Facts that May Give Rise to Liability for
Inducement to Infringe under US Patent Law
The United States Court of Appeals for the Federal Circuit (the “CAFC”) recently shed light on the facts that may give rise to a triable claim for inducement to infringe a United States patent. The defendant, SUMCO, sells silicon wafers to Samsung Japan Corporation (“Samsung Japan”), which then sells those wafers to Samsung Austin Semiconductor (“Samsung Austin”), a corporation located in the Unites States. The plaintiff, MEMC Electronic Materials, Inc., (“MEMC”) claimed direct infringement of its patent disclosing a process for manufacturing the wafers based on SUMCO’s alleged offering to sell and selling the wafers to Samsung Austin. MEMC also claimed that SUMCO induced Samsung Austin to infringe by manufacturing wafers according to specifications provided by Samsung Korea, the parent of both Samsung Japan and Samsung Austin, and by providing technical support to Samsung Austin.
Although the trial court granted a summary judgment in favor of the defendants on both of MEMC’s claims, the CAFC reversed the summary judgment order on MEMC’s claim for inducement to infringe. The CAFC found that evidence that SUMCO (1) provided substantial technical support to Samsung Austin, (3) shipped wafers directly to Samsung Austin, (3) dispatched technical and marketing personnel to Samsung Austin and (4) would not enter into an agreement to buy wafers unless the supplier also provides technical support for those wafers was sufficient for a trial court to find inducement to infringe.
Please note that the CAFC simply held that MEMC had provided sufficient evidence for a US trial court to be able to conclude that SUMCO had induced infringement on the part of Samsung Austin. Lexwell will provide an update on the findings of the trial court as they are available.
MEMC is the assignee of a patent that claims a method of preparing single crystal silicon substantially free of certain defects that can limit the yield potential of silicon wafers.
SUMCO manufactures the silicon wafers in Japan according to specifications provided by Samsung Korea. Samsung Japan sends SUMCO an electronic purchase order. SUMCO then manufactures the wafers. SUMCO packs the wafers into boxes, attaches a packaging label that indicates the wafers are destined for Austin, and delivers them to a packaging company. The packaging company transports the boxes to its own facility in Japan for shipment “free on board” to Samsung Austin’s semiconductor manufacturing facility in Austin.
In addition to the above-undisputed facts, MEMC produced e-mail messages between SUMCO and a Samsung Austin engineer that suggest that before SUMCO delivers the wafers to the packaging company in Japan, SUMCO provides Samsung Austin with detailed electronic test data on the wafers to obtain Samsung Austin’s approval for shipment.
A Samsung Austin engineer analyzes the test data and, if it indicates that the wafers are acceptable, the shipment to Samsung Austin is approved. These e-mail messages suggest that SUMCO and Samsung Austin communicate directly and independently of Samsung Japan in order to coordinate shipment dates and the number of wafers shipped. There was evidence that the e-mail messages had caused SUMCO to adjust its wafer manufacturing process in Japan, and had caused Samsung Austin to adjust its integrated circuit manufacturing process in Austin.
MEMC also produced e-mail messages that indicated that in the past SUMCO’s International Sales Manager had asked Samsung Austin to authorize shipment directly to Samsung Austin of wafers with a modified shape. These modified wafers were sent to Samsung Austin in response to problems with wafers that SUMCO had previously supplied. Samsung Austin’s sales manager granted SUMCO’s International Sales Manager authorization to add the modified wafers to an existing Samsung Japan purchase order, and Samsung Japan sent the modified wafers to Samsung Austin.
Finally, MEMC offered evidence that SUMCO personnel visited Samsung Austin’s facilities several times after the MEMC patent was issued. During these visits, SUMCO’s International Sales Manager and a SUMCO engineer made technical presentations concerning the accused wafers.
3. Background and History
On the first claim of direct infringement, the district court granted summary judgment in favor of the defendants, finding that there was no evidence that the defendants had engaged in infringing conduct within the United States.
On the second claim of SUMCO liability for inducement to infringe, the district granted summary judgment in favor of the defendants, holding that MEMC had failed to produce any evidence of inducement to infringe.
The CAFC upheld the district court on MEMC’s first claim of SUMCO direct liability for offering to sell the wafers. The CAFC noted that an “offer to sell” is determined under traditional contractual analysis, and that in this case there was no sale or offer for sale in the United States.
In support of its holding, the CAFC noted that (1) Samsung Japan alone controls when SUMCO receives a purchase order and the quantity of wafers ordered; (2) Samsung Japan designates the third party packaging company that transports the wafers to Samsung Austin; (3) Samsung Japan arranges for the wafer packaging, labeling, and shipping; and (4) Samsung Japan pays SUMCO electronically for the wafers after the packaging company delivers them.
However, the CAFC reversed the district court on MEMC’s second claim of SUMCO liability for actively inducing Samsung Austin to infringe. The CAFC held that MEMC had provided evidence that raised genuine issues of material fact regarding whether SUMCO’s activities constituted inducement to infringe.
In addition to the e-mail messages, the CAFC noted that MEMC had produced (1) a letter in which MEMC advised SUMCO that SUMCO was selling a product that may be covered by its patent and inviting SUMCO to take a license this patent; (2) testimony from a former Samsung Austin employee that Samsung Austin does not enter into a contact to purchase wafers from a supplier unless the supplier also provides the company with technical support for the wafers; (3) language in Samsung Japan’s purchase order under which an indemnification ran from SUMCO to Samsung Japan, the indemnification, according to MEMC, thereby amounting to an inducement of Samsung Austin to lessen the risk of a claim of infringement from MEMC with respect to Samsung Austin’s purchase and import into the United States of the accused wafers.
The CAFC commented on the indemnity provision, citing a 1990 CAFC case which held that an “indemnification agreement will generally not establish an intent to induce infringement, but….such intent can by inferred when the primary purpose is to overcome the deterrent effect that the patent laws have on would-be infringers.” The CAFC noted that the indemnify provision may have facilitated the sale of the wafers, but there was no evidence that the primary purpose of the agreement was to induce Samsung to infringe MEMC’s patent.
However, the CAFC did note that a reasonable jury could conclude that SUMCO induced infringement by Samsung Austin because of the substantial technical support MEMC had provided to Samsung Austin, the November and December 2002 shipment of wafers directly to Samsung Austin, the visits by SUMCO personnel to Samsung Austin, and the testimony that Samsung Austin will not enter into an agreement to buy wafers unless the wafer supplier also provides technical support for those wafers.
As a result, the CAFC sent the case back to the district court so that the district court would (1) construe the claims of MEMC’s patent; (2) determine whether Samsung Austin directly infringed that patent; and (3) if there is direct infringement by Samsung Austin, if SUMCO induced that infringement.