in the following approximate amounts: (i) $33 million in compensatory damages; (ii) $4 million in attorneysf fees; (iii) $2 million in prejudgment interest; and (iv) $14 million in enhanced damages. In addition, the district court permanently enjoined RIM from any of the manufacture, use importation, or sale of all accused BlackBerry systems, software, and handheld devices.  

RIM appealed to the Federal Circuit. First, RIM argued that the asserted claims, when properly construed did not read on the accused RIM systems. Second, RIM argued that the physical location of the relay component of the BlackBerry system put RIMfs allegedly infringing conduct outside the reach of Section 271. Third, RIM argued that the jury verdict of infringement lacked substantial evidence. This article discusses only RIMfs second argument regarding the territorial reach of US patent law.

 

 

4.    The Direct Infringement Claim

 

Under US patent law, whoever makes, uses, offers to sell, or sells any patented invention, within the US or imports into the US any patented invention during the term of the patent, infringes that patent.[P]   This provision is limited to patent infringement that occurs in the US and its territories. Infringement cannot be based on acts wholly done in a foreign country.

NTP alleged in its trial court complaint that RIM had infringed its patents by making, using, selling, offering to sell and importing into the US products and services, including the BlackBerry products and their related software. In response, RIM argued that because the BlackBerry Relay component of the accused system was located in Canada, it could not be liable as a direct infringer because the requirement that the allegedly infringing activity occur gwithinh the US was not satisfied.11  The district court had specifically held that the fact that the BlackBerry relay was located in Canada was not a bar to infringement in the matter, and instructed the jury that gthe location of RIMfs relay in Canada does not preclude infringement.h RIM appealed this finding to the Federal Circuit, contending that an action for infringement under Section 271(a) may lie only if the allegedly infringing activity occurs within the US. RIM argued that that standard was not met because the BlackBerry Relay component, described by RIM as the gcontrol pointh of the accused system, was housed in Canada. For Section 271(a) to apply, RIM asserted that the entire accused system and method must be contained or conducted within the territorial bounds of the US.

 

 

5.  Federal Circuit Analysis

 

The Federal Circuit noted that the infringement analysis differs for different types of infringing acts (use, offers to sell or selling), and for different types of patent claims, and distinguished the case at hand from a previous US Supreme Court case that had held that the domestic production of all component parts of a patented combination for export, assembly, and use abroad was not direct infringement under US patent law.[Q]  

 

(a) Use within the United States

Regarding use and NTPfs system claims, the Federal Circuit noted prior cases holding that the situs of infringement is wherever an offending act of infringement is committed, and not where the injury is felt. Because RIMfs US customers had sent and received messages by manipulating handheld devices in the US, the location of the use of the communication system as a whole had occurred in the US. Therefore, the Federal Circuit concluded that the jury had properly considered the issue of whether RIM was liable for infringement of NTPfs system claims because RIMfs customers put the system into action in the US.

Regarding use and NTPfs method claims, the Federal Circuit noted earlier cases that had recognized the distinction between patent claims to tangible items such as a product, device or apparatus, and patent claims to a process consisting of a series of acts or steps[R] and other case law holding that use of a gpatent for a method or process is not infringed unless all steps or stages of the claimed process are utilized.h[S]

The Federal Circuit concluded that, as a matter of law, a process cannot be used gwithinh the US unless each of the steps claimed in the process is performed within the territorial US. Applying this to the facts at issue, the Federal Circuit held that RIM could not be liable for induced or contributory infringement of NTPfs method claims because they recited a step that utilized an interface or interface switch, which was only satisfied by the use of RIMfs relay located in Canada. 

 

(b) Sale or Offers to Sell and Importation

Regarding direct gsalesh or goffers to sellh and NTPfs method claims, the Federal Circuit issued a narrow holding that RIMfs performance of at least some of the recited steps of the method claims as a service for its customers is not selling or offering to sell the invention covered by those claims. 

The Federal Circuit noted that because gsaleh is not defined in US patent law, Congress must have intended the term to have its ordinary meaning. The Federal Circuit then attempted to ascertain this meaning.[T]  The Congressional record indicates that Congress intended that the exclusive rights to make or sell an invention are not directly applicable to a patented process,[U] and that the only act that would infringe a process patent would be the act of making through the use of that patented process.[V]

The Federal Circuit noted that amendments to the patent law to make offering to sell and importing into the US an infringing activity were in intended to implement the Uruguay Round Agreement on Trade-Related Aspects of Intellectual Property Rights (the gTRIPs Agreementh). The TRIPs Agreement states that if the patented subject matter is a product, then the patentee may prevent unlicensed parties from making, using, offering for sale, selling or importing that product.[W] In contrast, if the patented subject matter is a process, then, according to the TRIPs Agreement, the patentee may prevent unlicensed parties from using, offering for sale, or importing gat least the product obtained directly by that process.h In other words, claimed processes are to be directly protected only from the act of using the process.

The Federal Circuit emphasized it was not holding that method claims may not be infringed under the gsellsh and goffers to sellh basis for liability under Section 271, but did conclude that RIMfs performance of at least some of the recited steps of the method claims could not be considered to be selling or offering to sell the invention covered by those method claims. For the same reason, the Court held that RIM had not infringed NTPfs method patents based on the importation basis for liability under Section 271.

 

 

(c) Contributory Infringement

The Federal Circuit then turned its attention to NTPfs claim of contributory infringement under Section 271(f).[X]

RIM argued that it was not liable for contributory infringement because it did not ship the handheld receivers and software components from the US to induce their combination in Canada. RIM further argued that it could not intend or induce any combination of components outside of the US because no component combined with the relay software in Canada was shipped to Canada from the US. NTP responded that the claimed system was formed somewhere, and that RIM induced that formation by supplying components in the US. NTP relied on a 2005 Federal Circuit case that had held that software code, even if intangible, is a component of a patented product for purposes of contributory infringement[PO] to further argue that RIM was liable for contributory infringement regardless of whether components supplied in the US move across national boarders.

The Federal Circuit began by noting that, as evidence by the Congressional record, Section 271(f) was enacted in response to a case that had involved components of a manufactured product, and not a process. The Federal Circuit then held that by merely supply products to its customers in the US, RIM was not supplying or causing to be supplied in the US any steps of a patented process invention for combination outside the US and cannot be liable for infringement of  NTPfs method claims under Section 271(f).

 

(d) Importation of a Product Manufactured by a Patented Process

Finally, the Federal Circuit considered the district court holding that wireless electronic mail specially formatted by using NTPfs patented process was a gproducth that RIM imported into, offered to sell, sold, or used within the US, thereby giving rise to liability under Section 271(g).

RIM argued that the product created by the NTP process was data or information, and that the Federal Circuit had held in a previous case[PP] that the production of intangible items, such as information, made by a patented process is not subject to Section 271(g). NTP countered that a gproducth can be ginformation in the abstract,h and that email packets that flowed from RIMfs email redirecting software, to the interface, and back to the radio frequency receiver had a tangible structure which included the interface address, a radio frequency address, and the inputted message. NTP further argued that the transformation of data could produce a tangible result, that RIM transformed data by moving email through the network, and that this tangible result was a product imported into the US, thus giving rise to liability under Section 271(g). 

The Federal Circuit agreed with RIM, concluding that for purposes of infringement under Section 271(g), the process must be for the gmanufacturingh of a gphysical article.h The production of information is not a product which is manufactured by a patented process that may be imported into the US. The Federal Circuit applied this reasoning to the case at hand and concluded that the relevant process claims were directed to methods for the transmission of information in the form of email messages. The Federal Circuit held that NTPfs method claims were not infringed because, like the gproduction of information,h the gtransmission of informationh does not entail the manufacturing of a physical product.

 



[P]   35 U.S.C. Section 271(a) (2000).

 

[Q]   3D Sys., Inc. v. Aarotech Labs., Inc., 406 U.S.

 

[R]   Joy Techs., Inc. v. Flakt, Inc., 6 F.3d 770, 773 (Fed. Cir. 1993).

 

[S]   Roberts Dairy Co. v. United States, 530 F.2d 1342, 1354 (Ct. Cl. 1976).

 

[T]   35 U.S.C. Section 271(a).

 

[U]   The Senate Report explains, gUnder our current patent laws, a patent on a process gives the patentholder the right to exclude others from using that process in the United States without authorization from the patentholder. The other two standard aspects of the patent right—the exclusive right to make or sell the invention—are not directly applicable to a patented process.h S. Rep. No. 100-83, at 30 (1987).

 

[V]   The House Report: gWith respect to process patents, courts have reasoned that the only act of infringement is the act of making through the use of a patented process . . . .h H.R. Rep. No. 99-807, at 5 (1986).

 

[W]   Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, art. 28, H.R. Doc. No. 103-316, at 1634 (1994).

 

[X]   This was based on 35 U.S.C. Section 271(f), which  provides:

(1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, 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 or causes to be supplied in or from the United States 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, where such component is uncombined in whole or in part, knowing that such component is so made or adapted 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. 35 U.S.C. Sec. 271(f) (2000).

 

[PO]   Eolas Technologies Inc., v. Microsoft Corp., 399 F.3d 1325 (Fed. Cir. 2005). This case involved whether software code exported on a ggolden masterh disk could be a component of patented invention under Section 271(f). The claim at issue was directed toward a software product that comprised ga computer usable medium having computer readable program code physically embodied thereinh and gcomputer readable program code.h

 

[PP]   Bayer AG v. Housey Pharmaceuticals Inc., 340 F. 3d 1367 (Fec. Cir. 2003).

 


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