NTP v. Research-In-Motion (Fed. Cir. 2005)
The CAFC has released a new appellate opinion that modifies the court’s analysis of Section 271 of the Patent Act but leaves the decision against RIM largely intact.
In December 2004, the Federal Circuit released its original opinion that pushed against the territorial bounds of patent law. In that opinion, the CAFC found that U.S. patent law covers instances where infringing elements are located abroad — so long as the “control and beneficial use” of the infringing system is within U.S. territory. This legal finding meant that RIM’s BlackBerry business, which spanned across the U.S. and Canadian borders, could be found to infringe NTP’s patent. Soon thereafter, RIM filed a motion for rehearing and rehearing en banc as well as other legal pleadings at the CAFC, district court, and PTO.
Rather than taking up the question in an en banc hearing, the original three-member panel (Judges Michel, Schall, and LINN) granted the petition for rehearing and revised portions of the opinion that discussed Section 271 — and thus withdrawing the December 14 opinion.
The new 75 page opinion takes a fresh look at the extent that a patent must be practiced within the U.S. to fall within the guise of 271(a).
35 U.S.C. 271(a): . . . whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States . . . infringes the patent.
The major dispute revolved around the phrase “within the United States:”
The grammatical structure of the statute indicates that “within the United States” is a separate requirement from the infringing acts clause. Thus, it is unclear from the statutory language how the territoriality requirement limits direct infringement where the location of at least a part of the “patented invention” is not the same as the location of the infringing act. (opinion at 52).
In an affirmative step, the court decided that locating a component outside the U.S. does not necessarily preclude infringement under 271(a). However, the court found that the analysis will depend upon the type of infringing act (use, make, sell) and the type of claim (system, method, product).
USE of SYSTEM: The site of the use of a patent is “the place at which the system as a whole is put into service, i.e., the place where control of the system is exercised and beneficial use of the system obtained.”
USE of METHOD: Each step must be performed in the U.S. “We therefore hold that a process cannot be used ‘within’ the United States as required by section 271(a) unless each of the steps is performed within this country.”
OFFERS to SELL and SELLING: You likely cannot infringe a method claim through sale! “It is difficult to envision what property is transferred merely by one party performing the steps of a method claim in exchange for payment by another party. Moreover, performance of a method does not necessarily require anything that is capable of being transferred.” NOTE — The court did not explicitly rule on this issue. Rather they only implied what their ruling would be.
Referring to 271(f), the court found that supplying U.S. customers with products does not fall within the clause even if those customers plan to perform a method with the product that would be infringing if performed wholly within the U.S.
Settlement: In the wake of the December opinion, NTP & RIM reportedly reached a settlement that included $450 million for NTP. The original settlement announcement was based on a 1/2 page term-sheet reportedly signed by the parties. As would be expected, 50 square inches of paper turned out to create a whole new level of disagreement between the parties who have been working through court mediation to flesh out the agreement.
In early June, the settlement issue came to a head and the parties staked out their positions on paper. In a motion filed with the CAFC, RIM argues that the term-sheet was a settlement of the case, and, as such, the case is now moot. RIM asked the CAFC to stay its decision on the for rehearing and remand the case to the district court to decide whether there has been a settlement. On the other hand, NTP has argued that the term-sheet was not a settlement and that there was never a “meeting of the minds.”
Now that the CAFC has remanded, the settlement issue will likely be resolved by the district court. (assuming the CAFC’s decision is not appealed to the Supreme Court).
Reexamination: In a parallel action, the patents at issue in the case (owned by NTP) are undergoing reexamination at the USPTO. As occurs in almost all inter partes and director-ordered reexaminations, the patent office has issued a non-final rejection in each NTP case that it has examined. Although this first rejection is a good sign for RIM, a final decision in the reexam will not be any time soon. (i.e., years). NTP has the opportunity to file a response to the non-final rejection. The PTO may then issue a final rejection, at which point NTP may ask for reconsideration, appeal to the PTO’s internal board (BPAI), and then appeal to the federal courts (i.e., the courts that have already determined that the patents are valid).