United States: Are U.S. Courts Going Global?

Originally Published in MIP World IP Contacts Handbook 2006, March 2006
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP

On October 30 2003, in the federal district court for the WD of Oklahoma Dr Voda sued Cordis Corporation for infringement of three US patents. The asserted patents protect guiding-catheters for performing angioplasty. After discovery, on supplemental jurisdiction grounds, Voda asked the court for leave to amend his complaint to assert infringement of four counterpart patents granted in Canada, France, Germany, and the UK, respectively. On August 2 2004, the district court accepted Voda’s request. Cordis appealed this order, and oral hearing before the Federal Circuit took place on January 12 2006, The Federal Circuit has not issued an opinion yet.

The decision of the district court to accept jurisdiction over foreign patents has generated much controversy. On the support side, an amicus brief filed by a group of law professors praised the district court decision. While Voda is not the first time a US district court has accepted jurisdiction over patent-infringement actions involving foreign patents, a US district court has never adjudicated the validity or infringement of a foreign patent absent an agreement of the parties. Accordingly, the professors see Voda as a big step toward solving the issue of fragmented multi-national litigation for patent enforcement whereby patentees could consolidate global litigation into a single US forum.

On the opposition side, amici briefs filed by the US government, AIPLA, and the Intellectual Property Owners Association argued that the district court decision violated comity and the act-of-state doctrine.

Many critics attack the existence of subject-matter jurisdiction over infringement of foreign patents on considerations of convenience. We believe that this stance confuses two different issues: (1) the ascertainment of jurisdiction; and (2) the exercise of jurisdiction. Only when jurisdiction is ascertained may the court decline to exercise it.

Of the various grounds for jurisdiction, according to the case law, only supplemental jurisdiction and diversity jurisdiction represent suitable avenues for granting jurisdiction when a plaintiff seeks consolidation of multi-national patent infringement actions. We focus here on supplemental jurisdiction.

The modern definition of supplemental jurisdiction stems from United Mind Workers v Gibbs (388 US 715, 725-28 (1966)). There, the Supreme Court held that a federal court has supplemental jurisdiction over state claims when "state and […] federal claims arose from the same nucleus of operative fact" In 1990, 28 USC § 1367(a) codified the holding in Gibbs.

Ortman v Stanray Corp, (371 F2d 154, 158 (7th Cir 1967)), extended the application of Gibbs to the infringement of foreign patents. In Mars Inc v Kabushiki-Kaisha Nippon Conlux (24 F3d 1368 (Fed Cir 1994)), the Federal Circuit discussed Ortman, and held that the infringement of a Japanese patent failed to meet the standards for supplemental jurisdiction.

Some maintain that Mars abrogated Ortman and established that supplemental jurisdiction never applies to foreign patents. That stance is mistaken. The ND of Illinois, for example, rejected the notion in Medigene AG v Loyola Univ of Chicago (No 98 C 2026, 2001 WL 1636916 (2001)), because "in appropriate circumstances Section 1367 permits exercise of supplemental jurisdiction over a claim for infringement of a foreign patent" (Id at *1).

Others argue that such "appropriate circumstances" do not exist because patents from different countries are not equivalent. This is only partially true. International harmonization has, to a great extent, synchronized the patent laws around the world. In addition, two basic concepts of patent law help to overcome this objection. First, the defined invention itself provides the common nucleus in counterpart patents. In other words, different national patents can protect the same invention. Second, in all countries, third party intrusion upon the grant of exclusivity to a patentee constitutes patent infringement. Thus, if a defendant interferes with the exclusivity granted to a patentee in different countries on the same invention, "a common nucleus of operative fact" arises.

Therefore, in our view, the Voda court correctly applied current US law in recognizing the possibility of supplemental jurisdiction arising from Cordis’s alleged interference with the exclusivity granted to Voda on the same invention in each of the five different countries.

If the Federal Circuit affirms the order of August 2 2004, the issue for the district court will be whether it should exercise jurisdiction. most US courts do not refuse consolidation on grounds of lack of jurisdiction; rather, they use other bases for declining to exercise jurisdiction.

First, according to the doctrine of forum non conveniens, courts may refuse to exercise jurisdiction when it appears that the plaintiff intends to harass the defendant through its choice of forum. This doctrine requires the application of a balancing test of private and public-interest factors and the existence of an adequate alternative forum. Many authorities have held that the difficulties in applying foreign law do not automatically give rise to a forum non conveniens dismissal.

Second, the act-of-state doctrine has often been to bar the courts of one state from reviewing the validity of a patent issued in another country. In the context of a proposed foreign patent consolidation, a dismissal based on the act-of-state doctrine requires two elements: (1) the issuance of a patent wherein the patent itself represents an "act of state"; and (2) the court is required to review the validity of the patents asserted in the litigation.

Some decisions have challenged the first premise asserting that patent grants are mere "ministerial acts". Even in such a case, international comity may still preclude consolidation based upon the notion that invalidating a foreign patent constitutes disrespect toward another sovereign country. Therefore, in our view, it is the possible invalidation of a foreign patent by a US court that presents the real bar to consolidation.

It is the author’s view that this problem can be solved – although with some practical drawbacks – by distinguishing and separating (bifurcating) the issue of infringement from the issue of invalidity. A plethora of decisions from both the Supreme Court and the Federal Circuit recognize the independence and severability of infringement from invalidity. As a result, a federal court has the power not only to determine the infringement of a foreign patent, but also to decline to resolve the issue of validity of the foreign patent.

Finally, § 1367(c) describes a number of reasons for declining the exercise of jurisdiction that, from the legislative history of this section, do not appear applicable to foreign law.

Accordingly, it is our view that the district court should not dismiss Voda’s amended complaint on forum non conveniens grounds. In applying the balancing test, most factors favour the plaintiff’s choice of forum (for example, the plaintiff and defendant are US citizens; Voda resides in Oklahoma City; the defendant is the alleged infringer of each patent at issue; and piecemeal litigation will, in part, be prevented). Furthermore, if the court does not determine the validity of the foreign patents, as we believe it should not, the principal act-of-state doctrine and international comity objections are eliminated.

Despite the enthusiasm of the supporters for the district court decision in Voda, even if US courts exercise jurisdiction, which we believe is allowed under current US case law, consolidation still appears to be a suitable strategy in very few cases.

The most compelling case for consolidation occurs when the plaintiff seeks only money damages wherein any awarded damages are enforceable entirely within the USA. A more difficult scenario arises when the plaintiff wants to enforce either a monetary award or an injunction overseas. In the absence of an international treaty, the law of the foreign country controls the enforcement of US judgments abroad. It is important to note that the United States does not have treaties dealing with the enforcement of judgments with most foreign countries, including the four countries involved here.

Moreover, if the US court accepts the bifurcation of the consolidated case, the defendant can stall the litigation by starting invalidity actions in the countries where the asserted patents issued. In addition, a defendant, where possible, could file declaratory judgment actions for non-infringement. Then, the defendant could request a dismissal of the consolidated US lawsuit involving the foreign patents, which is likely to be granted. When the defendant requests a dismissal of a consolidated litigation, in theory, the plaintiff has two options. First, it may request the US court to grant what is referred to as an anti-suit injunction. In the context of foreign patent litigation, however, federal courts have never issued a foreign country anti-suit injunction. Second, the plaintiff can demand a dismissal on lis pendens grounds in the foreign for a. This option is also very unlikely to be successful.

Finally, in consolidated patent cases, involving money damages (which is virtually always the case), US courts have to apply the lex delicti – the laws of the country where the infringement occurred. This means that courts have to apply both foreign patent and tort law. Therefore, the advantages of consolidation are mainly procedural.

If the Federal Circuit affirms the order of August 2 2004, the district court must resolve the issue of whether to exercise jurisdiction. If, on the other hand, the Federal Circuit decides to vacate the order it could either establish an exclusionary rule, in which it would close the door for consolidation or it may simply vacate it because in its view the requisite facts for consolidation do not exist here. We intend to provide supplemental comments when the Federal Circuit renders its decision in Voda. At this stage, it seems that neither the critics nor the supporters of the decision of the district court are either completely right or wrong. Even if US courts choose to exercise jurisdiction in consolidated patent infringement claims involving foreign patents, the problem of piecemeal litigation will not be avoided because as in almost all cases, validity will be at issue. An integral solution for reducing the amount of piecemeal litigation requires international treaties establishing not only the recognition of foreign judgments but also procedures to resolve jurisdiction issues when parallel litigation arises.

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