Timothy R. Holbrook, Territoriality and Tangibility After Transocean

• Publication year: 2012

TERRITORIALITY AND TANGIBILITY AFTER TRANSOCEAN

Timothy R. Holbrook*

ABSTRACT

Patent law is generally considered the most territorial form of intellectual property. The extension of infringement to include “offers to sell” inventions opened the door to potential extraterritorial expansion of U.S. patent law. In Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., the U.S. Court of Appeals for the Federal Circuit walked through the door by concluding (1) that the location of the ultimate sale, not the location of the offer, determines whether patent infringement occurred and (2) that there can be infringement by selling or offering to sell an invention based solely on diagrams and schematics. The one–two punch of these holdings works a considerable expansion of the territorial scope of a U.S. patent and of these infringement provisions generally. This Essay explores the consequences of these holdings, making the following conclusions. First, the elimination of a tangibility requirement for infringement, while ultimately correct, creates a number of problems when coupled with the court’s holding on extraterritoriality. Because the sale need not be consummated for there to be an infringing offer to sell, the court extended infringement to circumstances where no activity has taken place within the United States. Moreover, if this standard is used to inform the scope of the on-sale bar to patentability, then the court greatly expanded potential sources of prior art that could be used to invalidate existing U.S. patents. Additionally, comparing Transocean to the territoriality standards in trademark law demonstrates that the holding of Transocean may not be as extensive as some of the language in the opinion suggests if it is limited to offers made abroad by U.S. citizens or corporations. Regardless of the citizenship factor, this comparative analysis also

* Professor of Law, Emory University School of Law. © 2011. I greatly appreciate comments on earlier

drafts by Bernard Chou, Lucas Osbourne, and Sean Seymore. Thanks for wonderful research assistance to Alex Meier and Katherine Merriam. I would like to dedicate this Essay to the memory of two individuals who were invaluable in my development as a person and a lawyer and whom I lost in 2011. First, I dedicate this Essay to the memory of the Honorable Glenn L. Archer, Jr. of the U.S. Court of Appeals for the Federal Circuit, for whom I clerked. He was a wonderful mentor, a brilliant jurist, and a kind, genuine person. Second, I dedicate this Essay to the memory of my mother, Lenore Schang Holbrook, to whom I owe everything.

demonstrates that the Federal Circuit should take into account potential conflicts with the law in foreign locations where the negotiations take place.

INTRODUCTION 1090

1. THE EVOLUTION OF THE LEGAL STANDARD FOR INFRINGING OFFERS TO SELL A PATENTED INVENTION 1092

   1. The State of the Law Before Transocean 1093

   2. Lingering Ambiguities: The Extraterritorial Reach of “Offer[ing] to Sell” and the Requirement for a Tangible Infringing Device 1094

2. TRANSOCEAN: EXPANDING THE EXTRATERRITORIAL REACH OF U.S. PATENTS AND ELIMINATING THE NEED FOR A TANGIBLE INFRINGING DEVICE 1095

   1. (Apparent) Resolution of the Extraterritoriality Issue 1097

   2. Intangibility: Allowing for “Paper” Infringement by Selling

      or Offering to Sell the Invention 1098

3. IMPLICATIONS OF TRANSOCEAN: CONSIDERABLE EXPANSION OF

   COMMERCIALLY BASED INFRINGEMENT 1099

   1. Deconstructing and Evaluating the Extraterritorial Reach of Infringing Offers to Sell 1100

   2. Reconsidering the “Invention”: Intangible Infringement by

      Selling and Offering to Sell the Patented Invention 1106

      1. Is Transocean Contrary to Supreme Court Precedent? 1106

      2. What Is the Basis of Comparison for Infringement? The Need for an Enablement Standard 1109

   3. The One–Two Punch of Extraterritoriality and Intangibility: Criticisms and Consequences 1111

      1. The Territoriality and Tangibility Holdings Permit Infringement for Acts Entirely Removed from the United States 1111

      2. Unforeseen Consequences: The Potential Impact of

         Transocean on the On-Sale Bar 1112

4. DOES TRANSOCEAN REALLY STAND FOR WHAT IT SAYS? 1115

   1. Citizenship, Effects, and Conflicts: How Bulova Could Inform

      the Scope of Infringing Offers to Sell 1115

   2. What’s Missing? Taking Account of Potential Conflicts of

Law 1119

CONCLUSION 1121

INTRODUCTION

When Congress amended the Patent Act to include “offer[ing] to sell” an invention as a form of direct infringement in 1994,1 it provided very little guidance as to the meaning and scope of that provision.2 Courts3 and commentators4 have bemoaned this dearth of guidance and have attempted to fill the void.5 Nevertheless, two key, and seemingly unrelated, ambiguities

remained: (1) What was the extraterritorial reach of infringement by offering to sell an invention, and (2) could there be an infringing offer in the absence of a tangible embodiment of the invention?

1 Uruguay Round Agreements Act, Pub. L. No. 103-465, § 533(a)(1)(A), 108 Stat. 4809, 4988 (1994) (codified at 35 U.S.C. § 271(a) (2006)).

1. See Timothy R. Holbrook, Liability for the “Threat of a Sale”: Assessing Patent Infringement for

   Offering to Sell an Invention and Implications for the On-Sale Patentability Bar and Other Forms of Infringement, 43 SANTA CLARA L. REV. 751, 763 (2003).

2. See, e.g., 3D Sys., Inc. v. Aarotech Labs., Inc., 160 F.3d 1373, 1378 (Fed. Cir. 1998) (“Little

   interpretation of this change as it relates to direct infringement under § 271(a) has been given . . . .”); Sitrick v. Freehand Sys., Inc., No. 02 C 1568, 2002 WL 31443128, at *3 (N.D. Ill. Oct. 30, 2002) (“Federal Circuit case law defining ‘offer to sell’ under § 271 is still developing . . . .”); Cybiotronics, Ltd. v. Golden Source Elecs., Ltd., 130 F. Supp. 2d 1152, 1167 (C.D. Cal. 2001) (“‘[O]ffer to sell’ has received relatively little interpretation in the courts, and is not helpfully defined in the statute or in its legislative history.”); ESAB Grp., Inc. v. Centricut, LLC, 34 F. Supp. 2d 323, 333 (D.S.C. 1999) (“There is scant case law available interpreting what constitutes an ‘offer to sell’ as it appears in the amended form of 35 U.S.C. § 271(a).”); see also Joan E. Beckner, Note, Patent Infringement by Component Export: Waymark Corp. v. Porta Systems Corp. and the Extraterritorial Effect of U.S. Patent Law, 39 HOUS. L. REV. 803, 823 (2002) (“[T]he law surrounding an ‘offer to sell’ an invention without an actual or contemplated infringing sale remains unsettled.”).

3. See, e.g., Donald S. Chisum, Commentary, Normative and Empirical Territoriality in Intellectual

   Property: Lessons from Patent Law, 37 VA. J. INT’L L. 603, 608 (1997) (“Adding ‘offering for sale’ may have interesting implications for the territorial scope of a U.S. patent, depending on how the phrase is interpreted. . . . Is an offer by a person in another country to a customer in the United States an offer in the United States even though the sale will be consummated or the product delivered outside the United States?”); Edwin D. Garlepp, An Analysis of the Patentee’s New Exclusive Right to “Offer to Sell,” 81 J. PAT. & TRADEMARK OFF. SOC’Y 315, 318–25 (1999); Holbrook, supra note 2, at 763; Timothy R. Holbrook, Territoriality Waning? Patent Infringement for Offering in the United States to Sell an Invention Abroad, 37

   U.C. DAVIS L. REV. 701, 723–26 (2004); Thomas L. Irving & Stacy D. Lewis, Proving a Date of Invention and Infringement After GATT/TRIPS, 22 AIPLA Q.J. 309, 349–52 (1994); Scott A. Cromar, Note, Location of the Contemplated Sale: The Ultimate Guide in “Offer to Sell” Transnational U.S. Patent Infringement, 2012 U. ILL. L. REV. (forthcoming 2012) (manuscript at 7–9, 28–32), available at http://ssrn.com/abstract=1765342; Rex W. Miller, II, Note, Construing “Offers to Sell” Patent Infringement: Why Economic Interests Rather than Territoriality Should Guide the Construction, 70 OHIO ST. L.J. 403, 407–09 (2009); Robert Ryan Morishita, Note, Patent Infringement After GATT: What Is an Offer to Sell?, 1997 UTAH L. REV. 905, 908; Larry S. Zelson, Comment, The Illusion of “Offer to Sell” Patent Infringement: When an Offer Is an Offer but Is Not an Offer, 154 U. PA. L. REV. 1283, 1300–01 (2006).

4. See infra notes 13–33 and accompanying text.

   These issues remained unresolved until Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc.6 First, the Federal Circuit finally resolved a split in the district courts over the extraterritorial reach of the offer-to-sell provision, holding that an offer to sell is infringing if the offer’s

   contemplated sale would occur in the United States, regardless of where the actual offer was made.7 This approach, while offering considerable certainty, allows U.S. patents to reach activities occurring exclusively outside of the United States. Second, more subtly and perhaps more importantly, the Federal Circuit concluded that an offer or a sale can infringe in the absence of a physical embodiment of the invention.8 In other words, the court appears to be permitting “paper” infringement under these provisions, which is not the norm

   in patent law.

   
   

   While the extraterritorial aspect of the holding has garnered attention,9 the court’s reasoning regarding tangibility is also incredibly important. Indeed, the one–two punch of the court’s conclusions has an unintended collateral consequence: an immense expansion of the scope of this infringement provision. In this Essay, I explore the development of the law by the court, drawing on my earlier work in the area. The court’s decision in Transocean is a considerable step in the development of the law of patent infringement. When deconstructed, however, it does portend some potentially unintended consequences, not only for this infringement provision but also for infringement by selling an invention and for the on-sale bar to patentability of 35 U.S.C. § 102(b). In particular, it is now possible to find a party liable for infringement even though no sale is ever concluded in the United...