Editor’s note: This article has been corrected to accurately reflect the status of a petition for writ of certiorari at the U.S. Supreme Court. The high court has called for the views of the Solicitor General prior to determining whether to grant the petition for writ of certiorari.
U.S. patents can present infringement traps for the unwary energy company, with respect to those companies’ international activities. That is especially true in light of two decisions by the U.S. Court of Appeals for the Federal Circuit in
Transocean Offshore Deepwater Drilling Inc. v. Maersk Contractors USA Inc. (2010)
(Transocean 1) and
Transocean Offshore Deepwater Drilling Inc. v. Maersk Contractors USA Inc. (2012) (
Transocean II) (collectively the “
Transocean decisions, the Federal Circuit found patent infringement of two U.S. patents, even though all actual activities by the alleged infringer relative to the alleged infringing device occurred outside the United States. Before this decision, courts held that the infringing actions must actually occur within the United States to infringe a U.S. patent.
On Oct. 7, the U.S. Supreme Court called for the views of the U.S. Solicitor General regarding the
Transocean decisions. The issue is whether the Federal Circuit incorrectly applied U.S. patent law outside the territorial jurisdiction of the U.S. to overseas activities.
Review of the Federal Circuit’s
Transocean decisions reveals that in 2007, Transocean filed suit against Maersk, alleging that Maersk’s contract in Norway to provide a drilling rig to Statoil ASA specifically for use in the Gulf of Mexico infringed Transocean’s patents directed to dual-action drilling. The contract contained an option-to-modify clause pending the outcome of unrelated litigation involving the patents-in-suit. After the contract was signed, but before the rig was imported into the United States, Maersk exercised the option-to-modify clause and redesigned the rig to avoid infringement risks related to Transocean’s patents. The district court granted summary judgment of noninfringement, reasoning that no sale or offer to sell occurred within the United States, as required by Patent Act §271(a) to prove direct infringement.
Transocean I, the Federal Circuit reversed in favor of Transocean, holding that an offer to sell between two U.S. companies for actual performance in the United States may constitute infringement. On remand, a jury found that Maersk infringed the patents and awarded Transocean $15 million in damages. The trial judge overruled the jury’s verdict, but the Federal Circuit reinstated the verdict on appeal in
In its ruling, the Federal Circuit found infringement of Transocean’s U.S. patents. The court’s infringement finding was based on an “offer to sell” an infringing rig, even though the offer occurred in Scandinavia. The court noted that it was of no consequence that an infringing rig was never shipped to the United States (due to the modification).
Maersk has asked the Supreme Court to overturn the verdict. Some opine that the Federal Circuit’s extension of U.S. patent law to cover purely foreign acts that constitute direct infringement invites international friction and unjustly flies in the face of the Supreme Court’s articulation of a presumption against the extraterritorial application of U.S. law.
At the heart of the appeal is the interpretation of Patent Act §271(a), which states that an act of infringement occurs when someone “makes, uses, offers to sell, or sells any patented invention within the U.S.” or imports an infringing article into the United States.
In its petition for writ of certiorari, Maersk argues that, because the contract was signed in Scandinavia, it cannot be an act of U.S. patent infringement under the statute, as conduct in Scandinavia does not occur “within the U.S.” and one does not “sell” a product by contracting to provide a service using it (as is common in contracts for use of offshore drilling rigs).
Transocean, on the other hand, argues in its brief in opposition that the Federal Circuit correctly interpreted the statute to mean that offers to sell products for use in the United States are acts of infringement, even if the offers are not made in the United States.
Should the Supreme Court grant the writ of certiorari and find that offering, negotiating and entering into a contract outside the United States to provide services using a patented product constitutes an “offer to sell” or “sale” of a patented device “within the U.S.,” global energy companies will need to become more conscious of potential U.S. patent infringement risks in international dealings with customers. For example, such a finding would underscore the importance of obtaining freedom-to-operate opinions from legal counsel outlining whether certain commercialization activities, such as an offer to sell or a sale of a potentially patented product, may be pursued without infringing a valid U.S. patent right, regardless of the extraterritoriality of the activities.
Additionally, should the Supreme Court uphold the Federal Circuit’s holding in the
Transocean decisions, option-to-modify clauses would not shield companies from infringement allegations for use of a potentially infringing product in the United States where any act of offering to sell or selling the product took place outside of the United States. Moreover, removal of the restriction of territoriality as applied to the “offer to sell” or “sells” language of §271(a) may extrapolate to the additional infringing acts listed in the statute, thereby widening the patent infringement risks that global energy companies may face.
If the Supreme Court grants cert and ultimately reverses the Federal Circuit’s holding in the
Transocean decisions, energy companies should continue to seek freedom-to-operate opinions relevant to potentially infringing activities occurring solely in the United States and will be protected from patent infringement allegations in the United States for any offers to sell or sales of potentially infringing products made extraterritorial to the United States.