Federal Circuit IP

Harris Brumfield, Trustee for Ascent Trust v. IBG LLC, Interactive Brokers LLC

By Michael Loy Published April 24, 2024

Fed. Cir. 2022-1630

Mar. 27, 2024
(Prost, Taranto, Hughes; Precedential)

Summary: The Federal Circuit affirmed the District Court for the Northern District of Illinois and found that (1) patent owners may be able to recover damages for foreign sales if a domestic act of infringement under § 271(a) is the proximate cause of the foreign sales, but (2) Brumfield cannot recover damages for IBG’s foreign sales, which lack proximate causation with IBG’s domestic conduct.

Background

  • Trading Technologies Int’l (“TT,” Brumfield’s predecessor) owns four patents with method and CRM claims covering GUIs for displaying stock market information.
  • TT sued IBG in district court under § 271(a) for “making” an e-trading software product (“BookTrader”).
  • IBG developed and released BookTrader before the first asserted patent issued.
  • Foreign BookTrader users used the software after the asserted patents issued.
  • TT submitted expert testimony proposing a basis of damages based on the number of worldwide users.
  • The district court excluded TT’s proposed expert testimony under FRE 702 because foreign damages for infringement under § 271(a) are not available under Power Integrations v. Fairchild Semiconductor.

Key Issue

  • Are reasonable royalty damages available for wholly foreign sales under 35 U.S.C. § 271(a)?

Applicable Rule/Statute

  • “It is axiomatic that U.S. patent law does not operate extraterritorially to prohibit infringement abroad.” Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348, 1371 (Fed. Cir. 2013).
  • “[A] patent owner is entitled to recover … lost foreign profits when the patent owner proves infringement under § 271(f)(2).” WesternGeco LLC v. ION Geophysical Corp., 585 U.S. 407, 417 (2018).
  • “[Software] abstracted from a tangible copy no doubt is information … but it is not itself a … component.” Microsoft Corp. v. AT & T Corp., 550 U.S. 437, 438 (2007).

Holding

  • The WesternGeco framework applies to infringement under § 271(a) and reasonable royalties.
  • Even under WesternGeco, the district court correctly excluded TT’s proposed expert testimony

Reasoning

  • Reasonable royalties are a form of damages (not a substitute for damages) under § 284, and § 271(a) is expressly limited to domestic acts.
  • TT characterized BookTrader as “software” (not CRM), but direct infringement under 271(a) does not include “making” a method since “process patents are infringed only when the … process is performed.”

Takeaways

  • Use WesternGeco to analyze foreign damages proximately caused by domestic infringement under 35 U.S.C. § 271(a) and reasonable royalty calculations.
  • Under 271(a), “developing” intangible software is distinct from “making” tangible copies of software.