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September 11, 2008

On Display

Medical Solutions (MSI) sued C Change Surgical (CCS) for patent infringement "because CCS both "used" and "offered to sell" the allegedly infringing product at [a] trade show." MSI had sued CCS in D.C., where the trade show was. But neither company is based there. The district court pitched the case, because of lack of evidence that CCS had used, or offered to sell, the allegedly infringing product. The district court disallowed additional discovery. While jurisdiction was at issue here, more interesting was CAFC musing on what constituted "use" for patent infringement.

Medical Solutions v. C Change Surgical (CAFC 2007-1163)

Jurisdiction for a patent case is nationwide. But MSI had nothing to go on to back its allegation, on use or sale offer. Applying traditional contract principles, the district court reasoned that in order to constitute an "offer to sell," such an offer must include price terms. The CAFC backed the district court's refusal to allow discovery. MSI abandoned its "offer to sell" argument on appeal.

Absent discovery on the issue of personal jurisdiction, MSI was required "only to make a prima facie showing" of jurisdiction to defeat CCS's motion to dismiss. Trintec, 395 F.3d at 1282.

The U.S. Patent Act states that the tort of patent infringement occurs when a party "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." 35 U.S.C. ' 271(a).

When we "do not see what facts additional discovery could produce that would affect our jurisdictional analysis," we must "conclude the district court did not abuse its discretion in dismissing the action when it did." See Mwani v. bin Laden, 417 F.3d 1, 17 (D.C. Cir. 2005) (quoting Goodman Holdings v. Rafidain Bank, 26 F.3d 1143, 1147 (D.C. Cir. 1994)).

A district court has personal jurisdiction over the defendant in a patent infringement case if two things are true. First, jurisdiction must exist under the forum state's long-arm statute. Trintec Indus., Inc. v. Pedre Promotional Prods., Inc., 395 F.3d 1275, 1279 (Fed. Cir. 2005). Second, the assertion of personal jurisdiction must be consistent with the limitations of the due process clause. Id. The law of the forum (here the District of Columbia) governs the first inquiry; Federal law controls the second. 3d Sys., Inc. v. Aarotech Labs, Inc., 160 F.3d 1373, 1377 (Fed. Cir. 1998).

Because placement and sales information is not relevant to whether CCS's display or demonstration at the trade show constituted an infringing "use," further jurisdictional discovery along those lines would be unhelpful. Nor is there anything in the complaint or MSI's response to the motion to dismiss that make out a prima facie showing of jurisdiction sufficient to require that MSI be permitted to conduct jurisdictional discovery. See Trintec, 395 F.3d at 1283.

Just demonstrating a product does not constitute patent infringement "use". Use comprises "to put into action or service." Naturally, the inquiry is case by case. In this case, the trade show didn't qualify, but the appeals court refused to make that a blanket statement.

Several courts addressing whether a defendant has "used" a patented invention have held that "the mere demonstration or display of an accused product, even in an obviously commercial atmosphere" is not an act of infringement for purposes of ' 271(a). Fluid Mgmt. Ltd. P'ship v. H.E.R.O. Indus., Ltd., No. 95-5604, 1997 WL 112839, at *4 (N.D. Ill. Mar. 11, 1997) (quoting Intermedics, Inc. v. Ventritex, Inc., 775 F. Supp. 1269, 1286 (N.D. Cal. 1991) (concluding that absent concurrent sales-oriented activity which results in, or at least substantially advances, an actual sale, the demonstration of an accused product at a scientific trade show does not constitute an infringing "use")); see also Brennan v. Mr. Hanger, Inc., 479 F. Supp. 1215, 1231 (S.D.N.Y. 1979) (noting that the mere display of the infringing hanger bars would not constitute an infringing "use"). 3

3 A demonstration of an accused device plus the simultaneous solicitation of purchase orders has been held to amount to a sufficient degree of "selling" activity. See U.S. Envtl. Prods., Inc. v. Infilco Degremont, Inc., 611 F. Supp. 371 (N.D. Ill. 1985). However, that holding is inapposite here since MSI hangs its hat on the "uses" rather than the "sells" prong of ' 271(a).

In this case we need not (and do not) decide whether the demonstration of a product at a trade show could ever be sufficient to establish an infringing use.4

4 That said, we do recognize other courts have held that demonstrations of a device are not proper evidence of "use" because using a device means using it to perform its actual function or service, not using it as a demonstrative display. See Union Asbestos & Rubber Co. v. Evans Prods. Co., 328 F.2d 949, 951 (7th Cir. 1964); Advanced Semiconductor Materials Am., Inc. v. Applied Materials, Inc., No. 93-20853, 1995 WL 419747, at *6 (N.D. Cal. July 10, 1995) (holding that a demonstration "hardly qualifies as using the patented process for its intended purposes").

The ordinary meaning of "use" is "to put into action or service." NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282, 1317 (Fed. Cir. 2005) (quoting Webster's Third New International Dictionary 2523 (1993)).

The inquiry as to what constitutes a "use" of a patented item is highly case-specific, Van Well Nursery, Inc. v. Mony Life Ins. Co., 362 F. Supp. 2d 1223, 1229 (E.D. Wash. 2005).

Nothing doing affirmed.

Posted by Patent Hawk at September 11, 2008 5:00 PM | Case Law

Comments

Spurious litigation like this cries out for financial sanctions against the plaintiff and its attorneys personally.

Posted by: Joe Breimayer at September 12, 2008 8:04 AM

Not sure I agree with Joe that this case is that bad, but it's pretty certain the P's lawyers screwed this one when they dropped the offer to sell grounds.

The CAFC holds that to get in the door on a "use" grounds, you gotta' plead that the alleged IP banditos' use included all the elements. By not heating the instruments during the demo, the alleged IPBs avoid use-type infringement.

But I don't think you need the all-elements rule to get in the door on an offer to sell grounds. Sounds like the CAFC would have been willing to give the P some discovery on sales follow-ons from the exhibition if they had pursued the offer to sell grounds.

It's an interesting and informative decision, and I like Judge Zagel's clear style. Note how much the CAFC has to rely on DC decisions and Webster for a definition of "use." Apparently the CAFC has not developed this area extensively. This decision should help. Now they don't have to cite all those lowly DC decisions. How demeaning.

The P's lawyers probably collected $50K or so to screw this up, but the P is still alive in whatever jurisdiction the alleged IPBs go to to sell the product, so I don't see much harm to P by this loss other than the wasted legal fees.

Posted by: Babel Boy at September 12, 2008 8:39 AM