On the Rocks

LiteCubes, LLC v. Northern Light Products, Inc.

We'll give it to you neat.  LiteCubes, LLC v. Northern Light Products, Inc. holds that section 271 of the patent statute does not contain that requirement for the federal courts' subject matter jurisdiction.  Rather, section 271 states a necessary element of a claim for patent infringement.  According to the Federal Circuit's top shelf opinion, a complaint which sufficiently pleads a cause of action under the patent statute establishes federal subject matter jurisdiction regardless of the success or failure of the patent holder in establishing that claim.  In other words, establishing subject matter jurisdiction and establishing an infringing act are separate endeavors that patent litigants should not mix.

LiteCubes involved patented technology for glowing artificial ice-cubes.  After the jury returned a verdict of infringement, GlowProducts (the d.b.a. of defendant Northern Lights) argued that the district court lacked subject matter jurisdiction under section 271 because its sale of the allegedly infringing product had occurred "f.o.b." (free on board shipment) in Canada.  GlowProducts based its challenge on the theory that its sales occurred in Canada due to the f.o.b. shipment.  The district court found that the evidence regarding GlowProducts' sales was sufficient to invoke the court's subject matter jurisdiction and entered judgment in the patent holder's favor.

On appeal, the Federal Circuit served up an affirmance, but re-blended the underlying grounds to reflect its views that the limitation of section 271 are not truly jurisdictional but rather elements of the claim to be established.   According to the Court, subject matter jurisdiction does not fail simply because the plaintiff might ultimately be unable to succeed on the merits.  In its own version of Happy Hour, it allowed GlowProducts to challenge the jury's infringement verdict even though it had not raised it on appeal.  The court used its discretion to consider the technically waived issue because it considered the circumstances surrounding the subject matter jurisdiction question to be unusual.  Still, it rejected GlowProducts arguments.  The court reviewed the place of contracting and performance to determine place of sale.  It found that GlowProducts customers were in the United States when they contracted to buy the product and that the product was shipped directly to them in that location.  Substantial evidence, the court said, to support the jury's conclusion that GlowProducts sales activities met the occurrence requirements of section 271.

While there was no dispute over claim construction, GlowProducts challenged the infringement verdict.  The patent contained a claim which required the use of a filler material that could retain cold when cooled or heat when heated.  LiteCubes' expert testified that the filler the product contained performed as required.  GlowProducts' expert, while not disputing the scientific accuracy of that testimony, simply disagreed.  Based on such conflicting evidence, the court said that jury was entitled to make a choice and credit the testimony of LiteCubes' expert in order to reach the factual determination that it did.

Make the lessons learned here a double. 

First, patent litigants who hang their hopes entirely on a duel of experts need to realize they're already in a position of weakness because the jury can legitimately pick either side.  Your expert must do more than just offer conclusory disagreements.  Such opinions are not particularly persuasive and squander credibility.  Experts must both retain credibility and give the jury something substantive with which to work.

Second, businesses that export goods into the United States should scotch the notion that they can rely on the vagaries of the shipment method used to escape liability for patent infringement in the United States.  LiteCubes makes clear that the patent statute's extra-territorial reach includes foreign entities that sell infringing goods within the United States-a lesson that surely left the defendant here shaken, not stirred.

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