U.S. Appellate Court to Decide Whether Foreign Patent Claims Are in Play

Has the trend toward a one-stop shopping world pervaded our legal system, and specifically the patent community? We are well aware of recent globalization and the accompanying expansion of cross-border research and development, outsourcing to manufacturing facilities abroad and blossoming international trade. Multinational corporations depend upon revenue generated by these activities, which are often the subject of patents granted by the United States, Canada and other countries. As no single worldwide patent exists, a patent is typically enforceable only in the jurisdiction that granted the right. Indeed, a basic tenet of U.S. patent law is that it does not provide for extraterritorial effect[1] and, with limited exceptions, it does not restrict activities performed outside U.S. borders.[2] However, in light of recent developments, both holders of multijurisdictional patent portfolios and potential infringement defendants are paying heed to the prospect of transnational patent litigation in U.S. courts. A case currently before the Federal Circuit of the U.S. Court of Appeals, Voda v. Cordis Corp.,[3] may change the face of U.S. litigation as the court considers whether patent matters arising under foreign law may be heard. Federal courts do not have subject matter jurisdiction over all disputes. Jurisdiction is conferred, however, over federal matters such as those arising under U.S. patent laws.[4]

In Voda, the Federal Circuit will likely determine whether supplemental jurisdiction under 28 U.S.C. § 1367 authorizes an infringement determination with respect to foreign counterparts to asserted U.S. patents.[5] Section 1367(a) provides, in pertinent part, that “the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action … that they form part of the same case or controversy under Article III of the United States Constitution.”[6] In enacting the statute, Congress adopted the U.S. Supreme Court test for determining whether federal and state law claims form part of the same “case or controversy”—that is, if they “derive from a common nucleus of operative fact” and “would ordinarily be expected” to be tried “in one judicial proceeding.”[7] Under § 1367(c), the exercise of supplemental jurisdiction is discretionary and may be declined in various instances, including where the claim raises a “novel or complex issue of state law.”[8]

The question on appeal in Voda has not been presented to the U.S. Supreme Court, and it has been more than 11 years since the Federal Circuit addressed this issue. In that case, Mars Incorporated sued Nippon Conlux for infringement of a U.S. patent and its Japanese counterpart.[9] The U.S. district court dismissed the foreign patent claim and the Federal Circuit affirmed. On appeal, it was held that the foreign patent count was not an act of unfair competition to confer pendent jurisdiction. Supplemental jurisdiction under § 1367(a) was also lacking because the foreign claims did not share a common nucleus of operative fact to warrant a single proceeding.[10] Factors considered in Mars included the respective similarity of the patents and accused devices, the accused infringing acts and the governing laws.[11]

Nearly a decade later, Dr. Voda sued Florida-based Cordis Corporation for alleged infringement of three U.S. patents on guiding catheters used in angioplasty. Dr. Voda moved to amend his complaint to add infringement claims under national patents of Canada, Great Britain, France and Germany, all in the same family as the asserted U.S. patents. The district court granted the motion to amend, concluding that Mars did not provide for a broad rule precluding supplemental jurisdiction over a foreign patent claim where similar acts both in and out of the United States are alleged.[12] The interlocutory appeal was certified by the U.S. district court, accepted by the Federal Circuit, fully briefed, and argued on January 12, 2006.

The briefing on appeal in Voda is extensive with several prominent amici curiae entering the fray, predominantly on the side of appellant Cordis. In support of Dr. Voda, five U.S. law professors collectively argue against a per se rule restricting consideration of foreign infringement claims because the Mars factors may be satisfied by multinational firms that “commonly sell products that are similar or identical on an international basis.”[13] The professors also state that U.S. courts have authority to consider foreign patent claims under the U.S. patent statute[14] and on the basis of diversity jurisdiction.[15] While Dr. Voda acknowledges that supplemental jurisdiction over foreign patent claims should be exercised only in rare circumstances, Cordis urges that no such authority exists, and even if it did, jurisdiction should be declined in light of public policy considerations.

Amicus briefs filed by the American Intellectual Property Law Association (AIPLA), the Intellectual Property Owners Association (IPO), the Federal Circuit Bar Association and the U.S. government endorse many of Cordis’s arguments. Like Cordis, AIPLA takes the position that if the appellate court endorses a broad construction of § 1367(a), it would permit federal courts to regulate conduct abroad in the absence of any directive to do so.[16] Instead, AIPLA states that “strict statutory construction” is the best way to “help the potentially conflicting laws of different nations work together in harmony.”[17] Pro-appellant amici also favor preservation of international comity and the Act of State Doctrine—a doctrine that prevents courts from questioning the validity of a foreign country’s sovereign acts within its territory, including, as urged, governmental patent grants.[18]

Cordis and its allies add that complex foreign claims, often scrutinized under different legal standards, would unduly burden U.S. litigation. Dr. Voda and the law professors discount the differences between national patent laws as “overstated,” citing harmonization of laws with the enactment of the North American Free Trade Agreement and Trade-Related Aspects of Intellectual Property Rights (TRIPS) and converging examination outcomes of the U.S. and foreign patent offices.[19]

Finally, pro-appellant amici in Voda warn that consolidation of multinational patent enforcement could lead to increased forum shopping. While patents granted worldwide may appear to be similar, the laws of many countries depart, in some fashion, from U.S. patent law, often influencing the decision on where to litigate. One need not look beyond the U.S.–Canada border to appreciate this fact. On substantive issues, Canadian patent claims are subject to a purposive construction to determine whether the inventor intended strict adherence to expressed claim limitations. This often results in a more generous claim scope and greater likelihood of a successful infringement case, particularly since, in sharp contrast to U.S. jurisprudence, Canadian courts do not consider the doctrine of prosecution history estoppel and its limiting effect on patent claim scope.[20] Additionally, Canadian patents are not subject to unenforceability challenges based on alleged inequitable conduct during prosecution, a common counterclaim in U.S. lawsuits. Procedural differences also bear on litigation strategies. In Canada, it is more difficult and often cost-prohibitive to preliminarily enjoin acts of infringement. Canadian patent matters are heard by an experienced patent judge, whereas in the United States underlying factual questions may be decided by a potentially more sympathetic jury. Of at least equal significance here is the demonstrably increased scope and accompanying cost of U.S. discovery, a potential motivator for deep-pocketed litigants to try Canadian and other foreign patent claims in U.S. courts.

At oral argument in Voda, Judge Newman expressed having “trouble understanding as a matter of routine law” the rationale for a restrictive bright-line test based solely on the foreign nature of the claims, adding that “foreign law is often proved in the United States courts.” The panel, including Judges Prost and Gajarsa, also questioned the import of the district court’s failure to make express findings on the discretionary elements of § 1367(c), the limits imposed by Article III on § 1367(a) jurisdiction and the appropriateness of even adjudicating foreign patent validity.

If the district court’s decision is upheld in Voda, American inventors may have a new weapon—patent protection in foreign countries without leaving the United States. Are U.S. businesses prepared, however, to have U.S. patent matters tried abroad if the rest of the world invokes reciprocity? The IPO believes that the U.S. resolution of foreign patent claims will invite foreign courts to exercise jurisdiction over U.S. patent claims and in effect “interfere with every country’s ability to maintain the integrity of its own patent enforcement system, as well as to heighten economic instability and uncertainty” in the patent community.[21] Until this issue is resolved, companies may consider revisiting important freedom-to-operate and infringement opinions on foreign activities and patents, respectively, to assess the impact of an adjudication by a forum other than that originally contemplated.