High Hurdle for U.S. Courts to Hear Foreign Infringement Claims
Jan K. Voda v. Cordis Corp., A Comparative Law Perspective
By Toshiko Takenaka, Ph.D.1
In Voda v. Cordis, the Federal Circuit significantly limited an option for U.S. patent owners to sue accused infringers for not only claims of U.S. patent infringement, but for foreign patent infringement by finding an abuse of discretion by the Oklahoma district court that was eager to adjudicate foreign patent infringement relying on the supplemental jurisdiction under 28 USC §1367.2 Dr. Voda owns several patents related to guiding catheters for coronary angioplasty both in the United States and in foreign countries. The patentee initially sued Cordis, a Florida-based medical device manufacturer in the Western District of Oklahoma, asserting infringement of his U.S. patents. He then moved to amend his complaint to add claims of infringement of his foreign patents, which he obtained from a common Patent Cooperation Treaty (“PCT”) application with respect to Cordis’s conduct in Britain, France, Germany and Canada. Relying on the supplemental jurisdiction, the district court granted the patentee’s motion to add claims of foreign patent infringement while certifying an interlocutory appeal. Cordis filed an appeal to the United States Court of Appeals for the Federal Circuit.
Because multinational firms’ activities are not limited by national boundaries, a product may end up in several countries and infringe corresponding patents in these countries. Suing infringers in multiple countries can be extremely expensive and time consuming. In Europe, it is inevitable to move a product from one country to another; industry is keen on the development of a cost-effective system for quick enforcement in multiple countries. Responding to such a need, some European courts have developed a practice for granting cross-border injunctions. However, this attempt is now on hold due to the GAT decision issued by the European Court of Justice last summer.3
II. FEDERAL CIRCUIT TWO-PART TEST
The Federal Circuit followed the example of the ECJ, in setting a high hurdle for U.S. district courts to exercise their supplemental jurisdiction over infringement claims of foreign patents, although the court did not completely eliminate the possibility for U.S. district courts to exercise their jurisdiction. Reviewing the interlocutory appeal, the court found the district court’s exercise of jurisdiction as an abuse of discretion and vacated the order, granting the patentee leave to add foreign infringement claims, in a 2-1 decision.
The Federal Circuit set forth a two-part test for the appropriate exercise of supplemental jurisdiction by analyzing if: (1) §1367(a) authorizes the supplemental jurisdiction; and (2) the exercise of such jurisdiction is within the court’s discretion under §1367(c). In analyzing the four limitations to define the authorization under §1367(a), the court recognized that only one limitation was relevant in the Voda case: whether foreign claims, such as infringement claims of foreign patents, form part of the same case or controversy under Article III of the United States Constitution. The court cited the Supreme Court’s interpretation of §1367(a) requiring federal courts’ original claims and foreign claims deriving from a common nucleus of operative fact.4 In Mars,5 the court had already applied the common nucleus of operative fact requirement to evaluate the Delaware district court’s exercise of supplemental jurisdiction. To determine whether the foreign patent infringement claims met the requirement, the Mars court reviewed: (1) the difference between US and foreign patents; (2) the difference between the accused embodiments; (3) the difference between alleged acts of infringement; and (4) the difference between governing United States and foreign laws.
The Voda court adopted the same four-factor test, although it noted that the list of factors is not exhaustive. However, the Oklahoma district court failed to articulate any finding with respect to these factors. Accordingly, the Federal Circuit found an error, vacated the order, and remanded the case to the district court because it could not decide whether the common nucleus of operative fact requirement was met. Furthermore, it is necessary to consider foreign law expert testimony to determine the extent of differences between U.S. and foreign governing laws and the scope of U.S. and foreign patents. Such testimony could not be taken in an appeals court.
III. FEDERAL CIRCUIT FINDS MORE ERRORS
Although the Federal Circuit’s analysis could have stopped after finding this error, the court goes on to analyze the scope of discretion, and found another error because the district court also failed to analyze whether its exercise of supplemental jurisdiction was within the court’s discretion under 28 USC §1367(c). Section 1367(c) prevents district courts from exercising supplemental jurisdiction if there are compelling reasons for declining jurisdiction. The Federal Circuit concluded that considerations of comity, judicial, convenience, fairness, and other exceptional circumstances constitute such compelling reasons.
This conclusion is supported by the territoriality principle expressed in the Paris Convention, Patent Cooperation Treaty, and WTO TRIPS, although the Federal Circuit also recognized that these treaties do not include an express provision with respect to the capacity of enforcement in member state courts. Considerations of comity also supported the conclusion of declining to exercise jurisdiction because of no international duty for U.S. courts to exercise jurisdiction over foreign patent infringement claims; no evidence that it would be more convenient for U.S. courts to enforce foreign patents than other courts or that foreign courts would inadequately protect the rights of U.S. citizens; and possible prejudice against the rights of the foreign government through the enforcement of foreign rights by U.S. courts.
The Federal Circuit also analogized patents to land grants and applied the local action doctrine to restrain district courts from exercising their jurisdiction. Neither considerations of judicial economy nor convenience support the exercise of supplemental jurisdiction due to U.S. courts’ lack of judicial resources in foreign patent regimes and potential jury confusion. Finally, exercising supplemental jurisdiction over foreign patent infringement claims would lead to unfair results against alleged infringers because the act of state doctrine prevents U.S. courts from examining the validity and enforceability of foreign patents.
Writing a lengthy dissenting opinion, Judge Newman disagreed with the majority and urged to leave U.S. district courts discretionary options to exercise jurisdiction over foreign patent infringement claims. She explained that U.S. courts routinely apply foreign laws and foreign courts also adjudicated foreign patent infringement claims, citing a Japanese case decided by the Tokyo District Court. After challenging justifications to support the majority’s conclusion, her opinion concluded with a view adopted by proponents of patent harmonization to emphasize the similar policies underlying patent law of all industrialized nations. She noted that “it would be anomalous indeed for the United States now to rule that the courts cannot understand patent principles as applied in other nations.”
IV. COMPARATIVE LAW PERSPECTIVE
There are significant similarities between the Voda Federal Circuit decision and the GAT ECJ decision in restraining courts from hearing claims of foreign patent infringement. First, the majority’s application of the act of state doctrine limits the power of U.S. courts with respect to the question of validity and thus puts them in the same condition with European courts whose power is limited by Article 16(4) of the Brussels Convention on Jurisdiction and the Enforcement in Civil and Commercial Matters. The ECJ broadly interpreted Article 16(4) and the exclusive jurisdiction prevents member state courts from exercising jurisdiction over foreign patent infringement claims in all proceeding where an invalidity issue is raised, regardless of the form in which such issue is raised. United States doctrine of act of state did the same in completely eliminating district courts from inquiring into the validity and enforceability of patents granted by a foreign government. As a result, neither U.S. nor European courts can entertain a claim of foreign patent infringement, once a defense of invalidity or enforceability is raised.
However, the GAT ECJ decision does not necessary prevents European courts from adjudicating infringement claims of foreign patents if invalidity is not an issue at all. In contrast, the Federal Circuit views enforcement of foreign patents fundamentally unfair to alleged infringers because of a courts’ lack of power to examine the validity and enforceability. This follows that U.S. courts should refrain from adjudicating infringement claims of foreign patents, except for exceptional circumstances where the validity and enforceability of foreign patents has been already established in prior proceedings.
It is interesting to note that despite the Federal Circuit’s adherence to the territorial principle in leading patent international agreements, U.S. patent extends beyond its border in finding infringement of U.S. patents with respect to the exportation of a non-staple component specially adopted for use in a patented invention although a combination of such component to constitute the patented invention, direct infringement, occurs outside the United States. In AT&T v. Microsoft,6 the same court found infringement of U.S. patents when the defendant uploaded a master copy of infringing operation system software which would be downloaded by its licensees in foreign countries.7
It is also worth noting that the Japanese case, Coral Corp. v. Marine Bio K.K.8 , cited by Judge Newman, does not relate to patent enforcement. Instead, it was necessary to decide whether the accusation of infringement was true for adjudicating an unfair competition claim brought by an accused infringer. When it comes to the enforcement of foreign patents, Japanese courts are reluctant to adjudicate a claim of foreign patent infringement. In the card reader case,9 the Supreme Court of Japan affirmed its lower court’s denial of a request of injunction against the defendant’s act of exportation as well as a request of damages with respect to products which would have infringed U.S. patents once they arrive in the United States, although the court recognized that it was very likely that the products infringed U.S. patents.
Voda did not completely eliminate all possibility, but made it extremely difficult for patentees to sue in U.S. courts a defendant who engages in infringing acts in multiple countries. Therefore, a patentee must sue such defendant in each country where a patent is granted. However, U.S. patentees can establish infringement of U.S. patents with respect to activities in foreign countries under 35 USC §271(f) if they can show that the alleged infringer supplied from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components in the foreign countries. They can also establish infringement of U.S. patents if the alleged infringer supplied from the United States any component of a patented invention that is specially made or adopted for use in the invention with the knowledge that such components will be combined in foreign countries in a manner that would infringe the U.S. patent if such combination occurred within the United States. Accordingly, U.S. patentees can effectively prevent infringement in foreign countries by preventing exportation of an essential component which would be used for infringement and collect damages resulting from infringement in foreign countries.
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- Dr. Toshiko Takenaka is the Director of CASRIP and the Washington Research Foundation/ W. Hunter Simpson Professor of Law at the University of Washington School of Law.
- Section 1367 of 28 U.S.C. provides supplemental jurisdiction and gives U.S. district courts power to hear claims which the courts usually do not have jurisdiction such as a claim of foreign patent infringement unless the exercise of jurisdiction is expressly prohibited by federal statute. The United States Supreme Court interpreted the statute to give “a broad grant of supplemental jurisdiction over other claims within the same case or controversy, as long as the action is one in which the district courts would have original jurisdiction.” Exxon Mobil Corp. v. Allapattah Servs., 545 U.S. 546, (2005). In interpreting the statute, the Court emphasized the discretionary nature of the supplemental jurisdiction. See City of Chicago v. Int’l College of Surgeons, 522 U.S. 156 (1997). 28 USC §1367(c) clarifies the scope of the discretion by listing cases that district courts should decline from exercising supplemental jurisdiction: (1) the claim raises a novel or complex issue of State law; (2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction; (3) the district court has dismissed all claims over which it has original jurisdiction; or (4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.
- Gesellschaft fu¨r Antriebstechnik mbH & Co v Lamellen und Kupplungsbau Beteiligungs KG (GAT v Luk), Case C-4/03, European Court of Justice (ECJ), 13 July 2006; Phillip Johnson, Adjudication of Patent Validity is Sent Home, 1 JIPLP (No. 11) 688 (2006).
- Int’l College of Surgeons, 522 U.S. at 164-65.
- Mars Inc. v. Kabushiki-Kaisha Nippon Conlux, 24 F.3d 1368, 30 U.S.P.Q.2d (BNA) 1621 (Fed. Cir. 1994).
- AT&T Corp. v. Microsoft Corp., 414 F.3d 1366, 75 U.S.P.Q.2d 1506 (Fed. Cir. 2005)
- However, the Supreme Court limited this extraterritorial reach of U.S. patent law with respect to the exportation of software unless such software is incorporated in a computer readable medium. See Microsoft Corp. v. AT&T Corp., 550 U.S. ____ (2007). For a more detailed analysis of the Microsoft case, see Toshiko Takenaka, Supreme Court Disagrees with Federal Circuit in Two Controversial Patent Cases: KSR Int’l Co. v. Teleflex and Microsoft Corp. v. AT&T Corp., CASRIP Newsletter, Vol. 14, Issue 2 (Spring 2007).
- Judgment of Tokyo Dist. Ct. Oct. 2003 (Heisei 4 1943(wa)). An English summary and comment of the case by the author is available at http://www.law.washington.edu/CASRIP/Newsletter/Vol10/newsv10i3jp2.pdf
- Judgment of Supreme Court of Japan, Sept. 26, 2002, 56 Minshu (No. 7) 1551.