Enforcing Foreign Patents in the US: Distinguishing Voda

Fairchild Semiconductor v. Third Dimension (3D) (D.Maine 2008)

The dispute between Fairchild and 3D turns -- in-part -- on whether Fairchild's devices that it manufactures abroad are covered by 3D's Chinese patents. In a well written opinion, a Maine district court (J. Hornby) rejected 3D's motion to dismiss – finding that it has power to adjudge the conflict even though the analysis will almost certainly require determination of the scope of the Chinese patents.

Fairchild and 3D have an ongoing "worldwide" license agreement that allows Fairchild to use 3D's patented technology. The license specifically includes both the Chinese and US patents. For consideration, 3D receives a royalty payment for any Fairchild products "covered by" on or more claims of 3D's licensed patents. After analyzing 3D's patents, Fairchild stopped paying the royalty and also sued for a declaratory judgment that it owes no royalties and that its products are not covered by 3D's patents. The agreement also had a choice of forum (Maine or Texas courts) and choice of law (Maine or Texas law) that applied to the entire agreement. The case is in Federal Court based on diversity jurisdiction.

Courts normally enforce choice of forum & choice of law contractual provisions – especially when negotiated by two sophisticated parties. The catch for cases involving foreign patent rights is the Federal Circuit's strong aversion to allowing US courts to adjudge foreign patent rights. In the 2007 Voda case, for instance, the appellate court would almost always abuse its discretion by using its supplemental jurisdiction power to adjudge claims of foreign infringement.

Here, the district court distinguished Voda on a few grounds: First, this case reaches the court based on diversity jurisdiction rather than supplemental jurisdiction. Although diversity cases can be booted on convenience factors, diversity jurisdiction is not otherwise discretionary. Here, convenience factors favor Maine as a jurisdiction over China – in particular, both parties are in the US, one has its HQ in Maine, and both previously agreed to litigate in Maine. Second, this case is not a patent infringement case. Rather, it is a contract dispute that – as part of the dispute – questions the scope of a Chinese patent. Third, problems of international relations and comity are lessened because the Chinese patent issue only involves the scope of the Chinese patent and not its validity.

It is unclear whether the Federal Circuit will have jurisdiction over any subsequent appeal since the justification for federal jurisdiction is the diversity of parties rather than patent "arising under" jurisdiction.

 

Comments

[Sean]

Almost certainly, the CAFC would NOT have jurisdiction over an appeal.

Under the Holmes v. Vornado jurisprudence, an issue of US patent law needs to be in the complaint for the CAFC to get the matter. Normally a patent case provides the D/Ct with jurisdiction based on a federal question, and in an areain which the D/Cts have exclusive jurisdiction no less.

This one is, as you point out, a contract dispute with jurisdiction based on diversity. There is no way it goes to CAFC.

[EG]

An interesting case. I agree with Sean that this case wouldn't (or shouldn't) go up on appeal to the Federal Circuit as it is a contract (licensing) dispute. I also believe the district court judge balanced the factors correctly in accepting jurisdiction because this was a contractual dispute, but might well have declined jurisdiction (at least regarding the Chinese patent issues) if this was a patent dispute in view of the Vodis case.

One interesting comment made by 3D in this case is that "no U.S. court has ever intrepreted a foreign patent." I doubt that's true.

[Malcolm Mooney]

This case may also address the commonly asked question, "What the hell is the point of a Chinese patent?"

[e6k]

Clearly everyone has forgotted the spirited discussion of March 10:
http://www.patentlyo.com/patent/2008/03/pharma-prosecut.html

[6]

Allow me to put this more mildly D.

That is an imposter e6k above.

Please remove yourself from the premises.

Clearly D already deleted your earlier posting as well as my own asking the same assuming you would not repeat the stunt.

[6]

Quick question for you astounding legal minds out there. Why does the last "person" in 103c refer to a corporation OR person instead of actually requiring the assignment to be to the same person? Are corporations "persons" now?

"Subject matter developed by another person, which qualifies as prior art only
under one or more of subsections (e), (f), and (g) of section 102 of this title, shall not
preclude patentability under this section where the subject matter and the claimed
invention were, at the time the claimed invention was made, owned by the same
person or subject to an obligation of assignment to the same person."

[6]

It's not bad enough that I'm entirely ignored at the PTO. Now I'm being ignored on PatentlyO(R) as well?

[Humorless Democrat?]

Did I just hear a noise?

[Noise above Law]

Noise?

No, HD, I heard nothing of consequence.

[posing as Mooney]

Chinese patents are worthless crap.

[6]

The only way to make children quit playing the imposter game is to ignore them right?

At least you used my more recent name this time.

[posing as Mooney]

Its not an "imposter game" 6, its called "parody." Gawd, I hope you're not examining any important patent applications.

[posing as Mooney]

Excuse me, my bad, I thought you were accusing me of being an "imposter." I still hope you're not examining any important patent applications...

[stunned foreigner]

wether chinese patents are worthless crap or not would you accept dear M.Mooney that a chinese court decides about the scope of a us patent in a contract dispute?

[MaxDrei]

Can somebody explain to me what all the fuss is about. If the owner of a Chinese patent wants an infringer in China enjoined, it has to go to a Chinese court. But if that owner is American, and has granted a world-wide licence to another American, and there is a dispute about the contract, justiciable under US law, then the US court is the right forum, and should receive evidence about what constitutes infringement and invalidity in China, before it then decides whether to grant the American the relief it is seeking from the other American.

Same thing if two Chinese companies litigate their Contract. The Chinese court will then receive evidence about infringement and validity in the USA, no?

Problems, if one party to the contract is American, the other German or British. But what did the parties agree, about litigation disputes? Which jurisdiction is specified?

Or am I missing something?.

[Professor Frink]

No Max, except possibly a choice-of-law provision in the contract. But I'm guessing such a provision probably would have been that any disputes would be settled under U.S. law.

[MaxDrei]

Professor, thanks. When I wrote "which jurisdiction is specified" I indeed had in mind a "choice of law" clause in the Contract in suit (and I can't imagine any two American parties to a two party Contract ever choosing for dispute resolution any other law than American).

So, I guess we're done with this thread now.

[stunned foreigner]

Max Drei stated
"If the owner of a Chinese patent wants an infringer in China enjoined, it has to go to a Chinese court. But if that owner is American, and has granted a world-wide licence to another American, and there is a dispute about the contract, justiciable under US law, then the US court is the right forum, and should receive evidence about what constitutes infringement and invalidity in China, before it then decides whether to grant the American the relief it is seeking from the other American."

Max Drei,

the question is different:to rephrase it differently the question could be:is it sound that a german judge decides that a US patent is invalid or infringed in the USA(of course) by whoever?if this german judge decides eg that the US patent is infringed by equivalence, he may clearly have a very different appraisal of equivalence than a US court.Is'nt it shocking?and more sound to state that validity and/or infringement of a US patent can be decided only by the corresponding national(US) courts ?whatever the law of the contract is !
Stating the contrary would mean that you add competent courts(foreign) to the limited list of competent courts for patent matters that the law of most countries include in their patent laws.!!
It seems to me that in a similar situation the german court should ask first to the competent US judge/court if in the circumstances the US patent is valid and/or infringed and then, based on this US decision ,decides about the contractual dispute between the two parties under german law(the contract law in this case).AND of course VICE-VERSA(a US court asks to a chinese court to decide about validity/infringement in china)!
your views would be appreciated

[MaxDrei]

Hi Foreigner. In this blog, I am frequently accused of writing about the law as it should be, rather than as it is. But now the biter is bit. I can't imagine the scenario you describe, so can't really comment on it.

Maybe other readers can. Keep your fingers crossed, press your thumbs, or whatever it is you do, in your country.

[John Roethel]

At the risk of starting a "political correctness" war, can a Chinese patent only be infringed by a Chinese copy?

This is my attempt at humor.