District Court Concludes That U.S. Contracting for Sales Outside the U.S. Cannot Lead to an Infringing “Sale” or “Offer To Sell”

The World in U.S. Courts: Winter 2015 - Intellectual Property (Patent)

Ziptronix, Inc. v. OmniVision Technologies, Inc., U.S. District Court for the Northern District of California, October 21, 2014

In a case decided a day before the Federal Circuit appellate decision described above in the Halo Electronics case, the District Court in Oakland, California considered a patent infringement action brought by Ziptronix involving image sensors used in devices like digital cameras, smartphones, and tablets. The defendant OmniVision is a U.S. company that contracts to have image sensors and products containing them made in Asia, for ultimate sale to customers in the U.S. At issue was a motion for summary judgment filed by two other affiliated defendants, a Taiwanese semiconductor company and its U.S. subsidiary (collectively, “TSMC”), that manufacture and assemble products in Asia for OmniVision.

The Court first considered whether transactions involving TSMC constituted the “sale” or “offer to sell” of allegedly infringing products in the U.S. Noting that “mere knowledge” that a product ultimately will be imported into the U.S. cannot support a claim of direct infringement, the Court focused on the TSMC entities’ involvement with products actually sold in the U.S. In this regard, it noted that TSMC neither imported the allegedly infringing products into the U.S. nor directed any other entity to engage in such imports. Rather, and even assuming that the U.S. TSMC entity was responsible for contracting with Ziptronix, the Court characterized TSMC’s actions as potentially contracting in the U.S. for sales outside the country—conduct that does not support direct infringement liability. The Court also concluded that this analysis applied equally to the claim of an “offer to sell,” with the latter being judged with reference to where a proposed sale would take place. Addressing a question that has received different answers in other cases, the Court also concluded that no claim for direct infringement could be supported where an allegedly infringing product was sold overseas and later imported into the U.S., either directly or as components in finished products.

The Court next considered the claim that the Taiwanese TSMC entity had engaged in indirect infringement by inducing its U.S. subsidiary to engage in direct infringement. Concluding that no direct infringement had been committed by an TSMC entity, however, doomed the claim of indirect infringement. The Court also considered Ziptronix’s claim that TSMC had induced OmniVision to engage in direct infringement through direct imports of allegedly infringing products into the U.S., but fond the allegation unsupported by record evidence.

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