Overlooked Patent Cases: Foreign Activity Liability, Damages

• Published date: 21 October 2021
• Subject Matter: Intellectual Property, Patent
• Law Firm: Akin Gump Strauss Hauer & Feld LLP
• Author: Mr Daniel L. Moffett, Karina Moy and Golda Lai

In most cases, a patent holder's right to collect damages and exclude others from practicing the claims of a U.S. patent stops at the border. Accordingly, the vast majority of patent litigation involves alleged infringing activity and sales within the U.S.

Patent owners, therefore, may overlook theories of liability and damages for foreign activity that are available under the Patent Act and recent case law. Moreover, because cases focusing on foreign activity are less common, the jurisprudence is less settled. This article looks at several issues unique to foreign activities and examines recent district court activity relating to those issues.

Alleging Infringement for Exporting Software Under Section 271(f)

Title 35 of the U.S. Code, Section 271(f), makes the export of unassembled components of a patented invention a distinct act of infringement, expanding the scope of potentially infringing acts.

Specifically, Section 271(f)(1) "addresses the act of exporting a substantial portion of an invention's components," while Section 271(f)(2) "looks to the act of exporting components that are specially adapted for an invention."¹

A key portion of successfully pleading each of these theories of liability, therefore, is identifying the exported components, which recent cases suggest may be more difficult in the context of software.

In particular, because the U.S. Supreme Court in the 2007 Microsoft Corp. v. AT&T Corp. decision has stated that software in the abstract, i.e., "detached from an activating medium," cannot be a component under Section 271(f),² plaintiffs seeking to allege infringement of software-related patents must plead facts in a way that characterizes the component as more than abstract software code.

In addition, it may be difficult for a plaintiff to identify specific components being exported and combined, without more information about its competitor's product.

The difficulty plaintiffs may face in alleging infringement of exported software systems is illustrated in a recent U.S. District Court for the Northern District of California case. In June, the court in People.ai Inc. v. SetSail Technologies Inc. dismissed the case for failure to state a claim under Section 271(f) and (g) where the plaintiffs failed to allege any facts regarding what the components under Section 271(f) were, much less how those were combined.³

The patents at issue addressed data-analytics software that optimizes customer-relationship management.⁴ The court stated at the outset that "software in the abstract can be neither a component, as required by Section 271(f), nor a manufacture, as required by Section 271(g)."⁵

Furthermore, the court found that the pleadings included only "conclusory, boilerplate insertions" alleging infringement based on foreign activities and contained "no further information regarding activities outside the U.S."⁶ Given the lack of detail, the court dismissed the case with allowance to file an amended complaint.

Other district courts, however, have been more lenient with plaintiffs alleging infringement under Section 271(f), at least at the initial pleading stage. In Decurtis LLC v. Carnival Corp., for example, the U.S. District Court for the Southern District of Florida in January denied a motion to dismiss even though the complaint only generally alleged certain hardware and/or software as the components and did not state with specificity what the hardware and/or software were.⁷

The court stated that...