MEMC Electronic Materials, Inc. v. Mitsubishi Materials Silicon Corp.

United States Court of Appeals for the Federal Circuit
04-1396, -1513
MEMC ELECTRONIC MATERIALS, INC.,
Plaintiff-Appellant,
v.
MITSUBISHI MATERIALS SILICON CORPORATION,
MITSUBISHI SILICON AMERICA CORPORATION,
SUMITOMO MITSUBISHI SILICON CORPORATION (also known as Sumco),
SUMCO USA CORPORATION (also known as Sumco USA), and
SUMCO USA SALES CORPORATION (also known as Sumco USA Sales),
Defendants-Cross Appellants.
Robert M. Evans, Jr., Senniger Powers, of St. Louis, Missouri, argued for
plaintiff-appellant. With him on the brief was Marc W. Vander Tuig. Of counsel on the
brief were Duane H. Mathiowetz and Korula T. Cherian, Howrey Simon Arnold & White,
LLP, of San Francisco, California.
R. Terrance Rader, Rader, Fishman & Grauer PLLC, of Bloomfield Hills,
Michigan, argued for defendants-cross appellants. With him on the brief were David T.
Nikaido and Glenn E. Forbis. Of counsel were Ellen A. Efros and Lisa R. Mikalonis.
Appealed from: United States District Court for the Northern District of California
Judge Saundra Brown Armstrong
United States Court of Appeals for the Federal Circuit
04-1396, -1513
MEMC ELECTRONIC MATERIALS, INC.,
Plaintiff-Appellant,
v.
MITSUBISHI MATERIALS SILICON CORPORATION,
MITSUBISHI SILICON AMERICA CORPORATION,
SUMITOMO MITSUBISHI SILICON CORPORATION (also known as Sumco),
SUMCO USA CORPORATION (also known as Sumco USA), and
SUMCO USA SALES CORPORATION (also known as Sumco USA Sales),
Defendants-Cross Appellants.
__________________________
DECIDED: August 22, 2005
__________________________
Before NEWMAN, SCHALL, and DYK, Circuit Judges.
SCHALL, Circuit Judge.
MEMC Electronic Materials, Inc. (“MEMC”) is the assignee of record of U.S.
Patent No. 5,919,302 (the “’302 patent”). It brought suit in the United States District
Court for the Northern District of California against Mitsubishi Materials Silicon
Corporation, Mitsubishi Silicon America Corporation, Sumitomo Mitsubishi Silicon
Corporation (“SUMCO Corp.”), Sumco USA Corporation (“SUMCO USA”), and Sumco
USA Sales Corporation (“SUMCO USA Sales”) (collectively, “defendants” or “SUMCO”).
In its suit, MEMC alleged direct infringement of the ’302 patent under 35 U.S.C.
§ 271(a) and inducement of infringement of the patent under 35 U.S.C. § 271(b). The
district court eventually granted summary judgment in favor of defendants on the ground
that, as a matter of law, they could not be liable for either direct infringement or
inducement of infringement. MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silicon
Corp., No. 4:01-CV-04925 (N.D. Cal. Mar. 16, 2004) (“Summary Judgment Order”). As
far as direct infringement was concerned, the court ruled that there was no evidence of
sales or offers for sale of accused products in the United States. As far as inducement
of infringement was concerned, the court ruled that MEMC had failed to produce any
evidence of inducement of infringement by defendants. MEMC now appeals that
decision. At the same time, defendants cross-appeal the district court’s denial of their
motion for attorney’s fees, expert witness fees, and expenses.
We see no error in the grant of summary judgment with respect to direct
infringement. However, in view of what we think are genuine issues of material fact, we
hold the district court did err in granting summary judgment with respect to inducement
of infringement. Accordingly, with respect to MEMC’s appeal, the judgment of the
district court is affirmed-in-part and reversed-in-part and the case is remanded to the
district court for further proceedings. On the cross-appeal, we affirm the denial of
defendants’ request for attorney’s fees.
I.
MEMC is a supplier of silicon wafers to the semiconductor industry. The ’302
patent, entitled “Low Defect Density Vacancy Dominated Silicon,” relates to the
preparation of semiconductor grade single crystal silicon, which is used, in wafer form,
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in the manufacture of electronic components such as integrated circuits. ’302 patent
col. 1, ll. 9-16. Prior art methods of manufacturing single crystal silicon often resulted in
crystals containing large quantities of agglomerated intrinsic point defects. Id. col. 1, ll.
18-55. These defects can severely impact the yield potential of silicon wafers in
complex and highly integrated circuits. Id. col. 1, ll. 53-55. The patent discloses a
method of preparing single crystal silicon that is substantially free of agglomerated
intrinsic point defects. Specifically, the ’302 patent discloses a process specifying initial
growth conditions and the temperature range of the manufacturing process. Id. col. 3, l.
62 – col. 4, l. 14.
Claim 1, the only asserted independent claim of the ’302 patent, states as
follows:
1. A single crystal silicon wafer having a central axis, a front side
and a back side which are generally perpendicular to the central axis, a
circumferential edge, and a radius extending from the central axis to the
circumferential edge of the wafer, the wafer comprising
a first axially symmetric region in which vacancies are the
predominant intrinsic point defect and which is substantially
free of agglomerated vacancy intrinsic point defects wherein
the first axially symmetric region comprises the central axis
or has a width of at least about 15 mm.
’302 patent col. 23, ll. 17-23.
SUMCO, like MEMC, is a supplier of silicon wafers to the semiconductor
industry. It is undisputed that SUMCO’s silicon wafers are manufactured exclusively
outside of the United States at SUMCO’s manufacturing plant in Yonezawa, Japan.
Ostensibly, SUMCO sells silicon wafers to Samsung Japan Corporation (“Samsung
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Japan”), which then sells the wafers to Samsung Austin Semiconductor, located in
Austin, Texas (“Samsung Austin”).1
On December 14, 2001, MEMC sued SUMCO in the United States District Court
for the Northern District of California, claiming that SUMCO was liable for infringement
and inducement of infringement of the ’302 patent based upon SUMCO’s alleged sale
and importation of certain silicon wafers.2 MEMC asserted that SUMCO directly
infringed the ’302 patent under 35 U.S.C. § 271(a) by offering to sell and selling the
accused wafers to Samsung Austin. With respect to its claim of inducement of
infringement under 35 U.S.C. § 271(b), MEMC asserted that SUMCO encouraged and
enabled Samsung Austin to use the accused wafers by manufacturing wafers according
to Samsung Korea’s specifications and by providing technical support to the Samsung
Austin facility.
II.
On December 3, 2003, SUMCO filed a motion for summary judgment of zero
damages, arguing that MEMC could not prove that defendants committed the alleged
acts of infringement within the United States. SUMCO argued that it did not sell the
accused wafers either directly or indirectly to Samsung Austin, and that it only sold the
accused wafers to Samsung Japan. SUMCO also argued that it had not engaged in
1
Samsung Electronics Co., Ltd. (“Samsung Korea”) is the Korean parent
company of Samsung Austin and Samsung Japan.
2
Mitsubishi Materials Silicon Corporation and Mitsubishi Silicon America
Corporation were the original defendants. In February of 2002, SUMCO Corp. was
formed as a joint venture between Mitsubishi Materials Silicon Corporation and the Sitix
Division of Sumitomo Metals Industries, Ltd. The complaint was thereafter amended to
add SUMCO Corp., SUMCO USA, and SUMCO USA Sales as defendants.
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any conduct that would constitute the active inducement of infringement by Samsung
Austin in the United States.
MEMC responded that Samsung Japan was merely a conduit for the delivery of
defendants’ accused wafers and that Samsung Austin was SUMCO’s true customer.
MEMC also argued that defendants induced Samsung Austin’s infringement of the ’302
patent by manufacturing wafers according to Samsung Austin’s specifications and by
providing substantial technical support to Samsung Austin.
On March 16, 2004, the district court granted defendants’ summary judgment
motion. The court held that MEMC had failed to produce any evidence of sales or offers
for sales of the accused wafers in the United States by defendants or any evidence of
importation of the accused wafers into the United States by defendants. Summary
Judgment Order, slip op. at 2. The court also held that, vis-à-vis Samsung Austin,
MEMC had failed to provide any evidence of active and intentional inducement of
infringement by defendants. Id. On April 22, 2004, the district court entered final
judgment of non-infringement. Under these circumstances, the court reasoned, MEMC
could not establish entitlement to any damages. Id. On May 20, 2004, SUMCO filed a
motion for attorney’s fees, expert witness fees, and expenses. The district court denied
this motion on July 9, 2004. MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silicon
Corp., No. 4:01-CV-04925 (N.D. Cal. July 9, 2004) (“Attorney’s Fees Order”).
MEMC appeals the district court’s final determination of non-infringement as well
as the underlying order granting SUMCO summary judgment of zero damages.
SUMCO cross-appeals the district court’s denial of its motion for attorney’s fees, expert
witness fees, and expenses. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
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DISCUSSION
I.
Summary judgment is appropriate only if, when the facts are viewed in the light
most favorable to the nonmoving party and all doubts are resolved against the movant,
there are no genuine issues of material fact and the moving party is entitled to judgment
as a matter of law. Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
247-48 (1986); see also Caterpillar, Inc. v. Deere & Co., 224 F.3d 1374, 1379 (Fed. Cir.
2000) (“When ruling on a motion for summary judgment, all of the nonmovant’s
evidence is to be credited, and all justifiable inferences are to be drawn in the
nonmovant’s favor.”). The movant carries the initial burden of proving that there are no
genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986).
If the movant shows a prima facie case for summary judgment, then the burden of
production shifts to the nonmovant to present specific evidence indicating there is a
genuine issue for trial. Anderson, 477 U.S. at 250. This court reviews de novo the
district court’s finding that there is no genuine issue as to any material fact regarding
infringement. Amgen, Inc. v. Hoechst Marion Roussel, Inc., 314 F.3d 1313, 1339 (Fed.
Cir. 2003).
The district court based its ruling of non-infringement on MEMC’s inability to
establish damages for infringement and, thus, did not address the issue of claim
coverage with respect to the ’302 patent. Accordingly, we assume for purposes of this
appeal that the asserted claims of the ’302 patent read on the accused wafers. We turn
first to the issue of direct infringement.
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II.
The following facts are not in dispute: SUMCO sells the accused silicon wafers to
Samsung Japan, which then sells the wafers to Samsung Austin. As noted above, the
wafers are manufactured exclusively outside of the United States at SUMCO’s
manufacturing plant in Yonezawa, Japan. SUMCO manufactures the accused wafers
according to specifications provided by, and pursuant to a license from, Samsung
Korea. Typically, Samsung Japan sends SUMCO an electronic purchase order
specifying the number of wafers to be manufactured. At some point after the purchase
order is received, SUMCO processes the order and manufactures the wafers. The
wafers then are packed in boxes at the Yonezawa plant and delivered at Yonezawa to a
packaging company. SUMCO attaches a packaging label that indicates the destination
of the wafers to be Austin, Texas. The packaging company, in turn, transports the
boxes to its own facility for shipment, “free on board,”3 to Samsung Austin’s
semiconductor fabrication plant in Austin, Texas.
Beyond these undisputed facts, MEMC directs our attention to evidence in the
record from the summary judgment proceedings that it contends supports finding
specific contacts between SUMCO and Samsung Austin. In support of its allegation of
infringement, MEMC submitted a series of e-mails between SUMCO and an engineer at
Samsung Austin. These e-mails suggest that SUMCO provides Samsung Austin with
detailed electronic test data on the wafers for the purpose of obtaining Samsung
Austin’s approval for shipment before SUMCO turns the wafers over to the packaging
3
“Free on board” is a method of shipment whereby goods are delivered at a
designated location, usually a transportation depot, at which legal title and thus the risk
of loss passes from seller to buyer. See N. Am. Philips Corp. v. Am. Vending Sales,
Inc., 35 F.3d 1576, 1578 n.2 (Fed. Cir. 1994).
04-1396, -1513 7
company for shipment to the United States. The engineer at Samsung Austin analyzes
the test data upon receipt and, if the data indicates that the wafers are acceptable, the
shipment is approved. These e-mails also suggest that SUMCO and Samsung Austin
communicated directly and independently of Samsung Japan in order to coordinate
shipment dates and the quantity of wafers sent in each shipment, subject to Samsung
Austin’s final approval. In addition, the e-mails represent communications directly
between Samsung Austin and SUMCO that address various problems Samsung Austin
encountered with the wafers from time to time. These communications often resulted in
adjustments made in the upstream manufacturing process at the SUMCO facility in
Japan or adjustments made in the downstream process at the Samsung Austin facility
in Austin, Texas.
The e-mail correspondence between employees of SUMCO and the engineer at
Samsung Austin also reveals a transaction in November and December of 2002, during
which SUMCO’s International Sales Manager, Toshihiro Awa, requested authorization
from Samsung Austin for the shipment of a quantity of wafers with a modified edge-
shape directly to Samsung Austin. The wafers were sent in response to certain
problems with previously-supplied SUMCO wafers. Mr. Awa was granted authority from
Samsung Austin’s purchasing manager to add these wafers to an existing Samsung
Japan purchase order.
Finally, MEMC presented evidence suggesting that SUMCO personnel made
several on-site visits to the Samsung Austin plant after issuance of the ’302 patent.
First, MEMC pointed to the deposition testimony of Yoshihiro Wakisawa, an engineer at
SUMCO. Mr. Wakisawa testified that he took two trips to the Samsung Austin facility in
04-1396, -1513 8
2000 and 2001. Mr. Wakisawa further testified that, during at least one of the trips, he
made a technical presentation concerning the accused wafers. Second, MEMC cited
the deposition testimony of Mr. Awa that he made multiple trips to the Samsung Austin
facility, including one trip during 2000 or 2001 during which he made a technical
presentation concerning the accused wafers.
III.
On appeal, MEMC argues that the district court erred in granting summary
judgment of no direct infringement because the evidence of record demonstrates that
SUMCO offers to sell and sells the accused silicon wafers to Samsung Austin in Austin,
Texas. First, MEMC argues, SUMCO sells the accused wafers to Samsung Austin
based on evidence that SUMCO: (1) manufactures the accused wafers according to
Samsung’s specifications; (2) e-mails Samsung Austin the test data for shipment
authorization, (3) packages the wafers for shipment; (4) applies a shipping label for
Samsung Austin in Austin, Texas; and (5) provides crucial follow-up technical support.
Thus, SUMCO asserts that Samsung Japan’s “interposition in the purchase order
process” does not change the fact that Samsung Austin is SUMCO’s “true” customer.
MEMC cites N. Am. Philips Corp. v. Am. Vending Sales, Inc., 35 F.3d 1576 (Fed. Cir.
1994), and Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558 (Fed. Cir.
1994), for the proposition that the location of an infringing sale is either where the buyer
is located or where a patentee suffers economic loss.
Second, according to MEMC, the transmittal of data from defendants to
Samsung Austin constitutes an “offer to sell” the accused wafers within the meaning of
section 271(a). MEMC states that, “[t]hrough these e-mails, SUMCO has
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communicated its willingness to ship to [Samsung Austin] a certain quantity of wafers
(typically some subset of the total quantity identified in the electronic purchase order) on
a certain date for the previously agreed to price, such wafers having the characteristics
described by the voluminous data contained in the attached spreadsheets.” MEMC
states in addition that if Samsung Austin replies to the e-mail and accepts the tendered
data, the bargain is concluded and SUMCO causes the wafers to be shipped to the
United States. MEMC further states that SUMCO’s e-mails generate interest in the
accused wafers to the commercial detriment of MEMC—a result indicative of an
infringing offer to sell.
SUMCO responds that the district court did not err in granting summary judgment
that SUMCO does not directly infringe the ’302 patent under 35 U.S.C. § 271(a). This is
so, according to SUMCO, because MEMC presented no evidence that SUMCO sells or
offers to sell the accused wafers in the United States. SUMCO asserts that the test
data it sends to Samsung Austin is generated and sent after the accused wafers have
been purchased and manufactured in Japan. Consequently, according to SUMCO,
transmittal of this data cannot constitute an “offer to sell.” SUMCO states that e-mailing
of this test data is done merely to allow Samsung Austin to confirm that the actual
wafers satisfy Samsung’s specifications, i.e., the terms of the bargain already struck
between Samsung Korea and SUMCO. Likewise, SUMCO asserts that the post-sale
technical support it provides to Samsung Austin cannot qualify as a “sale” or “offer to
sell” within the meaning of section 271(a) because this support occurs after the wafers
have already been purchased and manufactured.
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The question we are presented with in this case is whether SUMCO’s activities in
the United States, as would be construed by a reasonable jury, are sufficient to
establish an “offer for sale” or “sale” within the meaning of 35 U.S.C. § 271(a).
Section 271(a) provides as follows:
Except as otherwise provided in this title, whoever without
authority makes, uses, offers to sell, or sells any patented
invention, within the United States or imports into the United
States any patented invention during the term of the patent
therefor, infringes the patent.
35 U.S.C. § 271(a) (2000). It is well-established that the reach of section 271(a) is
limited to infringing activities that occur within the United States. See Rotec Indus. v.
Mitsubishi Corp., 215 F.3d 1246, 1251 (Fed. Cir. 2000) (“These extraterritorial activities
however, are irrelevant to the case before us, because ‘[t]he right conferred by a patent
under our law is confined to the United States and its territories, and infringement of this
right cannot be predicated of [sic] acts wholly done in a foreign country.’” (quoting
Dowagiac Mfg. Co. v. Minn. Moline Low Co., 235 U.S. 641, 650 (1915))).
We have defined liability for an “offer to sell” under section 271(a) “according to
the norms of traditional contractual analysis.” Rotec Indus., 215 F.3d at 1255. Thus,
the defendant must “communicate[] a ‘manifestation 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.’” Id. at 1257 (quoting Restatement (Second) of
Contracts § 24 (1979)). We considered the meaning of “offer to sell” in 3D Systems,
Inc. v. Aarotech Laboratories, Inc., 160 F.3d 1373 (Fed. Cir. 1998). The defendants in
3D Systems provided potential California customers with price quotations, brochures,
specification sheets, videos, and sample parts related to their product. Id. at 1379.
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Based on this activity, the patentee sued the defendants in the United States District
Court for the Central District of California for infringement of a variety of patents, arguing
that the defendants were liable for “offering to sell” the patented inventions. Id. at 1377.
The defendants moved to dismiss the suit for lack of personal jurisdiction. Id. The
district court granted the motion to dismiss; on appeal, this court reversed. We
concluded that although the “price quotation letters state on their face that they are
purportedly not offers,” the letters could be “regarded as ‘offer[s] to sell’ under
section 271 based on the substance conveyed in the letters, i.e., a description of the
allegedly infringing merchandise and the price at which it can be purchased.” Id. at
1379. We also noted that “[o]ne of the purposes of adding ‘offer[] to sell” to
section 271(a) was to prevent exactly the type of activity Aaroflex has engaged in, i.e.,
generating interest in a potential infringing product to the commercial detriment of the
rightful patentee.” Id.We do not think that MEMC has presented any relevant evidence to support its
claim that SUMCO offered to sell the accused wafers to Sumsung Austin in the United
States. MEMC points to no evidence of negotiations occurring in the United States
between SUMCO and Samsung Austin. At the same time, transmittal of e-mails
containing technical data from SUMCO to Samsung Austin cannot constitute an “offer
for sale.” First, unlike the price quotation letters in 3D Systems, the e-mails, while
containing a description of the allegedly infringing wafers, do not contain any price
terms. Accordingly, on their face, the e-mails cannot be construed as an “offer” which
Samsung Austin could make into a binding contract by simple acceptance. See Rotec
Indus., 215 F.3d at 1251. MEMC contends that the e-mails contain an implicit price
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term—one that has been previously agreed upon by Samsung Japan and SUMCO.
However, in the circumstances of this case (where the e-mails did not incorporate a
price term), any negotiations that may have occurred between Samsung Japan and
SUMCO outside of the United States are irrelevant to the inquiry of whether, in the
United States, SUMCO has offered to sell the accused wafers.
Turning to the question of actual sale, the undisputed evidence is as follows: (1)
Samsung Japan alone controls when SUMCO receives an electronic purchase order
and how many wafers are ordered; (2) Samsung Japan designates a third party
packaging company to transport the wafers to Samsung Austin; (3) Samsung Japan
arranges for the packaging, labeling, and shipping of the wafers; and (4) Samsung
Japan pays SUMCO electronically for the wafers after they are delivered by the
packaging company. Significantly, as far as the sale is concerned, MEMC points to no
additional evidence. Thus, any “sale” of the wafers took place between SUMCO and
Samsung Japan, and the sale occurred in Japan where all of the essential activities
took place.
MEMC’s reliance on North American Philips and Beverly Hills Fan Co. is
misplaced. North American Philips simply noted that in some cases the criterion for
determining the location of a “sale” under section 271(a) is not necessarily where legal
title passes; the “more familiar places of contracting and performance” may take
precedence over the passage of legal title. 35 F.3d at 1579. Thus, simply because an
article is delivered “free on board” outside of the forum, a “sale” is not necessarily
precluded from occurring in the forum. Significantly, MEMC has not presented evidence
that, as far as SUMCO is concerned, “contracting and performance” took place in the
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United States. Similarly, Beverly Hills Fan Co. held that the situs of an injury is the
location, or locations, at which the infringing activity directly impacts on the interests of
the patentee, and that “[e]conomic loss occurs to the patent holder at the place where
the infringing sale is made because the patent owner loses business there.” 21 F.3d at
1571 (emphasis added). However, as noted above, MEMC presents no evidence that
SUMCO entered into any negotiations with Samsung Austin in the United States
concerning the accused wafers and no evidence that title of the wafers passed directly
from SUMCO to Samsung Austin. Mere knowledge that a product sold overseas will
ultimately be imported into the United States is insufficient to establish liability under
section 271(a). See Rotec Indus., 215 F.3d at 1251 (finding that the only activities that
are relevant to direct infringement are those activities that take place within the borders
of the United States). In short, MEMC has presented no evidence demonstrating that
SUMCO sold the accused wafers to Samsung Austin in the United States. Based upon
the foregoing, we see no error in the district court’s grant of summary judgment of no
direct infringement under 35 U.S.C. § 271(a).
IV.
MEMC argues next that SUMCO actively induces Samsung Austin’s infringement
of the ’302 patent under 35 U.S.C. § 271(b). According to MEMC, the district court
erred in granting summary judgment of no inducement of infringement, given evidence
that SUMCO had knowledge of the ’302 patent and evidence that SUMCO knowingly
supplied Samsung Austin with the accused wafers and provided Samsung Austin with
substantial technical support. First, in addition to the evidence noted in Part II, supra,
MEMC points to a letter dated April 17, 2000, in which MEMC advised SUMCO that it
04-1396, -1513 14
was selling a product that may be covered by the ’302 patent and in which it offered
SUMCO a license to practice the invention. Second, MEMC points to the deposition
testimony of Dr. Jose Coria, a former Samsung Austin employee, who stated that
Samsung Austin will not enter into an agreement to buy wafers from a wafer supplier,
unless the supplier will also provide Samsung Austin with technical support for the
wafers. Thus, according to MEMC, the substantial product support defendants have
provided to Samsung Austin has induced Samsung Austin to buy and use the accused
wafers and thus to infringe the ’302 patent. MEMC also points to the fact that Samsung
Japan’s purchase order for the accused wafers includes an indemnity provision for
patent infringement liability running from SUMCO to Samsung Japan, thereby reducing
the deterrent effect the ’302 patent would otherwise have on Samsung to use the
accused wafers in the United States or to import those wafers into the United States.
SUMCO responds that the district court properly granted summary judgment of
non-infringement under section 271(b) because: (1) it does not supply the accused
wafers to Samsung Austin; (2) there is no evidence that it encourages Samsung Japan
to ship the accused wafers to Samsung Austin; (3) post-sale technical support is
insufficient to establish active inducement under section 271(b); (4) the indemnity
clause in the purchase order relates only to claims under Japanese patent laws for
wafers sold by Samsung in Japan; and (5) MEMC has offered no evidence of the
required intent.
Under section 271(b), “[w]hoever actively induces infringement of a patent shall
be liable as an infringer.” 35 U.S.C. §271(b). “In order to succeed on a claim of
inducement, the patentee must show, first that there has been direct infringement,” and
04-1396, -1513 15
“second, that the alleged infringer knowingly induced infringement and possessed
specific intent to encourage another’s infringement.” Minn. Mining & Mfg. Co. v.
Chemque, Inc., 303 F.3d 1294, 1304-05 (Fed. Cir. 2002) (citations omitted).4 “While
proof of intent is necessary, direct evidence is not required; rather, circumstantial
evidence may suffice.” Water Techs. Corp v. Calco, Ltd., 850 F.2d 660, 668 (Fed. Cir.
1988).
As a preliminary matter, we do not agree with MEMC that the indemnity provision
included on Samsung Japan’s purchase order for the accused wafers establishes
SUMCO’s intent to induce infringement on the part of Samsung Japan. The provision
states as follows:
Supplier herein shall indemnify the buyer for all claims of
patent infringement whether direct or contributory and for all
costs for defending against such claims resulting from the
purchase of the above items.
As this court explained in Hewlett-Packard Co. v. Bausch & Lomb Inc., “an
indemnification agreement will generally not establish an intent to induce infringement,
but . . . such intent can be inferred when the primary purpose is to overcome the
4
It should be noted that “there is a lack of clarity concerning whether the
required intent must be merely to induce the specific acts [of infringement] or
additionally to cause an infringement.” MercExchange, L.L.C. v. eBay, Inc., 401 F.3d
1323, 1332 (Fed. Cir. 2005) (citing Insituform Techs., Inc. v. CAT Contracting, Inc., 385
F.3d 1360, 1378 (Fed. Cir. 2004)); see Manville Sales Corp. v. Paramount Sys., Inc.,
917 F.2d 544, 553 (Fed. Cir. 1990) (“The plaintiff has the burden of showing that the
alleged infringer’s actions induced infringing acts and that he knew or should have
known his actions would induce actual infringements.”); but see Hewlett-Packard Co. v.
Bausch & Lomb, Inc., 909 F.2d 1464, 1469 (Fed. Cir. 1990) (“Proof of actual intent to
cause the acts which constitute the infringement is a necessary prerequisite to finding
active inducement.”). We need not resolve that ambiguity in this case, however,
because it is undisputed that SUMCO had knowledge of the ’302 patent. Thus,
assuming that MEMC is able to demonstrate that SUMCO had intent to induce the
specific acts constituting infringement, intent additionally to cause an infringement can
be presumed.
04-1396, -1513 16
deterrent effect that the patent laws have on would-be infringers.” 909 F.2d 1464, 1470
(Fed. Cir. 1990) (citation omitted). As in Hewlett-Packard, the indemnity provision in
this case may have facilitated the sale of the accused wafers, but there is no evidence
that the primary purpose of the agreement was to induce Samsung Japan to infringe the
’302 patent. As noted by SUMCO, given that the sale of the wafers from SUMCO to
Samsung Japan occurred in Japan, it is more reasonable to conclude that the indemnity
clause relates to claims of patent infringement under Japanese law. In other respects,
we do not think that a claim of active inducement of Samsung Japan by SUMCO has
been properly preserved in the district court. We therefore need not address whether
inducing activity in Japan can give rise to liability under United States patent laws. See
Crystal Semiconductor Corp. v. Tritech Microelectronics, Int’l Inc., 246 F.3d 1336, 1351
(Fed. Cir. 2001).
Nevertheless, we conclude that there are genuine issues of material fact with
respect to whether SUMCO induced infringement of the ’302 patent on the part of
Samsung Austin. First, SUMCO had knowledge of MEMC’s patent as well as
knowledge of Samsung Austin’s potentially infringing activities. In addition, there is
evidence that SUMCO provides substantial technical support to Samsung Austin in the
form of e-mail communications. As noted above in Part II, the series of e-mails between
SUMCO and the engineer at Samsung Austin demonstrate that SUMCO works with
Samsung Austin to coordinate shipment dates and the quantity of wafers sent in each
shipment and that SUMCO makes adjustments in the manufacturing process in order to
address problems Samsung Austin encounters with the wafers. Second, there is
evidence that during November and December 2002, SUMCO sent a shipment of
04-1396, -1513 17
certain wafers directly to Samsung Austin in order to address technical problems with
previously-supplied SUMCO wafers. Third, there is evidence that SUMCO personnel
made several on-site visits to Samsung Austin, during which technical presentations on
the SUMCO wafers were made. In addition, as noted above, Dr. Coria testified that
Samsung Austin will not enter into an agreement to buy wafers from a wafer supplier
unless the supplier will also provide Samsung Austin with technical support for the
wafers. Dr. Coria testified as follows:
Q: When Samsung Austin Semiconductor enters
into an agreement to buy wafers from a wafer supplier, part
of the deal is that the wafer supplier will provide technical
support for those wafers and help Samsung solve problems
to the extent that they come up?
A: Yes.
Q: Does Sumco provide product support for the
wafer that it sells to Samsung Austin?
A: Yes.
***
Q: Does Samsung Austin expect that product
support as part of the sale?
A: Yes.
Q: And if Samsung Austin doesn’t get that product
support, it won’t buy the wafers, will it?
A: Yes.
(Feb. 11, 2004 Dep. of Dr. Coria at 47-48).
In light of the above evidence of record and viewing this evidence in the light
most favorable to MEMC, we are not prepared to hold that a reasonable jury could not
find intent to induce infringement. “Evidence of active steps taken to encourage direct
04-1396, -1513 18
infringement, such as advertising an infringing use or instructing how to engage in an
infringing use, show an affirmative intent that the product be used to infringe.” Metro-
Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., No. 04-480, slip op. at 18 (U.S. June 27,
2005) (internal citations and alternations omitted). First, a reasonable jury could
conclude that the e-mail communications between SUMCO and Samsung Austin in the
United States represent product support which enabled Samsung Austin to purchase
and use the accused wafers. See Metabolite Labs., Inc. v. Lab. Corp. of Am. Holdings,
370 F.3d 1354 (Fed. Cir. 2004) (finding active inducement of infringement based on
defendant’s publications describing and promoting use of patented method). As for the
requirement of specific intent to encourage infringement, it is undisputed that SUMCO
knew of the existence of the ’302 patent because it received a letter concerning it. This
type of evidence is relevant for supporting proof of intent for inducement (though not by
itself sufficient). See Fuji Photo Film Co., Ltd. v. Jazz Photo Corp., 394 F.3d 1368,
1378 (Fed. Cir. 2005); Mentor H/S, Inc. v. Med. Device Alliance, Inc., 244 F.3d 1365,
1379 (Fed. Cir. 2001). Moreover, the series of e-mails between SUMCO and Samsung
Austin provide sufficient circumstantial evidence for a reasonable jury to conclude that
SUMCO was not only aware of the potentially infringing activities in the United States by
Samsung Austin, but also that SUMCO intended to encourage those activities. See
Fuji Photo Film Co., 394 F.3d at 1378 (“A patentee may prove intent through
circumstantial evidence.”); Water Techs., 850 F.2d at 669 (“The requisite intent to
induce infringement may be inferred from all of the circumstances.”). For the foregoing
reasons, we reverse the district court’s grant of summary judgment of non-infringement
based on inducement of infringement under section 271(b) and remand the case to the
04-1396, -1513 19
district court for further proceedings on that issue. Those proceedings will, of course,
involve (i) construing the claims of the ’302 patent; (ii) determining whether Samsung
Austin directly infringes; and (iii) determining whether, if there is direct infringement on
the part of Samsung Austin, SUMCO induces that infringement.5
V.
We now turn to SUMCO’s cross-appeal. As there is no final resolution of the
dispute in this case, technically there is no “prevailing party” as is required for an award
of attorney fees under 35 U.S.C. § 285 and the issue may be premature. See
Medichem, S.A. v. Rolabo, S.L., 353 F.3d 928 (Fed. Cir. 2003). However, as the issue
is likely to arise again, we will address it in the interest of justice. SUMCO argues that
the district court clearly erred in denying its motion for attorney’s fees, expert witness
fees, and expenses. SUMCO sought to recover these fees and expenses in connection
5
MEMC also argues on appeal that the district court erred in striking certain
“claims charts” from the expert report of Dr. Luciano Mule’Stagno. The report consists
of the results of testing performed on silicon wafers produced during discovery by
SUMCO, and comprises seven pages of narrative opinion and almost 500 pages of
materials relating to testing methodology and results. The district court described the
“claims charts” as follows:
The Report contains various claim charts comparing the
tested wafers to the ’302 Patent. . . . The charts are crude
and merely contain check marks next to each of the claims
of the ’302 patent each tested wafer allegedly infringes. The
narrative accompanying the chart is also vague. For
example, “[e]ach wafer is also a single crystal meeting the
conventional geometric requirements of the preamble.”
Summary Judgment Order, slip op. at 30. The court concluded that the charts violated
Patent Local Rule 3-1 because they did not identify each element of each claim and did
not specify where each claim limitation was met in each accused wafer. Id. The court
also ruled that MEMC had failed to demonstrate “good cause” under Patent Local Rule
307 sufficient to amend its infringement contentions.
We see no abuse of discretion in the district court’s exclusion of the claims charts
from Dr. Mule’Stagno and thus decline to disturb the court’s ruling.
04-1396, -1513 20
with MEMC’s patent infringement claims. Before the district court, SUMCO asserted
that the case was exceptional under 35 U.S.C. § 285 “based on [MEMC’s] failure to
conduct an adequate prefiling investigation and for [MEMC’s] egregious litigation
misconduct in the prosecution of [its patent infringement claims].” (Motion for Attorney’s
Fees at 2). SUMCO also sought sanctions under Fed. R. Civ. P. 11 and 28 U.S.C.
§ 1927, “based on MEMC’s failure to conduct an adequate prefiling investigation; for
[MEMC’s] maintenance of an unwarranted infringement claim in the face of
uncontroverted evidence of the lack of subject matter jurisdiction; and for plaintiff’s
counsel’s unreasonable and vexatious multiplying of the proceedings.” (Id.)
With respect to its claim of an improper prefiling investigation, SUMCO asserted
that “[t]he extent of MEMC’s prefiling analysis was a ‘Competitor Analysis,’ performed in
Korea, comparing defendants’ wafers, obtained in Korea, against wafers manufactured
by MEMC, also in Korea. . . .” (Id. at 5.) SUMCO also asserted that there was no
evidence that the wafers used in the “Competitor Analysis” were manufactured pursuant
to the ’302 patent. (Id.) SUMCO further asserted that MEMC failed to investigate
whether SUMCO made, used, sold, offered for sale, or imported the accused wafers
into the United States, stating: “[t]he only evidence MEMC had was information from a[]
MEMC salesman in Texas who claimed to have seen boxes of wafers with defendants’
logo on them in Samsung’s warehouse . . . in Austin, Texas.” (Id. at 7.)
The district court determined that “MEMC’s pre-filing investigation, while not
ideal, does not rise to the level of sanctionable conduct under Section 285.” Attorney’s
Fees Order, slip op. at 4. The court noted that, prior to filing suit for infringement, two
lawyers for MEMC reviewed the ’302 patent and construed the claims consistent with
04-1396, -1513 21
the standard canons of claim construction. Id., slip op. at 3. The claims of the ’302
patent then were compared with the results of an analysis of SUMCO’s pure silicon
wafers, obtained in Korea. Id. The court noted further that the attorneys had reason to
believe that the wafers analyzed were used by both Samsung Austin and Samsung
Korea. Id., slip op. at 4. Thus, the court concluded:
Considering the information MEMC derived from the
Competitor Analysis and what MEMC knew about the silicon
wafer industry in general and about its own dealings with
Samsung in particular, MEMC’s belief, at the time it filed suit,
that Sumco’s pure silicon wafers infringed the ’302 Patent
cannot be characterized as frivolous or unjustified. Given
this, and given that there is no evidence either (1) that the
Sumco wafers that were the subject of the Competitor
Analysis were materially different from the Accused Wafers
or (2) that MEMC knew that the Accused Wafers were
materially different from the wafers analyzed in the
Competitor Analysis and proceeded with the instant suit
despite this knowledge, SUMCO has failed to meet its
substantial burden of showing that MEMC’s infringement
claim was “clearly and convincingly vexatious, unjustified, or
frivolous.” See Forest Labs., 339 F.2d at 1330. Moreover,
the record does not support a finding that an award of fees is
necessary in this case to prevent a “gross injustice.” Id. at
1329.
Id., slip op. at 6. The district court also concluded that MEMC’s belief, at the time of
suit, that SUMCO was performing infringing activity in the United States was neither
frivolous nor unjustified. Id., slip op. at 7-8. With respect to SUMCO’s motion for
sanctions under section 1927, the district court found that “the record does not support
a finding that MEMC’s conduct during this litigation was reckless or conducted in bad
faith.” Id., slip op. at 10.
Pursuant to 35 U.S.C. § 285, a “court in exceptional cases may award
reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285 (2000). A
determination of whether a case is eligible for attorney fees under section 285 is a two
04-1396, -1513 22
step process. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998).
First, the district court must determine whether a case is exceptional, a factual
determination reviewed for clear error. Id. (citation omitted). “A finding is clearly
erroneous when, despite some supporting evidence, ‘the reviewing court on the entire
evidence is left with the definite and firm conviction that a mistake has been
committed.’” Forest Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1328 (Fed. Cir. 2003)
(citing United States v. Gypsum Co., 333 U.S. 364, 395 (1948)). Second, the district
court must determine whether attorney fees are appropriate, a determination that we
review for an abuse of discretion. Cybor Corp., 138 F.3d at 1460 (citation omitted). “A
district court abuses its discretion when its decision is based on clearly erroneous
findings of fact, is based on erroneous interpretations of the law, or is clearly
unreasonable, arbitrary or fanciful.” Id. (citation omitted).
Moreover, under 28 U.S.C. § 1927:
Any attorney . . . who so multiplies the proceedings in any
case unreasonably and vexatiously may be required by the
court to satisfy personally the excess costs, expenses, and
attorneys' fees reasonably incurred because of such
conduct.
28 U.S.C. § 1927 (2000). We review the district court’s denial of SUMCO’s motion for
sanctions under section 1927 for an abuse of discretion, under the law of the Ninth
Circuit. Trulis v. Barton, 107 F.3d 685, 692 (9th Cir. 1995). The Ninth Circuit has held
that section 1927 authorizes sanctions only for the multiplication of proceedings, In re
Keegan Mgmt. Co. Sec. Litig., 78 F.3d 431, 435 (9th Cir. 1996), and that section 1927
sanctions require a finding of recklessness or bad faith, B.K.B. v. Maui Police Dep’t,
276 F.3d 1091, 1107 (9th Cir. 2002).
04-1396, -1513 23
We agree with MEMC that the district court did not clearly err in finding this case
not to be exceptional under section 285. As far as MEMC’s investigation prior to filing
suit for direct infringement under section 271(a) is concerned, there is evidence that
MEMC’s attorneys performed a good faith, informed comparison of the claims of the
’302 patent against the accused wafers. We also agree with MEMC that the district
court did not abuse its discretion in denying SUMCO’s motion for sanctions under
section 1927. SUMCO has failed, on appeal, to point to any evidence that MEMC’s
attorneys “unreasonably and vexatiously” multiplied the proceedings in this case.
Furthermore, “[b]ecause the section authorizes sanctions only for the ‘multipli[cation of]
proceedings,’ it applies only to unnecessary filings and tactics once a lawsuit has
begun.” In re Keegan Mgmt. Co. Sec. Litig., 78 F.3d at 435 (emphasis added). Thus,
the adequacy of MEMC’s prefiling investigation is irrelevant to the section 1927 inquiry.
Id.CONCLUSION
We agree with the district court that, as a matter of law, SUMCO cannot be liable
for direct infringement of the ’302 patent under 35 U.S.C. § 271(a). Summary judgment
of non-infringement on MEMC’s direct infringement claim was therefore proper.
However, because we conclude there are genuine issues of material fact with regard to
whether SUMCO is liable for induced infringement of the ’302 patent under 35 U.S.C.
§ 271(b), we hold that the district court erred in granting summary judgment in favor of
SUMCO on that claim. That part of the district court’s judgment is thus reversed, and
the case is remanded to the district court for further proceedings consistent with this
opinion. On the cross-appeal, we affirm the district court’s denial of SUMCO’s
04-1396, -1513 24
application for fees and expenses relating to MEMC’s claim of direct infringement and
inducement of infringement.
COSTS
Each party shall bear its own costs.
AFFIRMED-IN-PART, REVERSED-IN-PART, and REMANDED
04-1396, -1513 25