CASRIP Newsletter - Fall 2005, Volume 12, Issue 2
Can a Method Claim be Infringed if All Steps of the Patented Process are Not Used Within the United States? NTP, Inc. v. Research in Motion, Ltd.
By Landin Boring±
Can a method claim be infringed if all steps of the patented process are not used within the United States? This is one of the more interesting issues addressed by the U.S. Court of Appeals for the Federal Circuit in its recent opinion NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 75 U.S.P.Q.2d 1763 (Fed. Cir. 2005).
NTP, Inc. ("NTP"), a privately held company founded to license the patents of inventor Thomas Campana, owns patents covering systems and methods for enabling mobile users to send and receive electronic mail ("e-mail") over radio frequency wireless communication networks. Research in Motion, Ltd. ("RIM"), a Canadian corporation, sells the popular BlackBerry system, which allows users to send and receive e-mail using a handheld wireless device. The BlackBerry system is comprised of a handheld pager unit, "Redirector" software that routes e-mail messages from the handheld unit to the user's personal computer or corporate mail server, and access to a national wireless network. Importantly, the Redirector software sends messages to the BlackBerry Relay component of the wireless network, which is located in Canada.
On November 13, 2001, NTP filed suit against RIM in the U.S. District Court for the Eastern District of Virginia, alleging that the BlackBerry system infringed NTP's system and method claims. The jury found direct, induced, and contributory infringement by RIM on 14 claims of the patents-in-suit, and also found that the infringement was willful. The District Court entered final judgment in favor of NTP, and awarded $53.7 million in damages, including $14 million in enhanced damages. The Court also entered a permanent injunction against RIM, enjoining further manufacture, use, importation, and/or sale of all accused BlackBerry systems, software, and handheld devices. However, the injunction was stayed pending RIM's appeal to the Federal Circuit.
The Federal Circuit addressed three issues on appeal: (1) claim construction; (2) infringement of the system claims; and (3) infringement of the method claims. Regarding claim construction, the Court found that the District Court erred in construing three of the claims (involving the term "originating processor"), and remanded the case to the District Court to determine if the error was prejudicial to the verdict.
In addressing the infringement issues, the Court began by analyzing direct infringement under 35 U.S.C. § 271(a), which provides in pertinent part "whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent." Thus, infringement must occur within the territory of the United States to bring a claim of relief. The Court noted that this case presented an added degree of complexity regarding the "within the United States" language of the statute. First, the invention "is not one single device, but rather a system comprising multiple distinct components or a method with multiple distinct steps." Second, the nature of the components or steps permits their function and use to be separated from their physical location. The question thus becomes: What happens when one or more of the components or steps is located or performed outside of the United States?
RIM argued that the statutory requirement for infringement was not met, because the Relay component of the system is located in Canada, and therefore is not "within the United States." The District Court instructed the jury that "the location of RIM's Relay in Canada does not preclude infringement," and the jury found direct, induced and contributory infringement by RIM on all asserted claims, covering both systems and methods for transmitting an e-mail message between an originating processor and a destination processor. The Federal Circuit upheld infringement of the system claims, holding that the use of a claimed system under 35 U.S.C. § 271(a) is the place where the control and beneficial use of the system is obtained, in other words the place where the "system as a whole" is used. The court reasoned that BlackBerry customers in the United States control the transmission of e-mail messages, and also benefit from the exchange of messages, such that use of the system as a whole occurs in the United States. Therefore, the location of the Relay in Canada did not, as a matter of law, preclude infringement of the systems claims.
However, the Court adopted a different standard for the method claims, arguing that the concept of "use" of a method is fundamentally different than use of a system. The Court reasoned that a system is composed of component parts that are used collectively, whereas a method or process consists of multiple steps, and the use of the method requires performing each of the steps. Thus, the Court held that a method cannot be used "within" the United States unless each step is performed in this country. Therefore, RIM's customers could not directly infringe the method claims related to the Relay, and, as a consequence, RIM was not liable for induced or contributory infringement as a matter of law.
The Court also addressed the "offers to sell, or sells" prong of 35 U.S.C. § 271(a), an issue of first impression for the Court. It examined the legislative history of the patent statute, and concluded that Congress intended that method claims could only be directly infringed by use. While reserving judgment that method claims may never be infringed under the "offers to sell, or sells" prong, the Court held that RIM did not, as a matter of law, sell or offer to sell NTP's patented method in the United States. For the same reasons, the Court concluded that RIM did not infringe the method claims under the "imports into the United States" prong of 35 U.S.C. § 271(a).
NTP also claimed infringement under 35 U.S.C. § 271(f) because RIM actively induced its customers to "combine" the BlackBerry components used in the U.S. with the Relay located in Canada. Having concluded that the system claims were infringed under section 217(a), the Court limited the analysis to the method claims. Considering the legislative history of section 271(f), which addressed components of a "product" but did not refer to components of a "process", the Court reasoned that claims to tangible items, such as a product, device, or apparatus, are fundamentally different than claims to a process, which is a series of steps. Merely supplying BlackBerry handheld devices and software products to its customers in the United States was not the equivalent of supplying component steps for combination into NTP's patented methods. Thus, the Court held that because "RIM is not supplying or causing to be supplied in this country any steps of a patented process invention for combination outside the United States" NTP's method claims were not infringed under section 271(f) as a matter of law.
The final issue concerned infringement under 35 U.S.C. § 271(g), which provides in part that "whoever without authority imports into the United States or offers to sell, sells, or uses within the United States a product which is made by a process patented in the United States shall be liable as an infringer... ." The District Court held that "'wireless electronic mail' specially formatted by a patented process can be a 'product' under section 271(g)." In reversing the District Court, the Federal Circuit analogized this case to Bayer AG v. Housey Pharm., Inc., 340 F.3d 1367 (Fed. Cir. 2003), where it held that research data from the performance of a method was "the production of information" and not a physical product for the purposes of section 271(g). Likewise, NTP's claims were directed to methods for the "transmission of information," which does not entail the manufacturing of a physical product. Therefore, section 271(g) does not apply to the method claims as a matter of law.
This decision is good news for patent holders of multiple component systems, in that United States patent law will provide protection even if a competitor locates a critical component outside of the United States, provided the beneficial use and control of the system are located in the United States. However, the combined rulings from Bayer and NTP suggest that competitors may be free to infringe patented methods as long as one or more of the steps is performed outside of this country. This has implications for a broad range of technologies, including computer networking and computational biology, where the patented method generates useful data but does not manufacture a tangible physical article. For example, a patented software method that analyzes human DNA to identify genes associated with disease could be circumvented by analyzing the data overseas using the patented method and then simply transmitting the data back to research labs in the United States.
Ultimately, the result of NTP suggests important policy reasons to both harmonize international patent law, and to modify United States patent law under section 271(g) to make it unlawful to import data produced by a patented process performed outside the United States.