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Elements of infringement claim not jurisdictional; "sale" occurs at location of buyer and seller

April 29, 2008
Post by Blog Staff

In a decision yesterday, the Federal Circuit affirmed a district court's denial of the defendant's motion to dismiss for lack of subject matter jurisdiction. The court also denied the defendant's post-verdict motion for judgment as a matter of law. The defendant contended that because it shipped its allegedly infringing products f.o.b. from its place of business in Canada, it did not sell or import the product in the United States, and thus there was no subject matter jurisdiction over the plaintiff's infringement claims. Alternatively, the defendant argued these same facts in support of its motion for judgment as a matter of law.The Federal Circuit noted that the district court had erred in considering the issue of whether allegedly infringing products had been sold or imported in the United States as an issue implicating the court's subject matter jurisdiction. Instead, this issue was simply an element of the claim to be proven that did not affect the court's ability to hear the case. On the merits, the Federal Circuit rejected the contention that because legal title to the products changed in Canada that there was not a "sale" in the United States as contemplated by § 271(a), given that the customer was in the United States and the products were shipped there. As a result, the court affirmed the finding of infringement.More detail of Litecubes, LLC v. N. Light Prods., Inc. after the jump.

Lightcubes owns a patent directed to lighted artificial light cubes that can be placed in beverages as an illuminatable novelty item. The "Lightcube Copyright" also at issue in the case is directed towards the illuminatble artificial light cube product. The product at issue is shown below:LightcubeAt trial, defendant GlowProducts raised the issue of subject matter jurisdiction, arguing that because GlowProducts shipped its products to United States customers f.o.b. from its place of business in Canada (thereby transferring legal title to the products in Canada), the sale actually took place in Canada and the customer imported the goods into the United States. After the jury returned a willful infringement verdict, GlowProducts filed a motion to dismiss for lack of subject matter jurisdiction based on the argument it made during trial. Neither the district court nor Litecubes disputed the characterization of the issue as jurisdictional. The district court denied GlowProducts' motion, as well as its JMOL motions. GlowProducts appealed.The Federal Circuit noted that in the initial briefing, both parties assumed that the issue on appeal was jurisdictional. The Federal Circuit panel requested the parties be ready to discuss the following issue at oral argument:

Whether failing to establish that an alleged infringer "makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States an patented invention" is sufficient to divest the federal courts of subject matter jurisdiction over a patent infringement action, or instead whether the location of the allegedly infringing activity is a factual element of the claim which must be proven to show patent infringement but which does not affect the subject matter jurisdiction of the federal courts.

The Federal Circuit noted that "Lightcubes alleged in its complaint that GlowProducts violated 35 U.S.C. § 271(a)," that "this statute creates a federal cause of action for patent infringement over which the district courts have subject matter jurisdiction under § 1338(a)" and "Lightcubes, as GlowProducts concedes, properly pled every element of a § 271(a) claim." The Federal Circuit then noted that "[s]ubject matter jurisdiction does not fail simply because the plaintiff might be unable to ultimately succeed on the merits" and that "[i]t is firmly established . . . that the absence of a valid (as opposed to arguable) cause of action does not implicate subject matter jurisdiction, i.e., the courts' statutory or constitutional power to adjudicate the case." Accordingly, "a failure to prove the allegations alleged in a complaint requires a decision on the merits, not a dismissal for lack of subject matter jurisdiction." The Federal Circuit additionally cited the Supreme Court's 2006 Arbaugh decision for the "readily administrable bright line rule" that:

if the Legislature clearly states that a threshold limitation on a statute's scope shall count as jurisdictional, then courts and litigants will be duly instructed . . . . But when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as non-jurisdictional in character.
The Federal Circuit noted Congress had not stated that the requirement that the infringing act occur in the United States is "a threshold jurisdictional requirement as opposed to an element of the claim." The court, noting the history of this jurisprudence, managed to cite Chief Justice Marshall's 1804 opinion in The Charming Betsey. The Federal Circuit observed that while international law does not provide an independent limitation on Congress' legislative authority, "it is the international law concept of territorial limitations on the jurisdiction to prescribe that underlays the longstanding presumption that Congress does not intend its statute to have extraterritorial effect."The Federal Circuit, noting it could find no case where the question of sale within the United States was treated as a question of subject matter jurisdiction, concluded that the Supreme Court's Arbaugh rule governed the inquiry and that, because Congress had not clearly stated that any of the § 271 limitations were jurisdictional, held that "whether the allegedly infringing act happened in the United States is an element of the claim for patent infringement, not a prerequisite for subject matter jurisdiction." GlowProducts additionally alleged that the district court had no jurisdiction over Lightcubes' copyright claims as well. At oral argument both parties agreed "that the Patent Act and the Copyright Act should be interpreted consistently, and thus that if the Patent Act's requirement that the infringing act take place in the United States is not a jurisdictional requirement, the exclusion from the Copyright Act of acts taking place entirely abroad should also not be jurisdictional." The Federal Circuit agreed, and held there was subject matter jurisdiction over the copyright claims for the same reason as the patent claims. The Federal Circuit additionally found "substantial evidence of a sale within the United States." The court noted that it was "uncontested that GlowProducts sold and shipped the allegedly infringing products directly to customers located in the United States." The fact that the products were shipped f.o.b. from Canada did not preclude a finding that there was no sale in the United States. Specifically, in North American Philips Corp. v. American Vending Sales, Inc., 35 F.3d 1576 (Fed. Cir. 1994), the court noted that a "sale," for purposes of § 271(a), occurs both at the location of the seller and the buyer. Here, because the buyers were undisputedly in the United States, the argument that no sale took place in the United States necessarily failed, and the court affirmed the denial of GlowProducts' motion for judgment as a matter of law on the patent claims. Similar to the jurisdictional analysis, the court likewise affirmed the denial of the JMOL motion for the copyright claims, finding they should be treated the same as the patent claims on this issue.To read the full decision


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