The U.S. Court of Appeals for the Federal Circuit affirmed a district court's denial of defendant's motion for judgment as a matter of law respecting jury verdicts of patent and copyright infringement and also affirmed the court's denial of defendant's motion to dismiss those causes of action for lack of subject matter jurisdiction. Litecubes, LLC v. Northern Light Prods., Inc., Case No. 06-1646, (Fed. Cir., April 28, 2008) (Gajarsa, J.). The resolution of both issues turned on the question of whether shipment of an item FOB (free on board), from a foreign country into the United States, is a "sale" in the United States and thus a potentially infringement act under the patent and copyright statutes.
The patent in issue is directed to illuminated "beverage accessories" or artificial "ice cubes." Defendant Northern Light Products is a Canadian corporation that purchases novelty items from Chinese manufacturers and then advertises those items to customers in the United States and Canada on its website. American customers called the phone number provided to order the illuminated cubes and Northern Light shipped them FOB from Canada. Commercial law provides that title to goods is transferred to the buyer at the point of FOB shipment, in this case Canada. Northern Light thus contended that all sales were made in Canada, not in the United States. Northern Light moved to dismiss both patent and copyright infringement actions on grounds that the district court did not have subject matter jurisdiction. The district court denied the motion, finding that Northern Light "clearly imported the accused products into the United States," giving the district court jurisdiction to hear the case and providing substantial evidence to support the jury's patent and copyright infringement verdicts. Northern Lights appealed.
The Federal Circuit affirmed, agreeing with the district court's assertion of subject matter jurisdiction on the bright line test enunciated by the Supreme Court in Arbaugh v. Y & H Corp. In Arbaugh, the Supreme Court held that courts should construe statutory requirements as matters to be determined on the merits rather than as threshold, jurisdictional limitations. A statutory limitation should be treated as jurisdictional only where Congress has clearly articulated such an intent in the statute. The Federal Circuit noted that neither the patent and copyright statutes evince any such congressional intent and held that while an infringing act, such as a sale, offer to sell or importation of a patented or copyrighted item in the United States, must be proven as an element of a claim for infringement, such an act is not a prerequisite for subject matter jurisdiction.
Turning to Northern Light's motions as a matter of law and relying on its own precedent of North American Philips Corp. v. American Vending Sales, Inc., the Federal Circuit found the sales to American customers FOB (Canada) were sales in the United States. North American Philips held, in the context of personal jurisdiction, that a "sale" of a patented item occurred not only at the single point where commercial law would deem the transaction to have taken place but also at the locations of both buyer and seller (and perhaps at the locus of all points comprising the shipment route). In the case at bar, the Court found that there was substantial evidence to support the jury's patent and copyright infringement verdicts because the customers were in the United States when they ordered the accused artificial cubes and the cubes were delivered to those customers in the United States. The Court, in dicta, further noted that a distinction should be drawn between such conduct, part of which occurs in the United States and thus can support a finding of infringement by an American court and purely extraterritorial, non-infringing conduct.
Practice Note: Where patented or copyrighted items are made in a foreign jurisdiction and shipped into the United States, counsel should determine sufficient facts to carefully consider the appropriate defendant(s). If a foreign manufacturer has sold and shipped goods to a second entity in that jurisdiction who in turn ships those goods into the United States, the second entity, not the manufacturer, is more likely to be an appropriate accused infringer. If the manufacturer sells the goods to entities located in the United States, the manufacturer (and potentially also the American entities) may well have infringed the American patent or copyright irrespective of the formal location of transfer of title to the goods under commercial law. In any event, so long as the plaintiff pleads a substantial and non-frivolous act of infringement within the United States, a United States district court will have subject-matter jurisdiction.
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