United States: Pricing And Contracting Negotiations Do Not Constitute Or Transform Substantial Extraterritorial Activities Into A Sale Or Offer To Sell Under § 271(a)

In Halo Electronics, Inc. v. Pulse Electronics, Inc., Nos. 13-1472, -1656 (Fed. Cir. Oct. 22, 2014), the Federal Circuit affirmed the district court's judgment that Pulse Electronics, Inc. ("Pulse") did not sell or offer to sell products that Pulse manufactured, shipped, and delivered outside the United States, and that Pulse's alleged infringement with respect to products that Pulse sold and delivered in the United States was not willful.  As to Pulse's cross-appeal, the Federal Circuit affirmed the judgment of direct infringement of Halo Electronics, Inc.'s ("Halo") patents with respect to Pulse's products delivered in the United States, inducement with respect to products that were imported into the United States by others, and noninfringement of Pulse's U.S. Patent No. 6,116,963 ("the '963 patent").  The Federal Circuit also affirmed the judgment that the asserted claims of the Halo patents were not invalid for obviousness.

Halo, a supplier of electronic components, owns three patents directed to surface mount electronic packages.  Pulse, another supplier of electronic components, designs and sells surface mount electronic packages and manufactures them in Asia.  While Pulse delivers some of its packages to the United States, the majority are delivered outside the United States to contract manufacturers for companies such as Cisco, which incorporate the packages into their products and ship them to consumers around the world.  Pulse's sales offices abroad received purchase orders for Pulse packages delivered abroad; however, Pulse engaged in pricing negotiations with contract manufacturers, approved certain foreign pricing, and engaged in other activities in the United States.  When Pulse received purchase orders abroad, Pulse delivered the package products to Cisco contract manufacturers in Asia.  The contract manufacturers then paid Pulse.  After assembling the end products, the contract manufacturers sent invoices to Cisco, and Cisco paid the contract manufacturers for the end products. 

After an initial unsuccessful attempt to license the Halo patents to Pulse in 2002, Halo sued Pulse for patent infringement in 2007.  Pulse denied infringement and challenged the validity of the Halo patents.  The district court granted Pulse's motion for SJ that it did not infringe the Halo patents by selling or offering to sell packages that Pulse manufactured, shipped, and delivered outside the United States.  At trial, the jury found that Pulse directly infringed the Halo patents with the products that it shipped into the United States, that Pulse induced others to infringe the Halo patents with the products that were ultimately imported into the United States in the finished end products, that this infringement was probably willful, and that the asserted Halo patent claims were not invalid for obviousness.  In response to Pulse's post-trial motion, the district court later found that Pulse's infringement was not willful.  The district court denied Pulse's motion for JMOL of invalidity for obviousness of the asserted Halo patent claims as waived.  Halo appealed and Pulse cross-appealed.

"[W]e have not deemed a sale to have occurred within the United States for purposes of liability under § 271(a) based solely on negotiation and contracting activities in the United States when the vast majority of activities underlying the sales transaction occurred wholly outside the United States."  Slip op. at 11.

On appeal, the Federal Circuit affirmed all of the district court's holdings.  The Court first reviewed the grant of SJ of no direct infringement with respect to products that Pulse manufactured, shipped, and delivered abroad.  Halo argued that Pulse's activities with respect to these products directly infringed its patents because negotiations and contracting activities that occurred in the United States, which later resulted in binding contracts, constituted a sale or offer for sale under § 271(a).  According to Halo's reasoning, the location of the sale or offer for sale should not be limited to location of delivery of the products.  Pulse countered that the products were sold or offered for sale outside the United States because these products were manufactured, ordered, invoiced, shipped, and delivered abroad, and the discussions that took place in the United States were mere forecasts.  Pulse contended that Halo's position improperly expanded the scope of § 271(a) beyond the United States. 

The Federal Circuit agreed with Pulse.  The Court first examined whether the products that Pulse manufactured, shipped, and delivered abroad were sold within the United States under § 271(a).  On this point, the Court stated that "we have not deemed a sale to have occurred within the United States for purposes of liability under § 271(a) based solely on negotiation and contracting activities in the United States when the vast majority of activities underlying the sales transaction occurred wholly outside the United States."  Slip op. at 11.  The Court explained that a sale did not take place within the United States because all substantial activities with respect to these products took place outside the United States.  The quarterly negotiations between Pulse and Cisco in the United States "did not constitute a firm agreement to buy and sell," and were "insufficient to constitute a 'sale' within the United States," even if those negotiations later led to purchase orders and sales overseas.  Id. at 12-13.  Further, the Court emphasized the presumption against extraterritorial application of U.S. laws, stating:  "The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law."  Id. at 13 (quoting Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 454-55 (2007)).  Additionally, the Court rejected Halo's argument that the sales occurred in the United States because Halo suffered economic harm from the sales, reasoning that such logic impermissibly enlarged the geographical scope of § 271(a). 

The Federal Circuit next considered whether Pulse's activities within the United States constituted an offer to sell, described by the Court as "an offer contemplating sale in the United States."  Id. at 16.  Because Pulse's negotiation activities in the United States contemplated sales outside of the United States, the Court held that Pulse did not offer to sell the products for the purposes of § 271(a).  Therefore, the Court affirmed the SJ of no direct infringement by Pulse based on products manufactured, shipped, and delivered abroad.

Next, the Court addressed willfulness, applying the two-pronged Seagate analysis.  The Court affirmed the district court's holding that the objective prong of the willfulness inquiry was not satisfied, stating that the district court "properly considered the totality of the record evidence, including the obviousness defense that Pulse developed during the litigation, to determine whether there was an objectively-defined risk of infringement of a valid patent."  Id. at 18.  The Court held that, although Pulse was ultimately unsuccessful in challenging the validity of the Halo patents, it did raise a substantial question as to their obviousness.

The Federal Circuit considered Pulse's cross-appeal as to certain claim constructions and the judgments of infringement of the Halo patents and noninfringement of Pulse's '963 patent, but found no reversible error.  The Court also explained that Pulse had waived its right to challenge the factual findings that the jury relied upon in its verdict of nonobviousness with respect to the Halo patents because Pulse failed to file a motion for JMOL on the issue of obviousness during trial before the issue was submitted to the jury.  Therefore, the Court held that the district court was correct in presuming that the jury resolved all factual disputes relating to the scope and content of the prior art and secondary considerations in Halo's favor.  The Federal Circuit therefore affirmed the district court's judgment that the asserted claims of the Halo patents were not invalid for obviousness.

In their concurrence, Judges O'Malley and Hughes agreed with the majority's decision to affirm all aspects of the district court's decision but urged a reevaluation of the standard for enhanced damages in light of Highmark, Inc. v. Allcare Health Management Systems, Inc., 134 S. Ct. 1744 (2014), and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), and the terms of the governing statutory provision, 35 U.S.C. § 284 (2012).  The concurrence observed that the Court's standard for the award of enhanced damages under § 284 has closely mirrored its standard for the award of attorneys' fees under § 285.  Because the Supreme Court has determined that the Federal Circuit's standard for determining whether to award attorneys' fees was wrong, the concurrence reasoned that the Federal Circuit should also consider "whether those same interpretative errors have led us astray in our application of the authority granted to district courts under § 284."  O'Malley Concurrence at 3.

Judges: Lourie (author), O'Malley (concurring), Hughes (concurring)

[Appealed from D. Nev., Judge Pro]

This article previously appeared in Last Month at the Federal Circuit, November 2014

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
16 Jan 2019, Conference, Washington, DC, United States

Finnegan partner Lionel Lavenue will present “The Technology Accelerates: IP Issues at the Cutting Edge” during the Embry-Riddle Aeronautical University Aviation Law & Insurance Symposium.

17 Jan 2019, Webinar, Washington, DC, United States

As a part of Strafford Publications’ webinar series, Finnegan partners Erika Arner and Michael Flibbert

will discuss best practices for preparing a PTAB case for appeal to the Federal Circuit.

22 Jan 2019, Webinar, Washington, DC, United States

As part of Strafford Publications’ webinar series, Finnegan partners Shana Cyr and Mark Feldstein will provide essential updates on FDA practice and patent law relating to biologics and biosimilars.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions