In Halo Electronics, Inc. v. Pulse Electronics Inc. and Pulse Electronics Corporation, CAFC 2013-1472,-1656 (October 22, 2014), the Court of Appeal for the Federal Circuit (“CAFC”) reviewed the opinion of the District Court for the District of Nevada.

Among other things, the District Court granted summary judgment that Pulse Electronics (“Pulse”) did not sell or offer to sell with the United States the accused products that Pulse manufactured, shipped, and delivered to buyers outside the United States, and thus Pulse did not directly infringe Halo’s US Patents 5,655,985 (“the ‘985 patent”) and 6,297,720 (“the ‘720 patent”).

Halo is a supplier of electronic components and owns the ‘985 patent and the ‘720 patent.  Pulse is also a supplier of electronic components and it designs and sells surface mount electronic packages and manufactures those products in Asia.

The CAFC held that when substantial activities of a sales transaction, including the final formation of a contract for sale encompassing all essential terms as well as the delivery and performance under the sales contract, occur entirely outside the United States, pricing and contract negotiations alone do not constitute or transform those extraterritorial activities into a sale within the United States for purposes of Section 271(a).

While Pulse and Cisco, a purchaser of Pulse’s products, engaged in quarterly pricing negotiations for specific products, the negotiated price and projected demand did not constitute a firm agreement to buy and sell, binding on both Pulse and Cisco. Instead Pulse received purchase orders from Cisco’s foreign contract manufactures, which then firmly established the essential terms including price and quantity of binding contracts to buy and sell.  Also, Pulse was paid abroad by those contract manufacturers, not by Cisco, upon fulfillment of the purchase orders.  Thus substantial activities of the sales transactions at issue, in addition to manufacturing and delivery, occurred outside the United States.

Relying upon US Supreme Court precedent, [o]ur patent system makes no claim to extraterritorial effect; these acts of Congress do not, and were not intended to operate beyond the limits of the United States, and we correspondingly reject the claims of others to such control over our markets.” Microsoft, 550 U.S. at 444 (quoting Deepsouth Packing Co. V. Laitram Corp., 406 U.S. 518, 531 (1972) (quoting Brown v. Duchesne, 60 U.S. (19 How.) 183, 195 (1857))).

Further relying on the US Supreme Court for the Court’s rationale, the US Supreme Court has stated, if one desires to prevent the selling of its patented invention in foreign countries, its proper remedy lies in obtaining and enforcing foreign patents. See Deepsouth, 406 U.S. at 531.

In almost all circumstances, our firm would recommend either filing for patent protectino directly into the foreign country or countries in which commercial activity is likely or preferably filing a Patent Cooperation Treaty International Patent Application.

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