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Contract Made in Norway Between U.S. Companies for Sale of a Product Within the United States Constitutes Sale and Offer to Sell Within the United States Under § 271(a)

09-1556
August 18, 2010

Decision icon Decision

Last Month at The Federal Circuit - September 2010

Judges: Gajarsa, Mayer, Moore (author)

[Appealed from: S.D. Tex., Judge Hoyt]

In Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., No. 09-1556 (Fed. Cir. Aug. 18, 2010), the Federal Circuit reversed-in-part, affirmed-in-part, vacated-in-part, and remanded a decision of the district court granting SJ in favor of Maersk Contractors USA, Inc. (“Maersk”) on the issues of validity, infringement, and willfulness with regard to three deepwater drilling patents.  Because there remained genuine issues of material fact regarding objective evidence of nonobviousness and undue experimentation, the Court reversed the grant of SJ relating to invalidity.  Because a certain contract was both an offer to sell and a sale, the Court vacated the district court’s SJ of noninfringement and remanded for further findings.  The Court affirmed the district court’s holding of no willfulness.

Transocean Offshore Deepwater Drilling, Inc. (“Transocean”) asserted U.S. Patent Nos. 6,047,781; 6,068,069; and 6,085,851 against Maersk.  The patents relate to an improved apparatus for conducting offshore drilling and share a common specification.  Transocean accused Maersk’s DSS-21 rig of infringement.  Maersk’s Danish parent company, Maersk A/S, contracted with Keppel FELS Ltd. in 2005 to build the accused rig in Singapore.  Later, Maersk A/S negotiated with Statoil ASA (a Norwegian company) for Statoil ASA’s use of the accused rig.  The companies came to an agreement for use of the rig, and Maersk and Statoil Gulf of Mexico LLC (“Statoil”), a Texas corporation, signed a contract in Norway.  The contract specified that the “Operating Area” for the rig was the U.S. Gulf of Mexico, but that Statoil had the right to use the rig outside the Operating Area with certain limitations.

The contract also mentioned Transocean’s U.S. patents.  Maersk specifically retained the right to make “alterations” to the accused rig “in view of court or administrative determinations throughout the world.”  Slip op. at 16.  One of these “determinations” came when Transocean asserted the same patent claims in this case against another competitor, GlobalSantaFe Corp. (“GSF”).  Transocean prevailed in that case and the court issued an injunction requiring GSF to install a “casing sleeve” on one of its two advancing stations.  The district court in GSF held that that avoided infringement because the cased advancing station could no longer advance tubes to the seabed as the independent claims require.  Before delivering the rig to the United States, Maersk learned of the injunction against GSF and modified the accused rig with the same casing sleeve to prevent one of the stations from advancing pipes to the seabed.

The district court in this case held that all asserted claims were invalid, not infringed, and that Maersk did not act willfully. 

On appeal, the Federal Circuit first addressed validity.  The asserted claims generally require (1) a first advancing station capable of advancing tubular members to the seabed, (2) a second advancing station also capable of advancing tubular members to the seabed, and (3) a transfer assembly to move tubular members between the first advancing station and the second advancing station.  The district court held that the claims would have been obvious over two references, which the Federal Circuit agreed established a prima facie case that the claims would have been obvious because, in combination, the references taught all of the limitations of the claims.  The Court also found the reason to combine these references in one of the references.  Transocean, however, presented significant objective evidence of nonobviousness, which the district court did not consider.  Because of the failure to consider the objective evidence of nonobviousness and because genuine issues of material fact remained, the Court reversed the grant of SJ of invalidity based on obviousness.

Turning to enablement, the Federal Circuit agreed with Transocean that factual issues regarding undue experimentation precluded SJ of no enablement.  The parties heavily disputed whether the development of the transfer equipment would be “trivial” or a much more complex task based on the evidence presented below.  The Court also found that the district court erred in requiring Transocean to enable the invention to allow a person of ordinary skill in the art to take advantage of the “timesaving” aspect of the invention.  In the Court’s view, it was irrelevant whether the enabling disclosure would provide the most efficient transfer.  The Court, therefore, reversed the grant of SJ.

The Federal Circuit next considered infringement.  There was no dispute that there was an offer to sell, but Maersk argued that the offer was made in Norway, not the United States, thereby absolving it of § 271(a) liability.  The district court relied on the undisputed facts that the negotiation and signing of the contract took place outside the United States and that the contract gave Maersk the option to alter the rig to avoid infringement.  The district court also held that Transocean was collaterally estopped from arguing that the modified rig that Maersk delivered to Statoil (that included the casing sleeve to prevent advancing tubular members to the seabed) infringed the patent claims because this design was adjudicated as noninfringing in the GSF litigation.

Transocean argued that a contract between two U.S. companies for delivery or performance in the United States must be an offer to sell within the United States under § 271(a).  The Court agreed, noting that the focus of the inquiry should not be on the location of the offer.  Accordingly, the Court vacated the district court’s SJ of noninfringement.

With regard to whether there was an infringing sale, Transocean argued that a contract between two U.S. companies for performance in the United States constitutes a sale under § 271(a).  The Court instructed that it does not affect this analysis that Maersk eventually altered the design prior to delivery.  The subject of the offer to sell was the unmodified rig and the district court must determine whether this unmodified rig was “the patented invention.”  As with the offer to sell, the Federal Circuit held that a contract between two U.S. companies for the sale of the patented invention with delivery and performance in the United States constitutes a sale under § 271(a) as a matter of law.  The potentially infringing article was the rig sold in the contract, not the altered rig that Maersk delivered to the United States.

The Court rejected Maersk’s claim that the entire apparatus must have been constructed and ready for use in order to have been sold, citing NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1319 (Fed. Cir. 2005).  In the Court’s view, whether the schematics in the contract show sale of the patented invention was a genuine issue of material fact sufficient to withstand SJ.

With regard to collateral estoppel, Transocean argued that the issues were not identical in this case and the GSF litigation because there were differences in the facts and the legal standards.  Maersk responded, and the Federal Circuit agreed, that these differences were irrelevant because they did not relate to the holding by the GSF court that the modified rig does not infringe.  Thus, the Court held that the district court did not err in holding that Transocean was collaterally estopped from arguing that the rig modified in accordance with the GSF injunction infringed any of the asserted claims.

Turning to willfulness, the Federal Circuit agreed with the district court that, as a matter of law, there was no willfulness.  The Court found that, although the contract did show that Maersk knew of Transocean’s patents, it also showed intent to avoid infringement.  Because, as a matter of law, Maersk’s actions were not objectively reckless, the Court affirmed the district court’s holding of no willfulness.

 

Summary authored by Joyce Craig, Esq.