Halo Electronics, Inc. v. Pulse Electronics, Inc. ( 2016 )

United States Court of Appeals
for the Federal Circuit
______________________
HALO ELECTRONICS, INC.,
Plaintiff-Appellant
v.
PULSE ELECTRONICS, INC. AND
PULSE ELECTRONICS CORPORATION,
Defendants-Cross-Appellants
______________________
2013-1472, 2013-1656
______________________
Appeals from the United States District Court for the
District of Nevada in No. 07-CV-0331, Judge Philip M.
Pro.
______________________
Decided: August 5, 2016
______________________
CRAIG E. COUNTRYMAN, Fish & Richardson P.C., San
Diego, CA for plaintiff-appellant. Also represented by
MICHAEL J. KANE, WILLIAM WOODFORD, Minneapolis,
MN.
MARK LEE HOGGE, Dentons US LLP, Washington, DC,
for defendants-cross-appellants. Also represented by
SHAILENDRA K. MAHESHWARI, CHARLES R. BRUTON,
RAJESH CHARLES NORONHA.
______________________
2 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
Before LOURIE, O’MALLEY, and HUGHES, Circuit Judges.
LOURIE, Circuit Judge.
This case has returned to us on remand from the Su-
preme Court of the United States. In its earlier appear-
ance in this court, Halo Electronics, Inc. (“Halo”) appealed
from the decisions of the United States District Court for
the District of Nevada (1) granting summary judgment
that Pulse Electronics, Inc. and Pulse Electronics Corp.
(collectively, “Pulse”) did not sell or offer to sell within the
United States the accused products that Pulse manufac-
tured, shipped, and delivered to buyers outside the United
States and thus that Pulse did not directly infringe Halo’s
U.S. Patents 5,656,985 (“the ’985 patent”), 6,297,720 (“the
’720 patent”), and 6,344,785 (“the ’785 patent”) (collective-
ly, “the Halo patents”) with respect to those products; and
(2) holding that, with respect to the accused products that
Pulse sold and delivered in the United States, Pulse’s
infringement of the Halo patents was not willful, and thus
declining to enhance damages under 35 U.S.C. § 284. See
Halo Elecs., Inc. v. Pulse Eng’g, Inc., 810 F. Supp. 2d
1173, 1205–08 (D. Nev. 2011) (sale and offer for sale);
Halo Elecs., Inc. v. Pulse Elecs., Inc., No. 2:07-CV-00331,
2013 WL 2319145, at *14–16 (D. Nev. May 28, 2013)
(willfulness); Halo Elecs., Inc. v. Pulse Elecs., Inc., No.
2:07-CV-00331, ECF No. 523 (D. Nev. May 28, 2013) (final
judgment awarding damages without enhancement).
Pulse cross-appealed from the district court’s deci-
sions (1) construing the claim limitation “electronic sur-
face mount package” in the Halo patents; (2) construing
the claim limitation “contour element” in Pulse’s U.S.
Patent 6,116,963 (“the ’963 patent”) that Pulse asserted in
its counterclaim; and (3) holding that the asserted claims
of the Halo patents were not invalid for obviousness. See
Halo Elecs., Inc. v. Pulse Eng’g, Inc., 721 F. Supp. 2d 989,
998–1001 (D. Nev. 2010) (claim construction); Halo, 2013
WL 2319145, at *1–7 (obviousness); Halo Elecs., Inc. v.
HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 3
Pulse Elecs., Inc., No. 2:07-CV-00331, 2013 WL 4458754,
at *1–3 (D. Nev. Aug. 16, 2013) (obviousness).
We affirmed the summary judgment of no direct in-
fringement of the Halo patents by the accused products
that Pulse manufactured, shipped, and delivered outside
the United States because Pulse did not sell or offer to sell
those products within the United States. Halo Elecs., Inc.
v. Pulse Elecs., Inc., 769 F.3d 1371, 1377–81 (Fed. Cir.
2014). In addition, applying the then-controlling stan-
dard for an award of enhanced damages and the related
two-part test for willful infringement as stated in In re
Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007)
(en banc), and its progeny, we affirmed the judgment of no
willful infringement of the Halo patents with respect to
products that were delivered in the United States and,
consequently, the district court’s decision not to enhance
damages. Halo, 769 F.3d at 1381–83. On the cross-
appeal, because we found no reversible error in the con-
tested claim constructions, we affirmed the judgment of
direct infringement of the Halo patents with respect to
products that Pulse delivered in the United States and
the judgment of inducement with respect to products that
Pulse delivered outside the United States, but that were
ultimately imported into the United States by others, as
well as the judgment of noninfringement of Pulse’s ’963
patent. Id. at 1383. We also affirmed the judgment that
the asserted claims of the Halo patents were not invalid
for obviousness. Id.
Both parties petitioned for rehearing en banc, which
this court denied. Halo Elecs., Inc. v. Pulse Elecs., Inc.,
780 F.3d 1357 (Fed. Cir. 2015). Halo then filed a petition
for a writ of certiorari in the Supreme Court. Halo’s
petition presented two questions:
1. Whether the Federal Circuit erred by apply-
ing a rigid, two-part test for enhancing patent in-
fringement damages under 35 U.S.C. § 284, that
4 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
is the same as the rigid, two-part test this Court
rejected last term in Octane Fitness, LLC v. ICON
Health & Fitness, Inc., 134 S. Ct. 1749 (2014) for
imposing attorney fees under the similarly-
worded 35 U.S.C. § 285.
2. Whether the Federal Circuit erred by holding
that a U.S. defendant does not “sell” or “offer to
sell” the patented invention “within the United
States” under 35 U.S.C. § 271(a), even though it
enters [into] a requirements contract with a U.S.
customer that they negotiate and execute in the
U.S., that is governed by California law, that
specifies the material terms, and that creates le-
gally binding obligations.
Petition for a Writ of Certiorari, at i, Halo Elecs., Inc. v.
Pulse Elecs., Inc., 579 U.S. __, 136 S. Ct. 1923 (2016) (No.
14-1513), 2015 WL 3878398, at *i. In addition, Pulse filed
a conditional cross-petition for a writ of certiorari on the
obviousness issue. Conditional Cross-Petition for a Writ
of Certiorari, at i, Pulse Elecs., Inc. v. Halo Elecs., Inc.,
No. 15-121, 2015 WL 4550375, at *i (U.S. July 24, 2015).
The Supreme Court granted Halo’s petition in part,
limiting its review to Question 1 relating to enhanced
damages, and declining to review Question 2 relating to
sale and offer-for-sale. Halo Elecs., Inc. v. Pulse Elecs.,
Inc., 577 U.S. __, 136 S. Ct. 356 (2015). The Court also
denied Pulse’s conditional cross-petition relating to obvi-
ousness. Pulse Elecs., Inc. v. Halo Elecs., Inc., 577 U.S.
__, 136 S. Ct. 236 (2015).
On June 13, 2016, the Court announced its decision.
Halo Elecs., Inc. v. Pulse Elecs., Inc., 579 U.S. __, 136
S. Ct. 1923 (2016). The Court held that Section 284 of the
Patent Act “gives district courts the discretion to award
enhanced damages . . . in egregious cases of misconduct
beyond typical infringement.” Id. at 1935. The Court
rejected the Seagate test as “unduly rigid” and “impermis-
HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 5
sibly encumber[ing] the statutory grant of discretion to
district courts.” Id. at 1932 (internal quotation marks
omitted). Because we decided the enhanced damages
issue under the Seagate framework, the Court vacated our
decision and remanded the case for further proceedings.
On remand, we recalled our mandate and reopened
the case on July 14, 2016. Because the Supreme Court’s
review was limited to the issue of enhanced damages and
left undisturbed the judgments on other issues, we
reaffirm the summary judgment of no direct infringement
of the Halo patents by the accused products that Pulse
manufactured, shipped, and delivered outside the United
States, and we also reaffirm all aspects of the cross-
appeal. On those issues, we restate herein the reasoning
stated in our earlier opinion. Because the district court
applied the Seagate test in declining to enhance damages,
however, we vacate its unenhanced damages award with
respect to products that were delivered in the United
States, and remand for further proceedings consistent
with the Supreme Court’s opinion on enhanced damages.
BACKGROUND
Halo is a supplier of electronic components and owns
the ’985, ’720, and ’785 patents directed to surface mount
electronic packages containing transformers for mounting
on a printed circuit board inside electronic devices such as
computers and internet routers. The Halo patents are all
derived from an application filed on August 10, 1995. At
issue here are claims 6–8 and 16 of the ’985 patent, claims
1 and 6 of the ’720 patent, and claims 40 and 48 of the
’785 patent (collectively “the asserted claims”). Claim 6 of
the ’985 patent is representative and reads as follows:
6. An electronic surface mount package for
mounting on a printed circuit board in an elec-
tronic device, said electronic surface mount
package comprising:
6 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
a one piece construction package having a side
wall and an open bottom,
a plurality of toroid transformers carried with-
in said package by a soft silicone material, said
toroid transformers each having wires wrapped
thereon,
a plurality of terminal pins molded within and
extending from the bottom of said package,
each of said pins extending through a bottom of
said side wall and having a notched post upon
which said wires from said transformers are
wrapped and soldered thereon, respectively.
’985 patent col. 4 ll. 19–33.
Pulse, another supplier of electronic components, de-
signs and sells surface mount electronic packages and
manufactures those products in Asia. Some of Pulse’s
products were delivered by Pulse to customers in the
United States, but the majority of them were delivered
outside the United States, for example, to contract manu-
facturers for companies such as Cisco. Those contract
manufacturers incorporated the electronic packages
supplied by Pulse into end products overseas, including
internet routers manufactured for Cisco, which were then
sold and shipped to consumers around the world.
For those products that Pulse delivered abroad, all
purchase orders were received at Pulse’s sales offices
abroad. Halo, 810 F. Supp. 2d at 1207. However, Pulse
engaged in pricing negotiations in the United States with
companies such as Cisco, and Pulse’s employees in the
United States approved prices that its agents quoted to
foreign customers when the quoted prices fell below
certain thresholds. Pulse also engaged in other activities
in the United States, including meeting regularly with
Cisco design engineers, sending product samples to Cisco
HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 7
for pre-approval, attending sales meetings with its cus-
tomers, and providing post-sale support for its products.
Although Cisco outsourced its manufacturing activi-
ties to foreign contract manufacturers, Cisco negotiated
with its component suppliers the prices that its contract
manufacturers would pay when purchasing component
parts. As one of Cisco’s component suppliers, Pulse
executed a general agreement with Cisco that set forth
manufacturing capacity, low price warranty, and lead
time terms. J.A. 15135–37. However, that general
agreement did not refer to any specific Pulse product or
price. Cisco typically sent a request for quote to its com-
ponent suppliers and Pulse responded with the proposed
price and minimum quantity for each product as identi-
fied by its part number. After further negotiation, Cisco
issued the agreed-upon price, projected demand, and
percentage allocation to Pulse for each product for the
upcoming quarter. The percentage allocation divided
Cisco’s projected quarterly demand among its suppliers.
Cisco then communicated the price and allocation to its
contract manufacturers in Asia, and the contract manu-
facturers were expected to apply the Cisco price and
allocation when ordering components from Pulse and
other suppliers.
Upon receipt of purchase orders abroad, Pulse deliv-
ered the electronic package products from its manufactur-
ing facility in Asia to Cisco contract manufacturers, also
located in Asia, which then paid Pulse. After assembling
the end products, the contract manufacturers submitted
invoices to Cisco that itemized the cost of Pulse products
and other components that were incorporated into the
Cisco end products. Cisco then paid the contract manu-
facturers for the end products.
Pulse allegedly knew of the Halo patents as early as
1998. In 2002, Halo sent Pulse two letters offering licens-
es to its patents, but did not accuse Pulse of infringement
8 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
in those letters. J.A. 5953–54. The president of Pulse
contacted a Pulse engineer, who spent about two hours
reviewing the Halo patents and concluded that they were
invalid in view of prior Pulse products. Pulse did not seek
an opinion of counsel on the validity of the Halo patents
at that time and continued to sell its surface mount
electronic package products. A Pulse witness later testi-
fied that she was “not aware of anyone in the company . . .
that made a conscious decision” that “it was permissible
to continue selling” those products. J.A. 2245.
In 2007, Halo sued Pulse for patent infringement.
Pulse denied infringement and challenged the validity of
the Halo patents based on obviousness and other grounds.
Pulse also counterclaimed that Halo infringed Pulse’s ’963
patent directed to microelectronic connectors.
The district court first construed the disputed claim
limitations in the Halo patents and Pulse’s ’963 patent.
Relevant to this appeal, the court construed “electronic
surface mount package” in the preamble of the Halo
patent claims as non-limiting. Halo, 721 F. Supp. 2d at
999–1001. The court then further construed the term to
mean “an electronic device configured to attach to the
surface of a DC voltage only printed circuit board.” Id. In
addition, the court construed “contour element” in the
’963 patent claims to mean “a raised or recessed feature
that physically contacts the bend of an electrical lead both
before and after the modular plug is inserted into the
cavity.” Id. at 998–99. In view of that latter construction,
the parties stipulated to a judgment of noninfringement of
the Pulse ’963 patent. Halo Elecs., Inc. v. Pulse Elecs.,
Inc., No. 2:07-CV-00331, ECF No. 215 (D. Nev. Sept. 2,
2010).
Pulse moved for summary judgment that it did not di-
rectly infringe the Halo patents by selling or offering to
sell products that Pulse manufactured, shipped, and
delivered outside the United States. The district court
HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 9
granted the motion, holding that those products were sold
and offered for sale outside the United States and beyond
the scope of § 271(a). Halo, 810 F. Supp. 2d at 1206–08.
The parties next proceeded to trial on Halo’s claims of
(1) direct infringement by products that Pulse shipped
into the United States and (2) inducement of infringement
by products that Pulse shipped outside the United States
but were incorporated into end products that were ulti-
mately imported into the United States. The jury found
that: (1) Pulse directly infringed the Halo patents with
products that it shipped into the United States; (2) it
induced others to infringe the Halo patents with products
that it delivered outside the United States but ultimately
were imported into the United States in finished end
products; (3) it was highly probable that Pulse’s infringe-
ment was willful; and (4) the asserted claims of the Halo
patents were not invalid for obviousness. Halo, 2013 WL
2319145, at *1; Halo Elecs., Inc. v. Pulse Elecs., Inc., No.
2:07-CV-00331, ECF No. 482 (D. Nev. Nov. 26, 2012). The
jury awarded Halo $1.5 million in reasonable royalty
damages. Id.
In response to Pulse’s post-trial motion, the district
court applied the Seagate test and concluded that the
objective component of the willfulness inquiry was not
satisfied because Pulse “reasonably relied on at least its
obviousness defense” and Pulse’s unsuccessful obvious-
ness defense was not “objectively baseless.” Halo, 2013
WL 2319145, at *15. The court therefore held that Pulse’s
infringement was not willful, id. at *16, and thus did not
enhance damages under § 284, Halo, No. 2:07-CV-00331,
ECF No. 523 (D. Nev. May 28, 2013) (final judgment
awarding damages without enhancement).
Pulse also moved for JMOL of invalidity for alleged
obviousness of the Halo patent claims, which the district
court denied. Halo, 2013 WL 2319145, at *1–7; Halo,
2013 WL 4458754, at *1–3. The court reasoned that,
10 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
because Pulse did not file a pre-verdict motion under Fed.
R. Civ. P. 50(a) on the issue of obviousness, Pulse had
waived its right to challenge the jury’s implicit factual
findings underlying the nonobviousness general verdict.
Id. While noting that “each of the elements present in the
asserted patent claims also were present in the prior art,
except the standoff element” in two of the asserted claims,
Halo, 2013 WL 2319145, at *3, the court presumed that
the jury resolved all factual disputes relating to the scope
and content of the prior art and secondary considerations
in Halo’s favor and concluded that the asserted claims
were not invalid for obviousness based upon those pre-
sumed factual findings, id. at *3–7.
Halo appealed and Pulse cross-appealed. We have ju-
risdiction pursuant to 28 U.S.C. § 1295(a)(1).
DISCUSSION
I. Sale and Offer for Sale
We review the district court’s grant or denial of sum-
mary judgment under the law of the regional circuit, here
the Ninth Circuit. Lexion Med., LLC v. Northgate Techs.,
Inc., 641 F.3d 1352, 1358 (Fed. Cir. 2011). Applying the
law of the Ninth Circuit, we review the grant or denial of
summary judgment de novo. Humane Soc’y of the U.S. v.
Locke, 626 F.3d 1040, 1047 (9th Cir. 2010). Summary
judgment is appropriate when, drawing all justifiable
inferences in the nonmovant’s favor, “there is no genuine
dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
Halo argues that the district court erred in granting
summary judgment of no direct infringement with respect
to products that Pulse delivered abroad. Halo contends
that those products were sold and offered for sale within
the United States because negotiations and contracting
activities occurred within the United States, which re-
HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 11
sulted in binding contracts that set specific terms for price
and quantity. Halo argues that the location of the sale or
offer for sale should not be limited to the location of
delivery. Halo also argues that it suffered economic harm
in the United States as a result of Pulse’s sales.
Pulse responds that the products at issue were sold or
offered for sale outside the United States because those
products were manufactured, ordered, invoiced, shipped,
and delivered abroad. Pulse maintains that its pricing
discussions with Cisco in the United States were merely
forecasts and were not a guarantee that Pulse would
receive any actual order from any of Cisco’s contract
manufacturers. Pulse also responds that the district
court’s holding is consistent with our case law and the
presumption against extraterritorial application of United
States laws. Pulse contends that Halo improperly sought
to expand the geographical scope of § 271(a) to reach
activities outside the United States.
We agree with Pulse that the district court did not err
in granting summary judgment of no direct infringement
with respect to those products that Pulse manufactured,
shipped, and delivered outside the United States because
those products were neither sold nor offered for sale by
Pulse within the United States.
A. Sale
Section 271(a) of the patent statute provides in rele-
vant part that “whoever without authority makes, uses,
offers to sell, or sells any patented invention, within the
United States . . . infringes the patent.” 35 U.S.C.
§ 271(a) (emphases added); Microsoft Corp. v. AT&T
Corp., 550 U.S. 437, 441 (2007) (“It is the general rule
under United States patent law that no infringement
occurs when a patented product is made and sold in
another country.”). We first consider whether the prod-
ucts that Pulse manufactured, shipped, and delivered to
12 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
buyers abroad were sold within the United States for
purposes of § 271(a).
Our earlier cases addressing the issue of the location
of a sale arose in the context of personal jurisdiction. In
North American Philips Corp. v. American Vending Sales,
Inc., 35 F.3d 1576 (Fed. Cir. 1994), a case involving do-
mestic sales by defendants who shipped products from
Texas and California free on board (f.o.b.) to buyers in
Illinois, and concerning whether a trial court in Illinois
had personal jurisdiction over the defendants, we held
that patent infringement occurs where the infringing
sales are made. Id. at 1577–79 (citing Beverly Hills Fan
Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1570–71 (Fed.
Cir. 1994)). We stated that:
[T]he “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 in-
cluding 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.
Id. at 1579. We rejected the defendants’ argument that
the location of the sale was limited to “the place where
legal title passe[d] rather than the more familiar places of
contracting and performance.” Id. (citing Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 478–79 (1985)). And we
held that the sale in that case occurred in Illinois where
the buyer was located, but “not necessarily only there.”
Id. Thus, under North American Philips, a sale may occur
at multiple locations, including the location of the buyer,
for purposes of personal jurisdiction.
HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 13
In subsequent cases in which we addressed the issue
of liability under § 271(a) rather than personal jurisdic-
tion, we applied similar analyses to determine where a
sale occurred based on factors that included places of
contracting and performance. Litecubes, LLC v. N. Light
Prods., Inc., 523 F.3d 1353, 1370 (Fed. Cir. 2008); MEMC
Elec. Materials, Inc. v. Mitsubishi Materials Silicon Corp.,
420 F.3d 1369, 1377 (Fed. Cir. 2005). Although the place
of contracting may be one of several possible locations of a
sale to confer personal jurisdiction, we have not deemed a
sale to have occurred within the United States for purpos-
es of liability under § 271(a) based solely on negotiation
and contracting activities in the United States when the
vast majority of activities underlying the sales transac-
tion occurred wholly outside the United States. For such
a sale, one must examine whether the activities in the
United States are sufficient to constitute a “sale” under
§ 271(a), recognizing that a strong policy against extrater-
ritorial liability exists in the patent law. See Microsoft,
550 U.S. at 455 (“The traditional understanding that our
patent law operate[s] only domestically and do[es] not
extend to foreign activities is embedded in the Patent Act
itself.” (alterations in original) (citation and quotation
marks omitted)); MEMC, 420 F.3d at 1375–76 (“[T]he
reach of section 271(a) is limited to infringing activities
that occur within the United States.”).
The patent statute does not define the meaning of a
“sale” within the United States for purposes of § 271(a).
We have stated that “the ordinary meaning of a sale
includes the concept of a transfer of title or property.”
NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282,
1319 (Fed. Cir. 2005). Indeed, Article 2 of the Uniform
Commercial Code, which is recognized as a persuasive
authority on the sale of goods, provides that “[a] ‘sale’
consists in the passing of title from the seller to the buyer
for a price.” U.C.C. § 2-106; see also Black’s Law Diction-
ary 1364 (8th ed. 2004) (defining “sales” as “[t]he transfer
14 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
of property or title for a price”). Section 2-106 separately
defines a “contract for sale” as including “both a present
sale of goods and a contract to sell goods at a future time.”
While we have held that a sale is “not limited to the
transfer of tangible property” but may also be determined
by “the agreement by which such a transfer takes place,”
Transocean Offshore Deepwater Drilling, Inc. v. Maersk
Contractors USA, Inc., 617 F.3d 1296, 1311 (Fed. Cir.
2010) (citing NTP, 418 F.3d at 1319), the location of
actual or anticipated performance under a “contract for
sale” remains pertinent to the transfer of title or property
from a seller to a buyer, see id. at 1310 (considering the
location of delivery and performance under a contract).
Consistent with all of our precedent, we conclude that,
when substantial activities of a sales transaction, includ-
ing the final formation of a contract for sale encompassing
all essential terms as well as the delivery and perfor-
mance under that sales contract, occur entirely outside
the United States, pricing and contracting negotiations in
the United States alone do not constitute or transform
those extraterritorial activities into a sale within the
United States for purposes of § 271(a).
On undisputed facts, the products under discussion
here were manufactured, shipped, and delivered to buyers
abroad. Halo, 810 F. Supp. 2d at 1207 (“All accused
products [at issue] were at no point, in transit or other-
wise, in the United States.”). In addition, Pulse received
the actual purchase orders for those products abroad.
Although Pulse and Cisco had a general business agree-
ment, that agreement did not refer to, and was not a
contract to sell, any specific product. J.A. 15135–37.
While Pulse and Cisco engaged in quarterly pricing
negotiations for specific products, the negotiated price and
projected demand did not constitute a firm agreement to
buy and sell, binding on both Cisco and Pulse. Instead,
Pulse received purchase orders from Cisco’s foreign con-
tract manufacturers, which then firmly established the
HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 15
essential terms including price and quantity of binding
contracts to buy and sell. Moreover, Pulse was paid
abroad by those contract manufacturers, not by Cisco,
upon fulfillment of the purchase orders. Thus, substan-
tial activities of the sales transactions at issue, in addi-
tion to manufacturing and delivery, occurred outside the
United States. Although Halo did present evidence that
pricing negotiations and certain contracting and market-
ing activities took place in the United States, which
purportedly resulted in the purchase orders and sales
overseas, as indicated, such pricing and contracting
negotiations alone are insufficient to constitute a “sale”
within the United States. 1
Any doubt as to whether Pulse’s contracting activities
in the United States constituted a sale within the United
States under § 271(a) is resolved by the presumption
against extraterritorial application of United States laws.
“The presumption that United States law governs domes-
tically but does not rule the world applies with particular
force in patent law.” Microsoft, 550 U.S. at 454–55. As
the Supreme Court has stated on multiple occasions,
“[o]ur patent system makes no claim to extraterritorial
effect; these acts of Congress do not, and were not intend-
ed to, operate beyond the limits of the United States, and
we correspondingly reject the claims of others to such
control over our markets.” Id. at 444 (quoting Deepsouth
Packing Co. v. Laitram Corp., 406 U.S. 518, 531 (1972)
1 On these facts, we need not reach Halo’s argu-
ment that the place where a contract for sale is legally
formed can itself be determinative as to whether a sale
has occurred in the United States because we agree with
the district court here that the pricing negotiations and
contracting activities in the United States to which Halo
points did not constitute the final formation of a defini-
tive, binding contract for sale.
16 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
(quoting Brown v. Duchesne, 60 U.S. (19 How.) 183, 195
(1857))) (internal citation and quotation marks omitted).
“Foreign conduct is [generally] the domain of foreign
law,” and in patent cases, foreign law “may embody
different policy judgments about the relative rights of
inventors, competitors, and the public in patented inven-
tions.” Id. at 455 (alteration in original) (quoting Brief for
United States as Amicus Curiae 28). As the Supreme
Court has stated, if one desires to prevent the selling of
its patented invention in foreign countries, its proper
remedy lies in obtaining and enforcing foreign patents.
See Deepsouth, 406 U.S. at 531 (“To the degree that the
inventor needs protection in markets other than those of
this country, the wording of 35 U.S.C. §§ 154 and 271
reveals a congressional intent to have him seek it abroad
through patents secured in countries where his goods are
being used.”).
We also reject Halo’s argument that the sales at issue
occurred in the United States simply because Halo suf-
fered economic harm as a result of those sales. The
incurring of harm alone does not control the infringement
inquiry. As indicated, Pulse’s activities in the United
States were insufficient to constitute a sale within the
United States to support direct infringement. See N. Am.
Philips, 35 F.3d at 1579 (“[T]he statute on its face clearly
suggests the conception that the ‘tort’ of patent infringe-
ment occurs where the offending act is committed and not
where the injury is felt.”). Moreover, Halo recovered
damages for products that Pulse delivered outside the
United States but were ultimately imported into the
United States in finished end products based on a theory
of inducement.
Following Halo’s logic, a foreign sale of goods covered
by a U.S. patent that harms the business interest of a
U.S. patent holder would incur infringement liability
under § 271(a). Such an extension of the geographical
HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 17
scope of § 271(a) in effect would confer a worldwide exclu-
sive right to a U.S. patent holder, which is contrary to the
statute and case law. See, e.g., Power Integrations, Inc. v.
Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348, 1371–
72 (Fed. Cir. 2013) (“[T]he entirely extraterritorial pro-
duction, use, or sale of an invention patented in the
United States is an independent, intervening act that,
under almost all circumstances, cuts off the chain of
causation initiated by an act of domestic infringement.”)
(citing Morrison v. Nat’l Austl. Bank Ltd., 561 U.S. 247,
266 (2010) (“But the presumption against extraterritorial
application would be a craven watchdog indeed if it re-
treated to its kennel whenever some domestic activity is
involved in the case.” (emphasis in original))).
We therefore hold that the district court did not err in
granting summary judgment that Pulse did not sell
within the United States those products that Pulse manu-
factured, shipped, and delivered abroad.
B. Offer for Sale
We next consider whether Pulse offered to sell within
the United States those products that Pulse manufac-
tured, shipped, and delivered abroad. An “offer to sell”
generally occurs when one “communicate[s] a manifesta-
tion of willingness to enter into a bargain, so made as to
justify another person in understanding that his assent to
that bargain is invited and will conclude it.” MEMC, 420
F.3d at 1376 (internal quotation marks omitted). We
have held that “a description of the allegedly infringing
merchandise and the price at which it can be purchased”
may constitute an offer to sell. 3D Sys., Inc. v. Aarotech
Labs., Inc., 160 F.3d 1373, 1379 (Fed. Cir. 1998). 3D
Systems did not, however, involve international transac-
tions and in that case this court considered the issue of
offer to sell in a personal jurisdiction context.
More importantly, we have held that “the location of
the contemplated sale controls whether there is an offer to
18 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
sell within the United States.” Transocean, 617 F.3d at
1309 (emphasis added). “In order for an offer to sell to
constitute infringement, the offer must be to sell a pa-
tented invention within the United States.” Id. In
Transocean, contract negotiations occurred outside the
United States for delivery and performance in the United
States. This court held that the location of the contem-
plated sale controlled and that the offer to sell infringed
the patent at issue.
The case now before us involves the opposite situa-
tion, where the negotiations occurred in the United
States, but the contemplated sale occurred outside the
United States. We adopt the reasoning of Transocean and
conclude here that Pulse did not directly infringe the Halo
patents under the “offer to sell” provision by offering to
sell in the United States the products at issue, because
the locations of the contemplated sales were outside the
United States. Cisco outsourced all of its manufacturing
activities to foreign countries, and it is undisputed that
the locations of the contemplated sales were outside the
United States. Likewise, with respect to other Pulse
customers, there is no evidence that the products at issue
were contemplated to be sold within the United States.
An offer to sell, in order to be an infringement, must
be an offer contemplating sale in the United States.
Otherwise, the presumption against extraterritoriality
would be breached. If a sale outside the United States is
not an infringement of a U.S. patent, an offer to sell, even
if made in the United States, when the sale would occur
outside the United States, similarly would not be an
infringement of a U.S. patent. We therefore hold that
Pulse did not offer to sell the products at issue within the
United States for purposes of § 271(a).
For the foregoing reasons, we affirm the summary
judgment of no direct infringement with respect to those
HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 19
products that Pulse manufactured, shipped, and delivered
abroad.
II. Enhanced Damages
Applying the then-controlling Seagate test for willful
infringement, the district court determined that Pulse did
not willfully infringe the Halo patents with respect to
products that were delivered in the United States, and
thus declined to enhance damages under 35 U.S.C. § 284.
Under Seagate, establishing willful infringement required
a two-prong analysis entailing an objective and a subjec-
tive inquiry. First, the patentee was required to “show by
clear and convincing evidence that the infringer acted
despite an objectively high likelihood that its actions
constituted infringement of a valid patent.” Seagate, 497
F.3d at 1371. Second, with the “threshold objective
standard” satisfied, the patentee was required to “also
demonstrate that this objectively-defined risk (deter-
mined by the record developed in the infringement pro-
ceeding) was either known or so obvious that it should
have been known to the accused infringer.” Id.
The Supreme Court has now rejected the Seagate test
as “unduly rigid” and inconsistent with “the statutory
grant of discretion to district courts” to enhance damages
under § 284. Halo, 136 S. Ct. at 1932 (internal quotation
marks omitted). In particular, the Court rejected the
clear-and-convincing standard of proof, as well as the
tripartite framework for appellate review. Id. at 1934.
The Court also rejected Seagate’s requirement of “a find-
ing of objective recklessness in every case before district
courts may award enhanced damages.” Id. at 1932. Such
a threshold requirement, the Court explained, “excludes
from discretionary punishment many of the most culpable
offenders, such as the ‘wanton and malicious pirate’ who
intentionally infringes another’s patent—with no doubts
about its validity or any notion of a defense—for no pur-
pose other than to steal the patentee’s business.” Id.
20 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
Rather, “[t]he subjective willfulness of a patent infringer,
intentional or knowing, may warrant enhanced damages.”
Id. at 1933.
Moreover, the Court held that Section 284 allows dis-
trict courts to exercise their discretion in deciding wheth-
er to award enhanced damages, which “are generally
reserved for egregious cases of culpable behavior” beyond
“typical infringement.” Id. at 1932; see also id. at 1933–
34 (“Section 284 allows district courts to punish the full
range of culpable behavior. Yet none of this is to say that
enhanced damages must follow a finding of egregious
misconduct. . . . [S]uch punishment should generally be
reserved for egregious cases typified by willful miscon-
duct.”).
Here, the jury awarded Halo $1.5 million in reasona-
ble royalty damages with respect to products that were
delivered in the United States. The jury also found that it
was highly probable that Pulse’s infringement was willful.
However, the district court determined that the objective
prong of the Seagate test was not met because it conclud-
ed that the obviousness defense that Pulse presented at
trial was not objectively baseless. On appeal, Pulse does
not challenge the propriety of the jury finding of subjec-
tive willfulness. In light of the Supreme Court’s decision,
we vacate the district court’s determination of no willful
infringement. We remand for the district court to exercise
its discretion and to decide whether, taking into consider-
ation the jury’s unchallenged subjective willfulness find-
ing as one factor in its analysis, an enhancement of the
damages award is warranted.
Halo argues that Pulse did not actually rely on any
invalidity defense pre-suit when selling the accused
products because Pulse’s obviousness defense was
developed after the lawsuit was filed in 2007. As the
Supreme Court explained, “culpability is generally meas-
ured against the knowledge of the actor at the time of the
HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC. 21
challenged conduct.” Halo, 136 S. Ct. at 1933. Thus, in
assessing the culpability of Pulse’s conduct, the district
court should consider, as one factor in its analysis, what
Pulse knew or had reason to know at the time of the
infringement of the Halo patents.
Accordingly, we vacate the district court’s decision not
to enhance damages under § 284 and remand for further
proceedings.
III. Cross-Appeal
Pulse cross-appeals from the district court’s construc-
tion of the claim limitations “electronic surface mount
package” in the Halo patents and “contour element” in
Pulse’s ’963 patent and the resulting judgments of in-
fringement of the Halo patents and noninfringement of
Pulse’s ’963 patent. We have considered Pulse’s argu-
ments but find no reversible error in those judgments.
We therefore affirm the judgment of direct infringement
with respect to products that Pulse delivered in the Unit-
ed States and the judgment of inducement with respect to
products that Pulse delivered outside the United States
but ultimately were imported into the United States in
finished end products, as well as the judgment of non-
infringement of Pulse’s ’963 patent.
In addition, Pulse cross-appeals from the judgment
that the asserted claims of the Halo patents were not
invalid for obviousness. It is true that the record evidence
indisputably shows that almost all the limitations in the
asserted claims were known elements of electronic pack-
ages that existed in the prior art. However, Pulse did not
file a motion during trial under Fed. R. Civ. P. 50(a) on
the issue of obviousness before that issue was submitted
to the jury and thus waived its right to challenge the
jury’s implicit factual findings underlying the nonobvi-
ousness general verdict. The district court thus correctly
presumed that the jury resolved all factual disputes
relating to the scope and content of the prior art and
22 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
secondary considerations in Halo’s favor. Based upon
those presumed factual findings, the court did not err in
reaching the ultimate legal conclusion that the asserted
claims were not invalid for obviousness. We therefore
affirm the judgment that the asserted claims of the Halo
patents were not invalid for obviousness.
CONCLUSION
For the foregoing reasons, we affirm the judgment
that Pulse did not directly infringe the Halo patents by
selling or offering to sell within the United States those
accused products that Pulse manufactured, shipped, and
delivered outside the United States. With respect to the
infringing products that were delivered in the United
States, we vacate the unenhanced damages award and
remand for the district court to determine whether an
award of enhanced damages is appropriate. On the cross-
appeal, because we discern no reversible error in the
contested claim constructions, we affirm the judgment of
direct infringement with respect to products that Pulse
delivered in the United States and the judgment of in-
ducement with respect to products that Pulse delivered
outside the United States, but that were imported into the
United States by others, as well as the judgment of non-
infringement of Pulse’s ’963 patent. We also affirm the
judgment that the asserted claims of the Halo patents
were not shown to be invalid for obviousness.
AFFIRMED IN PART, VACATED IN PART,
AND REMANDED
COSTS
No costs.