The illusion of "offer to sell" patent infringement: when an offer is an offer but is not an offer.

• Author: Zelson, Larry S.

INTRODUCTION

1. EVALUATING SPECIFIC PERSONAL JURISDICTION IN "OFFER TO SELL" PATENT INFRINGEMENT CASES A. The Federal Circuit Test for Personal Jurisdiction in Patent Cases B. The Federal Circuit's Application of the Akro Test to "Offer to Sell" Patent Infringement Cases II. INTERPRETING "OFFER TO SELL" INFRINGEMENT IN THE CONTEXT OF THE PATENT STATUTES AND CONTRACT LAW A. The Addition of "Offer To Sell" as an Independent Statutory Grant to the Patentee B. Distinguishing "Offer To Sell" (Infringement) from "Offer" (Contract Law) and "On Sale" (Patentability Bar) C. The Federal Circuit's Interpretation of "Offer To Sell" III. KEEPING THE SUBSTANTIVE "OFFER TO SELL" INFRINGEMENT ANALYSIS DISTINCT FROM THE PERSONAL JURISDICTION DETERMINATION A. Mixed Decisions in the District Courts B. Effective "Offer to Sell" Infringement Liability Requires a Different Analysis C. A Possible Solution CONCLUSION INTRODUCTION

   The approval of the Agreement on Trade-Related Aspects of International Property Rights (1) (TRIPs) by the United States in 1994 necessitated substantial changes to the U.S. patent laws. (2) In particular, a patentee's grant was expanded to encompass the right to exclude others from offering the patented invention for sale. (3) Accordingly, 35 U.S.C. [section] 271(a), the default provision of the patent infringement statute, was modified to read, in pertinent part, that "whoever without authority makes, uses, offers to sell, or sells any patented invention within the United States ... during the term of the patent therefor, infringes the patent." (4)

   Since the addition of "offer to sell" infringement, many cases implicating this statutory provision have been filed in federal district court, (5) and a few have reached the Court of Appeals for the Federal Circuit (hereinafter Federal Circuit or CAFC). (6) However, no such case has yet substantively adjudicated, based on a fully developed record, whether the article or method purportedly offered for sale in fact infringed valid claims of an issued U.S. patent. (7) Rather, each such reported or unreported case alleging "offer to sell" infringement has received only a preliminary disposition. Most often, these cases have considered either a summary judgment motion based on whether there was an "offer to sell" within the meaning of [section] 271(a) (8) or a motion to dismiss for lack of specific personal jurisdiction over a defendant based solely on the purported "offer to sell" activities and contacts. (9)

   The substantive evaluations of personal jurisdiction and infringement based on "offers to sell" are not necessarily completely independent. In some of the personal jurisdiction cases, the courts have conflated the issues and conducted an "offer to sell" analysis--at least based upon the pleaded facts when viewed most favorably to the nonmoving party (i.e., the plaintiff)--to reach a conclusion regarding specific personal jurisdiction over a defendant. (10) On the surface, it seems almost inevitable that these issues will be conflated, since the prevailing specific personal jurisdiction test used by the Federal Circuit in patent cases (11) requires a nexus between the cause of action and the activities in the forum, which here are bound to be the same activities. If the in-forum activities suffice to support an alleged "offer to sell" for purposes of the patent infringement statute, the requisite contacts likely exist to justify the exercise of specific personal jurisdiction over the offering party. Conversely, if the in-forum activities cannot support an alleged "offer for sale," the exercise of personal jurisdiction will likely be found improper.

   However, the apparent symmetry of this reasoning is illusory. (12) The conflation, as manifest in the cases, results because the "offer to sell" query serves two purposes. It is an essential element for proving alleged infringement under the "offer to sell" provisions of the patent statutes. (13) It is also the key--assuming no other contacts between the defendant and the forum state--to evaluating whether the exercise of specific personal jurisdiction can be justified under due process. (14)

   The dual doctrinal function of the purported "offer to sell" enables two defensive approaches to "offer to sell" infringement litigation, the substantive avenue and the procedural avenue. (15) Notwithstanding that both avenues ultimately may require addressing whether there was an "offer to sell," the disparate purposes served by the "offer to sell" determination within each context suggest that there is, or at least should be, a distinctly different meaning of "offer to sell" within each context. As a result, there should be considerable differences as to how these two avenues are analyzed by courts.

   This Comment argues that there is a difference of meaning between an "offer to sell" for purposes of satisfying the patent infringement statute and an "offer to sell" giving rise to sufficient contacts within a forum to authorize specific personal jurisdiction. The dissimilarity of purpose served by the two applications necessitates that there be a difference. Additionally, this Comment discusses why these two tests should not be equated as a matter of doctrinal coherence; why courts have generally been unable to make the required distinction; and how patent infringement enforcement would be enhanced by judging each application of the "offer to sell" analysis under different criteria. (16)

   This Comment provides a detailed analysis of the determination of "offer to sell" in both statutory patent infringement and personal jurisdictional circumstances. Part I explores the Federal Circuit test for personal jurisdiction in patent matters and then posits that in the application of its test for "offer to sell" infringement actions, the CAFC has reached beyond the jurisdictional question to make substantive pronouncements as to the meaning of the "offer to sell" language in the patent infringement statute. Part II discusses the interpretation of "offer to sell" within the purview of the patent infringement statute and finds that analogies to the "offer" in contract law and the "on sale" bar to patenting are both inadequate to serve the economic purpose of "offer to sell" infringement liability. Part III argues that the disparate purposes served by the two "offer to sell" analyses necessitate that they be treated as doctrinally distinct, illustrates how various federal district courts have gone astray due to lack of clear guidance from the Federal Circuit as to the differences and the import of those differences, and concludes that the meaning of "offer to sell" must be interpreted specifically within its discrete and particular personal jurisdictional and substantive contexts if the "offer to sell" patent infringement statute is to evolve meaningfully as a distinct and viable cause of action.

1. EVALUATING SPECIFIC PERSONAL JURISDICTION IN "OFFER TO SELL" PATENT INFRINGEMENT CASES

   A fundamental reason for the establishment of the Court of Appeals for the Federal Circuit (17) was to promote national uniformity in the adjudication of patent matters. (18) Therefore, when evaluating whether the exercise of personal jurisdiction over an alleged patent infringer is proper, the Federal Circuit applies its own law "rather than that of the regional circuit in which the case arose." (19) This standard applies equally whether the defendant is an alleged infringer or a patentee in a declaratory action. (20)

   1. The Federal Circuit Test for Personal Jurisdiction in Patent Cases

      Each circuit court is free to develop its own test for the exercise of personal jurisdiction, framed by relevant Supreme Court precedents, (21) and prior to the creation of the CAFC, (22) these various regional circuit tests were applied in patent litigation. (23) The Federal Circuit recognized early in its existence its "mandate to achieve uniformity in patent matters" as "the spirit and guiding principle of th[e] court." (24)

      However, more than a decade passed until the Federal Circuit had the opportunity to assess the need for a uniform personal jurisdiction standard regarding matters within its exclusive grant of appellate subject matter jurisdiction. (25) The analytical framework of Beverly Hills Fan Co. v. Royal Sovereign Corp. (26) set the stage for the Federal Circuit to enunciate, within a year, its test for personal jurisdiction that has been followed since. (27)

      As a preliminary matter, the CAFC in Akro recognized that "[b]ecause subject matter jurisdiction [in a patent infringement] action exists by virtue of a federal question," a Fifth Amendment due process analysis was appropriate. (28) However, finding that the Supreme Court had never reached the due process issue in a federal question case, (29) the Akro court fashioned a test based on the Fourteenth Amendment due process jurisprudence emanating from International Shoe and its progeny. (30) Nevertheless, the potential difference of interpretation between Fifth Amendment due process and Fourteenth Amendment due process (31) could be critical in a patent case involving an alien defendant. While there is always a forum within the United States where a party domiciled in another state is amenable to suit, the same is not true for a party domiciled in a foreign country. (32)

      The Akro due process test involves three successive determinations: whether the activities or contacts in the forum were purposefully directed, (33) whether the cause of action "arise[s] out of or relate[s] to those activities," (34) and whether the exercise of personal jurisdiction would be constitutionally reasonable. (35) The first prong of Akro captures the traditional minimum contacts analysis, and the third prong bounds personal jurisdiction within the constitutional guarantee of due process. With regard to the analysis of "offer to sell" infringement, this Comment has no quarrel with the Federal Circuit's interpretation of...