United States District Court, N.D. California
ORDER DENYING FREESCALE'S MOTION FOR SUMMARY JUDGMENT ON NON-INFRINGEMENT DUE TO EXTRATERRITORIAL SALES
YVONNE GONZALEZ ROGERS, District Judge.
Defendant Freescale Semiconductor, Inc. ("Freescale") filed its Motion for Summary Judgment on November 6, 2013, moving for summary judgment on several grounds. (Dkt. No. 303.) Among those grounds are Freescale's motion for summary judgment on its affirmative defense of non-infringement due to the extraterritorial nature of certain alleged infringing activities and related cross-claim for declaratory relief on the same grounds. Said differently, the patent laws of the United States only reach activities that occur in the United States. If no such activities exist, there can be no infringement under U.S. law.
Having carefully considered the papers submitted, the admissible evidence, and the pleadings in this action, and for the reasons set forth below, the Court hereby DENIES the motion on the extraterritorial sales issue, as triable issues of facts exist from which a reasonable jury could find that "sale or "offers to sell" occurred in the United States.
In 2009, Freescale negotiated and signed a "Freescale Standard Sales Agreement" with Amazon Fulfillment Services, Inc. ("AFS"), referred to hereafter as the Freescale-AFS Agreement. AFS is a subsidiary of Amazon.com, Inc. ("Amazon"). Amazon is a United States corporation headquartered in Seattle, Washington. AFS is incorporated in Delaware and also located in Seattle, Washington. The Freescale-AFS Agreement was negotiated by representatives of the parties in the United States and executed in the United States. It names Amazon/Lab126 as the "Buyer" of Freescale's i.MX50 products and establishes that both parties to it are United States entities. (SUMF Fact 92.) Amazon Lab126 ("Lab126") is a division of Amazon located in Cupertino, California. (SUMF Fact 91.)
The terms of the December 31, 2009 Freescale-AFS Agreement provide that AFS is the "Buyer" and that "Buyer desires to purchase products from Freescale, and Freescale desires to sell products to Buyer strictly in accordance with the terms and conditions of this Agreement." The Freescale-AFS Agreement "governs all product purchases made by Authorized Purchasers (as defined in section 3.2 below) from Freescale." (Agreement at § 1.1) Freescale will sell to Authorized Purchasers, and Authorized Purchasers will buy from Freescale, products from time to time." ( Id. at § 1.2.) Prices were set forth in Attachment A to the Freescale-AFS Agreement and the "Prices" term of the Agreement stated that Freescale would not provide any Designee (as defined in Section 3.2) "any rebates, discounts, free Product, kick-back or other similar terms related directly or indirectly to the Product supplied to any Designees under this Agreement without Buyer's express, prior written consent." (Agreement at § 2.) "Authorized Purchasers" includes AFS as well as "Designees" authorized by AFS under the Agreement "to issue purchase orders for Products, receive, reschedule or cancel deliveries of such Products, process warranty related claims related to such Products, and pay for such Products and all related costs." ( Id. at § 3.2.) Designees may be foreign firms such as Foxconn and Ensky, a Singapore company. ( Id. at §§ 3.2, 4.1.) Under the agreement, with one exception, "each time an Authorized Purchaser wishes to purchase Product(s) from Freescale, the Authorized Purchaser must submit to Freescale a written purchase order." ( Id. at § 3.1.) It further provides that each delivery of Freescale products "will be separately invoiced" ( id. at § 11), and that "Authorized Purchaser will pay each invoice within thirty (30) days of the date of receipt of the invoice, " paying the Product prices reflected in Attachment A to the Agreement. ( Id. at §12).
Freescale argues that certain of its chips cannot qualify as infringing units because they are manufactured outside the U.S., sold to a manufacturer outside the U.S., and incorporated by that manufacturer into a product (here, an Amazon Kindle) outside the U.S. Only sales "within the United States" are infringements under 35 U.S.C. § 271(a).
Freescale has asserted non-infringement as an affirmative defense and as a basis for declaratory judgment. (Dkt. No. 21.) Thus Freescale bears the burden of persuasion on these issues at trial, as well as in this motion, and must establish "beyond controversy every essential element of its" claim of no infringement on account of extraterritorial sales. See S. California Gas Co. v. City of Santa Ana, 336 F.3d 885, 888 (9th Cir. 2003) (citing William W. Schwarzer, et al., CALIFORNIA PRACTICE GUIDE: FEDERAL CIVIL PROCEDURE BEFORE TRIAL § 14:124-127 (Rutter Group, 2001). The evidence is viewed in the light most favorable to Mediatek, the party opposing summary judgment, and must be sufficient for the Court to find that no reasonable trier of fact could find other than for Freescale. Id.
"It is axiomatic that U.S. patent law does not operate extraterritorially to prohibit infringement abroad." Power Integrations v. Fairchild Semiconductor Int'l, 711 F.3d 1348, 1371 (Fed. Cir. 2013). As the Supreme Court stated, the "general rule under United States patent law is that no infringement occurs when a patented product is made and sold in another country." Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 441 (2007). Accordingly, direct infringement liability is "limited to infringing activities that occur within the United States." MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1375 (Fed. Cir. 2005). Whether "activities in the United States, as construed by a reasonable jury, are sufficient to establish an offer to sale' or sale' within the meaning of 35 U.S.C. §271(a)" may be resolved on summary judgment. Id. at 1375 (affirming summary judgment of no direct infringement for product sales in Japan). "It is well established that the reach of section 271(a) is limited to infringing activities that occur within the United States." "Mere knowledge that a product sold overseas will ultimately be imported into the United States is insufficient to establish liability under section 271(a)." MEMC Electronic, 420 F.3d at 1377. Further, "the location of the contemplated sale controls whether there is an offer to sell within the United States." Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617 F.3d 1296, 1309 (Fed.Cir.2010).
The cases considering whether a sale or offer of sale occurred for purposes of section 271 look to a number of different factors, such as:
(1) location of a contemplated future sale, Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617 F.3d 1296, 1309 (Fed.Cir.2010) (where an offer which is made in Norway by a U.S. company to a U.S. company to sell a product within the U.S., for delivery and use within the U.S., this constitutes an offer to sell within the U.S.);
(2) location of delivery, Id. at 1310, and MEMC Eletronic Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1377 (Fed.Cir.2005) (pricing discussions with U.S. entity did not trump negotiations, ordering, and receipt of product overseas);
(3) location of "performance, " Id .; see also Fellowes, Inc. v. Michilin Prosperity Co., Ltd., 491 F.Supp.2d 571, 577 (E.D.Va.2007) ("situs of infringement is determined according to the places of contracting and ...