District Court Refuses to Assess Damages Based on Manufacture and Sale of Allegedly Infringing Product Outside the U.S. Under “Hypothetical Negotiation” Theory

The World in U.S. Courts: Summer 2014 - Intellectual Property (Patent)

France Telecom SA v. Marvell Semiconductor Inc., U.S. District Court for the Northern District of California, April 14, 2014

France Telecom sued Marvell, a U.S. semiconductor manufacturer, for patent infringement in connection with chips sold outside the U.S. by a non-U.S. corporate affiliate of Marvell that was not named in the suit. The production and sale of allegedly infringing chips occurred outside the U.S., but certain of the chips were later imported into the U.S.

The District Court in San Francisco concluded that there was no evidence that the non-U.S. affiliate, referred to as MAPL, was the “alter ego” of Marvell through control or overlapping organization, so as to make Marvell responsible for the actions of an independent legal entity that was not sued. Moreover, the Court found that the production and sale of allegedly infringing chips by MAPL outside the U.S. could not constitute infringement of France Telecom’s U.S. patent, even if such ex-U.S. sales were the “direct and foreseeable result of the U.S. infringement.” Among other things, the Court cited precedent that such non-infringing activities outside the U.S. broke the “chain of causation” necessary to support damages.

Nevertheless, France Telecom offered several theories under which it could still collect damages. First, it argued that a “hypothetical negotiation” with Marvell for a license would have included sales by MAPL. The Court characterized this contention as too “weak” and speculative to create a genuine issue of fact for trial, noting as well that Marvell would not have faced liability for such sales in the event of litigation and thus would have no reason to negotiate. The Court then rejected France Telecom’s argument that damages could be attributable to products made and sold outside the U.S. but later imported into the U.S., finding that the noninfringing sale outside the U.S. precluded subsequent claims for infringement.

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