The Journal of The DuPage County Bar Association

Back Issues > Vol. 18 (2005-06)

“System” Travels Abroad, “Method” Gets Grounded: Transnational Reach and Acts of Infringement of Different U.S. Patent Claim Types After Ntp V. Rim (Fed. Cir.)
By Jefferson Perkins

In the United States, an inventor may obtain a patent on a "novel and nonobvious process, machine, [article of] manufacture or composition of matter."1 A U.S. Patent grants to its owner the right to exclude others from making, using, selling or offering for sale the patented invention "within the United States", and from importing the patented invention "into the United States."2 In NTP, Inc. v. Research in Motion, Ltd., No. 03-1615, 2005 U.S. App. LEXIS 15920 (Fed. Cir. Aug. 2, 2005), a panel of the Court of Appeals for the Federal Circuit (Judges Michel, Schall and Linn) addressed the novel questions of whether a system (considered to be a kind of "machine") and a corresponding method (synonymous with "process"), substantively covered by system and method claims in the patents in suit but having components or steps both inside and outside of the United States, are considered to be "used within the United States" and therefore to directly infringe the patent. Curiously, the answer was "yes" for the system claims, but "no" for the method claims. The panel also cast doubt on whether the acts of selling, offering for sale, making or importing could ever infringe a patented process claim under 35 U.S.C. §271(a).

A United States patent cannot be infringed by acts wholly done in foreign countries.3 More complicated is the fact pattern in which some activity takes place inside of the United States, and other activity takes place outside of it. In Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972), the Supreme Court ruled that making all of the parts of a patented machine in the US, but assembling those parts into the patented machine only outside of the US, did not constitute "making" the machine for the purpose of US patent infringement. Congress largely overruled this result by enacting 35 U.S.C. §271(f) in 1984. Further, in 1988 Congress extended the geographical reach of a process or method claim by adding 35 U.S.C. §271 (g), substantially to the effect that the sale, use, etc. of a non-patented product in the US, if made by a patented process even outside of the US, is an act of infringement.

Even after these Congressional amendments, the 1952 US patent statute remains silent on many sorts of transnational activities that have grown exponentially in frequency and importance over the last half-century. In a now-common example, a process (and a system) uses software running on a server in one country, and also uses software on a client computer in another country. Can the system and method claims of a national patent, issued in either country, be directly infringed by such a distributed system and process? It was only a matter of time before a case like this reached the Federal Circuit, and the one that did relates to the well-known BlackberryTM handheld unit or pager.

The Blackberry system, run by defendant Research in Motion (RIM), uses (1) Redirector software installed on the user’s desktop or, alternatively, a corporate server, (2) a handheld unit, (3) a Blackberry "Relay" sited in Waterloo, Canada, and (4) a partner wireless network. Email is copied from the email server and is sent, by the Desktop Redirector, to the Blackberry Relay in Canada. The messages are then transmitted from the Blackberry Relay over a partner wireless network to the handheld unit. The handheld unit sends an email message along the reverse path: the message is sent via the wireless network to the Canadian Blackberry Relay, thence over the Internet to the Redirector software, where it will be transmitted to its intended destination and also copied into the "sent email" folder on the desktop.4 RIM interposed a defense that because the Blackberry Relay was located in Canada, the entirety of the claimed system and process was not "within the United States," and therefore it could not have directly infringed the patents "within the United States." 5

The panel distinguished Deepsouth by noting that in that case, the act of making and the resulting patented invention were wholly outside of the United States, while the instant case involved a system which was partly within and partly outside of the United States and relates to acts which may have occurred within or outside of the United States.6 It thought the fact pattern in Decca Ltd. v. United States, 544 F.2d 1070 (Ct. Cl. 1976) more apposite. In this last case, the claimed invention was a radio navigation system requiring stations to transmit signals to a receiver. The receiver then calculated its position by noting the time difference in the signals. The accused system operated by the United States had three transmitting stations, one of which was in Norway. While the Decca court reached no clear conclusion of whether the accused system was "made" in the United States, it had less trouble with "use", asserting that use occurred wherever the signals are received and used in the manner claimed. More broadly, the Decca court found significant that the equipment was owned by the United States, that the equipment was controlled from the United States, and that the actual beneficial use of the system occurred within the United States.7 In NTP, components of the accused Blackberry system were in two different countries. Following North American Philips Corp. v. Am. Vending Sales, Inc., 35 F.3d 1576, 1579 (Fed. Cir. 1994), the panel adopted the abstraction that, relative to a "system" claim, an act of infringement occurs at a single "situs", and then set about determining just where this "situs" was. It said, "the use of a claimed system under 271(a) is the place at which the system as a whole is put into action or service, i.e., where control of the system is exercised and beneficial use of the system is obtained."8 It resisted RIM’s contention that the Blackberry Relay controlled the accused systems, and instead found that because US customers send and receive messages by manipulating the handheld devices in the United States, the location of the use of the communication system "as a whole" occurs in the United States.9

The Federal Circuit panel could have used the same "legal framework" to determine whether there was infringement of the corresponding method claims.10 It could have found a "situs" for the accused method by determining where control of the method is exercised and where beneficial use of the method is obtained. But, believing that the "use" of a patented method is fundamentally different from the "use" of a patented system, the panel instead held "that a process cannot be used ‘within’ the United States as required by Section 271(a) unless each of the steps is performed within this country."11

Not finding infringement of the method claims by "use within the United States", the panel went on to hold that RIM’s performance of at least some of the recited steps of the asserted method claims could not be acts of "sale", "offer for sale" or "importation" under 35 U.S.C. § 271(a).12 Through its dicta this panel made clear that it thought that only "use" of a method could infringe a method claim. It was unswayed by the fact that the "on sale" bar of 35 U.S.C. 102(b) clearly does apply to method claims, and that therefore another area patent jurisprudence clearly has found instances in which a method could be "offered for sale" or "sold".13

Since it concluded that RIM’s transnationally distributed process did not directly infringe any of the method claims in suit under 35 U.S.C. 271(a), the panel next addressed whether RIM has any liability under those method claims for furnishing components of a patented product for extranational assembly, 35 U.S.C. §271(f), or for extranationally producing a product by a patented process and then importing the product into the US, 35 U.S.C. §271(g). Relative to Section 271(f), the panel distinguished Eolas Technologies Inc. v. Microsoft Corporation, 399 F.3d 1325, 1338-1341 (Fed. Cir. 2005) by noting that while software could be a "component" of a claimed article of manufacture under Section 271(f), the handheld devices and Redirector software were not "component" steps supplied for combination into NTP’s patented methods.14 "The very nature of the invention may compel a difference".15 Relative to Section 271(g), while cases such as State Street Bank and Trust Co. v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998), In re Alappat, 33 F. 3d 1526 (Fed. Cir. 1994), and AT& T Corp. v. Excel Communications, Inc., 172 F. 3d 1368 (Fed. Cir. 1998) may have established that electronic communications such as email messages are "tangible results" for the purpose of assessing whether statutory subject matter exists, this panel held that such email messages are insufficiently tangible "products" to trigger liability for infringement under 35 U.S.C. §271(g).16

U.S. patent attorneys in the electronic and computer arts routinely draft both "system" and "method" claims on the same inventive structure. Sometimes they have a harder time getting "system" claims allowed than they do corresponding "process" or "method" claims, because U.S. Examiners will often resist lending patentable weight to functional expressions inside of system claims, but will fully consider them if they are drafted as steps in a process or a method. Nevertheless this case tells patent prosecutors that "system" claims should be preferred over "method" claims, in those instances where a choice has to be made between the two. A patent practitioner may make such a choice in limiting the overall number of claims in the patent application for economic reasons, or in responding to a restriction/election requirement by the U.S. Examiner.

The NTP case was decided only by a panel of Federal Circuit judges and other panels or the Federal Circuit sitting en banc may have different things to say about the transnational scope of "system" and "method" claims and how they can be infringed. But at least until such further opinions issue, or until a "clear signal" from Congress to the contrary is heard,"system" claims appear to have clear legal advantages over "process" or "method" claims, and patent prosecutors should act accordingly.17

1.35 U.S.C. §101.

2.35 U.S.C. § 271(a).

3.Rotec Industries, Inc. v. Mitsubishi Corp., 215 F.3d 1246, 1255 (Fed. Cir. 2000).

4. NTP, 2005 U.S. App. LEXIS 15920, 9 – 11.

5. NTP, 2005 U.S. App. LEXIS at 15920, 79 – 81.

6. NTP, 2005 U.S. App. LEXIS at 15920, at 85.

7. NTP, 2005 U.S. App. LEXIS at 15920, 87, quoting Decca, supra, 544 F.2d at 1083.

8. NTP, 2005 U.S. App. LEXIS 15920, 90 (emphasis added).

9. NTP, 2005 U.S. App. LEXIS at 15920, at 91 – 92 (It would be interesting to see how this panel would treat the reverse pattern: a central server inside the United States, but remote end-user units only outside of the United States).

10. NTP, 2005 U.S. App. LEXIS at 15920, at 88.

11. NTP, 2005 U.S. App. LEXIS at 92-93

12. NTP, 2005 U.S. App. LEXIS at 102-103.

13. NTP, 2005 U.S. App. LEXIS at 101.

14. NTP, 2005 U.S. App. LEXIS at 107.

15. NTP, 2005 U.S. App. LEXIS at 107, quoting Minton v. Nat’l Assn. of Sec. Dealers, Inc., 336 F.3d 1373, 1378 (Fed. Cir. 2003).

16. NTP, 2005 U.S. App. LEXIS 15920 at 112.

17. NTP, 2005 U.S. App. LEXIS 15920 at 101.

Jefferson Perkins of Foley & Lardner, Chicago, is a graduate of the University of Illinois and The John Marshall Law School. His practice includes domestic and international patent and trademark prosecution, with emphasis in patent prosecution falling on the electronic and chemical arts; licensing agreements; related litigation and corporate issues. He has practiced in the area of intellectual properties since 1983.

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