"Sale" Has a Physical and Conceptual Aspect

Litecubes, LLC, v. Northern Light Products, Inc. [2006-1646] (April 28, 2008) [GAJARSA, Newman, Ardher] The Federal Circuit affirmed a judgment of patent and copyright infringement against a defendant who challenged jurisdiction on the grounds it did not sell the allegedly infringing products within the United States, nor import the products into the United States.
SIGNIFICANCE: Jurisdiction is determined from the well-pleaded Complaint. Where legal title passes is not controlling on where a sale occurred.
BRIEF: GlowProducts is a Canadian corporation operating from its offices in Victoria, British Columbia, which acquires novelty items from Chinese manufacturers and then sells the items primarily in North America. GlowProducts does not have offices, facilities, or assets in the United States. Evidence at trial, however, established that GlowProducts sold the accused products directly to customers located in the United States and that GlowProducts would ship the products, f.o.b., from its Canadian offices to its customers in the United States. After the trial had concluded and the jury entered a verdict of willful infringement, GlowProducts filed a motion to dismiss for lack of subject matter jurisdiction on these grounds. Neither Litecubes nor the district court challenged GlowProducts characterization of the issue as jurisdictional. Instead Litecubes opposed the motion on the grounds that there was ample evidence that GlowProducts had sold, offered to sell, or imported the allegedly infringing products to the United States. The district court agreed, denying GlowProducts’ motion, finding evidence of infringement “sufficient to establish subject matter jurisdiction in this Court” because GlowProducts “clearly imported the accused products into the United States.”
LOF: Subject matter jurisdiction is a question of law reviewed de novo. The Federal Circuit noted that Litecubes alleged in its complaint that GlowProducts violated 35 U.S.C. § 271(a). Nevertheless, GlowProducts argues that even though Litecubes’ well-pleaded complaint establishes that federal patent law creates the cause of action, there is no subject matter jurisdiction over this suit because Litecubes has failed to prove that GlowProducts sold or offered to sell products in the United States or imported products into the United States. The Federal Circuit said that subject matter jurisdiction does not fail simply because the plaintiff might be unable to ultimately succeed on the merits. It is firmly established that the absence of a valid (as opposed to arguable) cause of action does not implicate subject-matter jurisdiction, i.e., the courts’ statutory or constitutional power to adjudicate the case. A failure to prove the allegations alleged in a complaint requires a decision on the merits, not a dismissal for lack of subject matter jurisdiction. The Federal Circuit observed that even if the complaint fails to allege a cause of action upon which relief can be granted, this “failure to state a proper cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction.
Turning the denial of JMOL, the Federal Circuit said that although the district court based its ruling on a finding that GlowProducts imported its goods into the United States, the preferable initial inquiry, given the facts of this case and our prior established law, is whether there was a sale within the United States. It was uncontested that GlowProducts sold and shipped the allegedly infringing products directly to customers located in the United States. GlowProducts based its argument that these were not sales in the United States on the grounds that the products were shipped f.o.b., and thus title over the goods were transferred while the goods were still in Canada. The Federal Circuit said that its case law was inconsistent with such a theory, and concluded that there is substantial evidence of a sale within the United States for the purposes of § 271.
The Federal Circuit cited North American Philips Corp. where it said that “unlike the ‘making’ and the ‘using’ of an infringing article, which as purely physical occurrences are relatively straightforward to place, the ‘selling’ of an infringing article has both a physical and a conceptual dimension to it. That is to say, it is possible to define the situs of the tort of infringement-by-sale either in real terms as including the location of the seller and the buyer and perhaps the points along the shipment route in between, or in formal terms as the single point at which some legally operative act took place, such as the place where the sales transaction would be deemed to have occurred as a matter of commercial law.” The Federal Circuit found no policy that would be furthered by according controlling significance to the passage of legal title.” The Federal Circuit concluded that simply because an article is delivered ‘free on board’ outside of the forum, a sale is not necessarily precluded from occurring in the forum.”
The Federal Circuit held that since it found substantial evidence of a sale within the United States, it need not determine whether there was also an offer to sell within the United States or importation into the United States, and concluded that substantial evidence supported the jury verdict of copyright infringement.