Extraterritoriality of U.S. Patents: The Law – A Reminder and Update

May 13, 2014

EM_MainIs a U.S. patent infringed by an offer to sell a product embodying that patent if that offer to sell occurs wholly outside of the United States? Yes, according to current law.  In the 2012 Federal Circuit decision of Transocean Offshore Deepwater Drilling, Inc. v. Maersk Drilling USA, Inc., (“Maersk”), a patent owner can successfully sue a third party for infringement if that party makes –wholly outside of the U.S.–an offer to sell the patented product.  This case arguably represents the Federal Circuit´s departure from its own as well as Supreme Court precedent, resulting uncertainty in the international exploitation of patents.

Maersk was appealed to the Supreme Court, which recently referred the question to the Solicitor General for an advisory opinion.  It is now evident that no decision will be rendered by the Court until the next term, continuing the uncertainty in this important area of international patent law. It thus remains prudent for companies to remain vigilant about the scope of pre-sales activities it conducts with respect to potentially patent-conflicting products, both inside and outside the U.S.

The Maersk decision

§ 271(a) of the U.S. Patent Act provides, “whoever without authority makes, uses, offers

to sell, or sells any patented invention, within the United States or imports into the United

States any patented invention . . . infringes the patent.” In Maersk, the Federal Circuit held that an offer made in Norway by an alleged infringer, a United States company, to another United States company to sell a drilling rig within the United States, for delivery and use within the United States, constituted an offer to sell within the United States and thus infringed the U.S. patent.

As pointed out by one of the amicus briefs in the Supreme Court appeal of the case (the brief of ten law professors), “the Federal Circuit considerably expanded the extraterritorial reach of (U.S. patent law): there can be infringement if negotiations take place anywhere in the world, so long as the potential sale may be in the United States. . .”

Under the facts of this case, infringement can be found even if the agreement being negotiated after the original offer contained a clause expressly providing that the final design could be modified if litigation showed that the rig infringed the plaintiff’s patents.

What constitutes an infringing “offer”

Under U.S. patent law, an “offer” is determined under established general contract law principles. The defendant must communicate a ¨manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it¨.  An offer to sell differs from a sale, in that an offer to sell need not be accepted to constitute an act of infringement.

Preparatory activities by a putative offeror, without contact with a third party (a putative offeree), has been held to not constitute infringement.  Even if a communication explicitly states that it is not an offer, it can constitute an offer to sell under section 271 based on the substance conveyed in the communication. Communication of price quotations, brochures, specification sheets, videos, and sample parts by the offeror to the offeree constitute an offer under Federal Circuit interpretation of “offer”.  Likewise, the e-mailing of price information and links to the product constitutes a potentially –infringing offer for sale.

Publishing business plans that include discussions of the infringing device can also constitute infringement.

In view of Maersk, any communications a company makes outside of the U.S. with respect to prospective sales of an infringing product must be vigilantly reviewed to ensure the communication does not constitute an “offer” under current U.S. law.