1, 1992; (2) because Hughes did not file its Complaint until December 2, 1992, it is not entitled to take advantage of the extended damage recovery period provided under the tolling agreements; (3) this case is therefore governed solely by 35 U.S.C. § 286, which provides that a plaintiff may recover only for infringement occurring within the six years preceding the filing of the Complaint; and (4) because the '712 patent expired more than six years before the Complaint was filed, it could not have been infringed during the statutory period. Hughes has filed a Cross-Motion for Partial Summary Judgement on the grounds that, based on the terms of the tolling agreements, it is entitled to recover damages for infringement of the '712 patent occurring between September 1, 1982 and October 14, 1986, the date the '712 patent expired.
NSC's argument has at least three serious flaws. First, it is based upon a fundamental misunderstanding of 35 U.S.C. § 286. When a potential defendant signs an agreement to toll an ordinary statute of limitations, he is agreeing to allow the potential plaintiff to file his Complaint on or before some specified date after the statutory time limit has elapsed. If the potential plaintiff fails to file his Complaint on or before this date, he usually loses the benefit of the tolling agreement and his action is barred by the statute of limitations. However, 35 U.S.C. § 286 places no time limit on the filing of the Complaint. Rather, it provides that a plaintiff may recover damages only for those acts of infringement which occurred within the six years preceding the filing of the complaint. Standard Oil Co. v. Nippon Shokubai Kagaku Kogyo Co., Ltd., 754 F.2d 345, 348 (Fed. Cir. 1985). Given the way that 35 U.S.C. § 286 functions, agreements to toll its six-year damage recovery period are properly construed as allowing the potential plaintiff to recover damages for acts of infringement occurring during both (1) the six-year statutory period; and (2) a supplemental damage recovery period specified in the agreement. Using this analysis, the 1988 tolling agreement between NSC and Hughes is properly construed as allowing Hughes to recover (1) damages for all acts of infringement occurring within the six years preceding the filing of the Complaint, December 2, 1986 to December 2, 1992; plus (2) damages for all acts of infringement occurring during the supplementary damage recovery period to which the paries agreed, September 1, 1982 to September 1, 1988. Because the combined damage recovery period provided under the 1988 tolling agreement encompasses the entire period for which Hughes seeks to recover damages for infringement of the '712 patent, September 1, 1982 to October 14, 1986, it is entitled to prevail in its Cross-Motion for Summary Judgment by virtue of this agreement alone, and the Court need not consider the 1992 tolling agreement extension.
Second, NSC's construction of the 1988 tolling agreement would be inconsistent with the mutual intent of the parties at the time it was executed. See Cal. Civ. Code § 1636; AIU Ins. Co. v. Superior Court, 51 Cal.3d 807, 821-22, 274 Cal. Rptr. 820, 831, 799 P.2d 1253 (1990) (mutual intent of the parties at the time a contract was executed governs subsequent judicial efforts at interpretation). On the date in which the 1988 tolling agreement was signed, Hughes had two choices. First, it could have filed a Complaint alleging that NSC had infringed the Bower patents, thereby preserving its right to recover damages for infringement occurring during the preceding six years. However, this would have cost a great deal of money and consumed a significant amount of both the parties' and the district court's time. Second, Hughes could execute an agreement with NSC allowing Hughes to recover damages for infringement during that six-year period without filing a federal law suit. Under the second approach, (1) Hughes would not lose its right to recover damages; (2) NSC would avoid a lawsuit, at least for the time being; (3) both parties could pursue settlement and possibly avoid the need for litigation; and (4) the federal courts would not be required to step in and resolve the parties' differences, at least for the time being, and perhaps indefinitely. The evidence reveals that both parties understood that Hughes was following this second approach when it proposed the 1988 tolling agreement.
The third and final flaw in NSC's argument is perhaps the most disturbing. In its memorandum of points and authorities in support of its Motion for Summary Adjudication in Santa Clara County Superior Court, NSC argued that (1) neither the original tolling agreement nor the tolling agreement extension "placed [any] limitation on how long Hughes could delay bringing suit," Points & Auths. at 2:24-25; and (2) Hughes "could indefinitely delay bringing suit" against NSC, points & Auths. at 3:1-2. Obviously, this directly contradicts the arguments which NSC has made in connection with its Motion for Partial Summary Judgment before this Court. The Court wonders whether counsel for NSC was unable to understand this inconsistency or whether counsel believed that the Court would not be able to do so. If it was the former, the Court urges counsel for NSC to be more diligent and studious in the future. If it was the latter, counsel for NSC is advised that neither they nor their client will benefit from such tactics.
For the reasons stated above, the Court (1) DENIES NSC's Motion for Partial Summary Judgment regarding its alleged acts of infringement occurring more than six years before the filing of the Complaint; and (2) GRANTS Hughes' Cross-Motion for Partial Summary Judgment on the issue of whether it may recover damages for acts of infringement occurring after September 1, 1982.
B. General Motors' Motion for Summary Judgment on NSC and Fairchild's Counterclaim
In their Counterclaim, NSC and Fairchild allege that General Motors, Hughes' parent company, has (1) directly infringed the '735, '984 and '634 patents; and (2) induced infringement of these patents. General Motors now moves for summary judgment.
1. NSC and Fairchild's Claim That General Motors Directly Infringed the '735 and '984 Process Patents
General Motors contends that it could not, as a matter of law, directly infringe the '735 and '984 process patents within the meaning of 35 U.S.C. § 271(a),
since (1) it does not manufacture semiconductors; (2) the only way to directly infringe a process patent under 35 U.S.C. § 271 (a) is to actually perform the process taught in the patent; (3) merely selling products manufactured using an infringing process does not constitute direct infringement under 35 U.S.C. § 271(a). The Court agrees. It is well established that an individual who merely sells a product manufactured using an infringing process does not directly infringe the process patent within the meaning of 35 U.S.C. § 271(a). Atlantic Thermoplastics Co., Inc v. Faytex Corp., 970 F.2d 834, 836 (Fed. Cir. 1992); Koratron Co. v. Lion Uniform, Inc., 449 F.2d 337, 338 (9th Cir. 1977). Accordingly, General Motors is entitled to summary judgment on NSC and Fairchild's claim that it has directly infringed the process patents under this statute.
However, under certain circumstances, an individual who sells a product manufactured using an infringing process may directly infringe under 35 U.S.C. § 271(g).
General Motors contends that it has not infringed the process patents under this provision because (1) the allegedly infringing semiconductors are merely a "trivial and nonessential component" of its automobiles, see 35 U.S.C. § 271(g)(2); and (2) even if they are not "trivial and nonessential," it is not a proper party under 35 U.S.C. § 271(g).
The crux of General Motors's "trivial and nonessential" argument is that (1) the allegedly infringing semiconductors are only a small part of its automobiles; and (2) the manufacturing of the allegedly infringing semiconductors is far removed in the chain of production from the assembly its automobiles. Specifically, General Motors asserts that (1) many of the allegedly infringing semiconductors are manufactured by IC Delco, a subsidiary of Delco Electronics and then transferred to the Audio Business Unit of Delco Electronics for incorporation into car radios; (2) Delco Electronics then sells the radios to General Motors; and (3) General Motors then installs the radios into its automobiles and sells them to consumers. Other semiconductors manufactured by IC Delco are incorporated into hybrid products, which often contain several chips. The hybrid products are then incorporated into larger electronic components, such as ignition control modules. These modules are then sold to General Motors, incorporated into automobile ignition systems, and the final product, a finished automobile, is sold to the public. Still others are incorporated into antitheft and airbag systems.
Although General Motors' evidence makes it clear that the allegedly infringing semiconductors are only a small part of their automobiles, it does not support a finding that they are trivial and nonessential as a matter of law, particularly in light of the legislative history of 35 U.S.C. § 271(g). 35 U.S.C. § 271(g) was enacted as part of the Process Patent Amendments Act of 1988 (hereafter the "PPAA"), 102 Stat. 1563. The Report of the Senate Judiciary Committee gives a series of examples designed to guide the courts in defining the words "trivial and nonessential." S. Rep. No. 83, 100th Cong., 1st Sess., 49-52 (1987). In one such example, the Committee indicates that if a shock absorber is manufactured using an infringing process and subsequently incorporated into an automobile, the automobile manufacturer would not be shielded from the effect of 35 U.S.C. § 271(g) by the "trivial and nonessential" exception. Based on the evidence which General Motors has presented, there are only two differences between the case at bar and the one described by the Committee: (1) the semiconductors General Motors uses pass through one or more subsidiaries before they are finally incorporated into its finished automobiles; and (2) the semiconductors are not directly incorporated into General Motors' automobiles, but are merely parts of larger systems or modules. These distinctions are not so significant as to justify summary judgment.
General Motors' second argument raises a more fundamental and troubling problem: whether the imposition of liability on General Motors under the PPAA given the particular facts of this case would be consistent with the legislative history and purpose of that statute. The primary purpose of the PPAA was "to modernize our patent laws" by providing "patent protection against the importation, and subsequent use or sale, of products made abroad . . . using a process patented in the United States." S. Rep. No. 83, 100th Cong., 1st Sess., 29-30 (1987). The Judiciary Committee later reiterates that the PPAA was intended to "protect against the entry into the U.S. marketplace of goods made abroad without authorization from [an] inventor who has a process patent in this country." Id. at 30. Finally, and most importantly to the case at bar, the Judiciary Committee states that
The primary target of the U.S. process patent holder will naturally be the manufacturer, who is practicing the process and importing [sic] the resulting goods into the United States. If that manufacturer is subject to the jurisdiction of the U.S. courts then it would be the preferred defendant because of its direct knowledge of the process. Since the manufacturer may not be subject to jurisdiction, [the PPAA] also allows the patentholder to sue the persons receiving the goods in this country in the belief that they may be in the best position, apart from the manufacturer, to determine how the goods were made.
Id. at 39.
Based on its legislative history, it appears that the PPAA was designed to provide a remedy within the United States for United States process patent holders whose processes were being used in other countries to manufacture goods for importation into the United States. It does not appear to have been designed to provide a basis for holding a domestic, downstream seller of goods, such as General Motors, liable for infringement merely because it has incorporated an allegedly infringing good produced by a domestic, upstream manufacturer, such as Delco Electronics, into its finished product. Accordingly, General Motors is entitled to summary judgment on NSC and Fairchild's claim that it directly infringed the process patents under 35 U.S.C. § 271(g).
2. NSC and Fairchild's Claim that General Motors Directly Infringed the '634 Product Patent
Under 35 U.S.C. § 271(a), "whoever without authority makes, uses or sells any patented invention, within the United States during the term of the patent therefor, infringes the patent." General Motors admits that it purchases semiconductors from its subsidiary, Delco Electronics, and incorporates them into its automobiles. However, General Motors contends that it has not directly infringed the '634 patent by doing so, since the semiconductors which it purchases do not infringe the '634 patent.
The '634 patent is directed to an integrated circuit having certain individual circuit elements arranged in such a manner as to reduce the effects of mechanical stress on the operation of the circuit as a whole. Such mechanical stress occurs when the integrated circuit's silicon substrate is mounted in a protective packaging material, such as a ceramic or metal "lead frame," and may cause certain matched elements of the integrated circuit to fail to operate properly. The '634 patent teaches that (1) when a semiconductor substrate is mounted on a lead frame, the resulting mechanical stress will be symmetrical about an axis, that is, the amount of stress experienced at a particular location on one side of the axis will be approximately equal to the amount of stress experienced at a corresponding location on the opposite side of the axis; and (2) the adverse effects of this stress can be reduced by locating pairs of circuit elements about the axis of symmetry.
General Motors contends that none of Delco's semiconductors use the mechanical stress reduction techniques taught by the '634 patent. Rather, General Motors has presented evidence that Delco compensates for mechanical stress by either (1) locating matched circuit elements side-by-side and as close as possible to each other on the semiconductor substrate, Kearney Depo., pp. 62-63, Alexander Decl., Exh. O; and (2) "cross-coupling" the circuit elements, Kearney Depo., pp. 52-58 and Exh. 14, Alexander Decl., Exh. O.
Although NSC and Fairchild dispute the fine points of General Motors' interpretation of the '634 patent, they have not produced even a shard of evidence that any of Delco's semiconductors infringe it. Accordingly, General Motors is entitled to summary judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986) (summary judgment appropriate where nonmoving party fails to designate "specific facts showing that there is a genuine issue for trial").
3. NSC and Fairchild's Claim That General Motors Induced Infringement of the '735, '984 and '634 Patents