District Court Finds Master Purchase Agreement to Which U.S. Distributor Was a Party Could Establish Required U.S. Link to Patent Infringement Claim Arising Out of Purchase Order Between Canadian and U.S. Companies

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

Asatek Holdings, Inc. v. CoolIT Systems, Inc., U.S. District Court for the Northern District of California, August 19, 2014

In this patent infringement suit involving a coolant system for computer hardware, the defendant CoolIT sought summary judgment on grounds that none of its sales of the relevant products—the sole basis for the lawsuit—occurred in the U.S.

The Patent Act only applies to patented goods made, used, sold or offered for sale in the U.S.  The U.S. District Court in San Francisco observed that the geographical aspect of its jurisdiction is relatively easy to determine with respect to manufacture and use, but that the "sale" and "offer for sale" of a product has a conceptual dimension that requires an inquiry into the facts.  It surveyed case law to the effect that the location where legal title passes is less relevant to the question where a "sale" occurred than the circumstances of "contracting" and "performance."

In this case, the sales at issue were made via purchase orders ("POs") issued under a master product purchase agreement ("PPA") that did not itself effect any transactions.  The defendant argued that the POs were issued by a Canadian company to a Hong Kong company, to which the products were delivered, and thus that the alleged infringement was not within the scope of the Patent Act.  The plaintiff maintained that there was a factual dispute as to whether the POs had any connection with the U.S.  The PPA, however, clearly had U.S. connections, as it had been entered into by a U.S. company that was the parent of the Canadian company that issued the POs.  The Court's opinion is unclear in places because portions have been redacted, presumably to preserve the confidentiality of commercially sensitive information.  However, the Court did conclude that the PPA may bear on the question whether the subject sales pursuant to the POs should be deemed to have been made in the U.S.  This conclusion followed despite the fact that the PPA was entered into before issuance of the patents in suit, as the PPA nevertheless was relevant to inform the relationships between the parties and a course of dealing.

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