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Federal Circuit Limits Overseas Patent Liability
The National Law Journal
August 20, 2009
An en banc ruling by the U.S. Court of Appeals for the Federal Circuit has narrowed the reach of U.S. patent laws covering companies' overseas sales and production.
The Wednesday decision in the closely watched Cardiac Pacemakers Inc. v. St. Jude Medical Inc. determined that patents for methods or processes are not subject to patent infringement liability if the products are assembled and sold overseas. Patents for products, however, are not exempt.
The plaintiffs in the case accused a company that sells implantable cardioverter defibrillators, which detect and correct abnormal heartbeats, of infringing on a patent for a "method of heart stimulation." The method uses a programmable, implantable heart stimulator.
The en banc ruling overturned the Federal Circuit's Dec. 18 ruling on method patents' liability for overseas infringement. "In sum, the langue of [the law's relevant section], its legislative history, and the provision's place in the overall statutory scheme all support the conclusion that [the law's relevant section] does not apply to method patents," wrote Circuit Judge Alan Lourie.
The new Cardiac Pacemakers opinion also overruled a 2005 Federal Circuit decision on the same issue, Union Carbide Chems. & Plastics Tech. Corp. v. Shell Oil Co.
Lawyers involved in the case believe the Federal Circuit's decision to rehear the case en banc stemmed from a 2007 U.S. Supreme Court case, Microsoft Corp. v AT&T Corp.
The Supreme Court held that Microsoft was not liable under U.S. patent law for foreign computer makers' sales of Windows software copies that infringed on an AT&T speech software patent. Microsoft sent the foreign companies master discs with encrypted Windows data. The foreign companies sold the products to non-U.S. customers.
Plaintiffs' side appeal lawyer Arthur I. Neustadt, a senior partner at Alexandria, Va.-based intellectual property firm Oblon Spivak McClelland Maier & Neustadt who represented the patent holders and argued the plaintiffs' case at the Federal Circuit, said the dissent got it right.
"We thought that the legal issue was pretty clear," Neustadt said. "Namely that Congress, in passing the law, said that it applied to patented inventions. Patented inventions in all other areas of the patent law means applies to the four different [patent] classes."
Jeffrey Olson, a partner in Sidley Austin's Los Angeles intellectual property group who represented the defendant, said his client is pleased with the court's majority ruling. "This limits the extraterritorial effect of U.S. patents solely related to methods," Olson said.
