Eolas and RIM Decisions Change the Potential for U.S. Damages Based on Foreign Infringing Activities
As I mentioned earlier, from a legal standpoint, the most important aspect of the Eolas v. Microsoft decision [pdf] is its treatment of extraterritorial infringement. Under traditional notions, U.S. patent law did not extend beyond the territorial bounds of the country. Although this principle was affirmed in the CAFC 2004 case of Pellegrini v. Analog Devices (cert. denied 2004), it appears now that Pellegrini has been narrowly interpreted.
With the one-two punch of Eolas and RIM v. NTP [pdf decision], the CAFC has laid-out a clear path for patent holders to collect damages for certain infringing activity occurring abroad. These cases are based on software-type technology, however, I see clear applications to other technologies, including biotechnology.
In Eolas, the patentee claimed an “executable application” used for a specific purpose. The CAFC upheld Microsoft’s liability for infringement due to its foreign sales under Section 271(f) of the patent statute. Section 271(f) creates a cause of action for infringement due to foreign sales when a component of a patented invention is supplied from the U.S., knowing that the component will be combined in an infringing manner outside the U.S.
As in the figure above, Microsoft had shipped a master copy of computer code for Internet Explorer (IE) to its foreign suppliers who then copied the disk and sold the copies on foreign soil. This activity was seen as infringing, even though the patented invention was not practiced until at least the 3rd step above.
Thus, two principles of emerge from Eolas: (i) there is no "physicality" requirement for a component of a patented invention to fall within the statute; and (ii) the shipped component itself need not be part of the infringing use, rather a foreign produced copy of the shipped component can create infringement liability when the copy is to be used in an infringing manner.
Of course, one of the closest parallels to computer code is genetic code. Quite easily, the CAFC Eolas decision could be expanded to include shipment of DNA or other genetic material abroad for replication and incorporation into a patented invention.
The RIM (RIMM) v. NTP opinion concerning the hand-held BlackBerry held that plain language of section 271(a) does not preclude infringement where a system is used within the United States even though a component of that system is physically located outside the United States. According to the Court, the test is not whether the infringement took place within the United States, but whether "control and beneficial use" of the infringing system was within the United States. It appears that "control and beneficial use" will be liberally construed -- for instance, in RIM's case, control of the system and RIM headquarters were in Canada. End users, however, were located in the U.S. At a minimum, control and beneficial use of the BlackBerry system was located in both the U.S. and Canada.
The RIM case has potential to have a major impact on outsourcing of manufacturing and services. Essentially, a call center located in India may now be found to be infringing a U.S. patent if a court finds that the control and beneficial use of the system can be seated in the U.S.