Holding

A Federal Circuit upheld a district court’s denial of defendant GlowProducts’ motion to dismiss for lack of subject matter jurisdiction based on plaintiff Litecubes’ copyright and patent infringement action relating to defendant’s lighted artificial ice cube. According to the Federal Circuit, a plaintiff is able to establish subject matter jurisdiction by having a well pled complaint, even if the defendant is a foreign entity and the infringing activity is potentially outside the U.S. Further, even if a plaintiff fails to prove his infringement claims, it does not mean that federal courts have no subject matter jurisdiction over such claims. Here, plaintiff Litecubes overcame the motion to dismiss by alleging a violation of federal patent and copyright statutes. Additionally, the Federal Circuit sustained the trial court’s jury verdict finding copyright and patent infringement, as the court found no basis for overturning such finding. Specifically, because customers at issue were in the United States when they contracted for the purchase of the infringing artificial ice cubes, and the products were delivered directly to the United States, there was substantial evidence to support the jury’s conclusion that GlowProducts sold the infringing artificial ice cubes within the U.S.

Detailed Summary

Plaintiff-appellee Carl L. Vanderschuit, owner and founder of co-plaintiff-appellee Litecubes, LLC (“Litecubes”), was the inventor and owner of U.S. Patent No. 6,416,198 (the “’198 patent”). The ’198 patent was for an illuminated novelty item that could be placed in beverages, i.e., a lighted artificial ice cube.  Litecubes was the licensee of the ’198 patent and the owner of a registered copyright on Litecubes.  Defendant-appellant Northern Light Products, Inc., doing business as GlowProducts.com (“GlowProducts”) was a Canadian corporation operating from its offices in Victoria, British Columbia.  GlowProducts was engaged in the business of purchasing novelty items from Chinese manufacturers and selling them primarily in North America.  It had offices, facilities, and assets in the United States.  Evidence at trial established that GlowProducts sold the infringing products directly to customers located in the U.S. and that GlowProducts would ship the products f.o.b. from its Canadian offices to its customers in the U.S.

In April 2004, Litecubes filed this copyright and patent infringement action against GlowProducts in the U.S. District Court for the Eastern District of Missouri. The district court entered a judgment against GlowProducts after a jury verdict finding copyright and patent infringement. Subsequently, GlowProducts filed a motion to dismiss the case for lack of subject matter jurisdiction (“SMJ”) on the grounds that it did not sell the allegedly infringing products within the United States, nor import the products into the United States.  Litecubes opposed the motion on the ground that there was ample evidence that GlowProducts had sold, offered to sell, or imported the allegedly infringing products to the United States.  The district court denied GlowProducts’ motion, finding evidence of infringement “sufficient to establish subject matter jurisdiction in this Court” because GlowProducts “clearly imported the accused products into the United States.” Litecubes v. N. Light Prods., Inc., No. 4:04cv00485, at *3 (E.D. Mo. Aug. 25, 2006) (Memorandum and Order). The district court did not reach the issue of whether there were sales or offers to sell in the United States.  The district court also dismissed GlowProducts’ motions for judgment as a matter of law (“JMOL”), concluding that substantial evidence supported the jury verdict.  Id. at *12.

Subsequently, GlowProducts instituted this appeal before the Federal Circuit to question the denial of its motion to dismiss for lack of SMJ.  In deciding the appeal, the Federal Circuit characterized the case as one involving “the often-confused boundary between elements of a federal claim, which must be established before relief can be granted, and the requirements for establishing subject matter jurisdiction.” The Federal Circuit upheld the district court’s denial of the motion to dismiss, but on different grounds. According to the Federal Circuit, it was error for the district court to treat the issue of whether the goods had been imported into the U.S. “as an issue impacting its subject matter jurisdiction.” In order that a plaintiff may succeed in his action for patent or copyright infringement, he must demonstrate that the allegedly infringing act did take place in the U.S.  But just like the other elements of the claims, failure to do so does not mean that federal courts have no SMJ over the action.

The Federal Circuit took this case as an occasion to apply 28 U.S.C. § 1338(a), which provides that “[t]he district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks.” Under the “well-pleaded complaint rule,” subject matter jurisdiction exists if a “well-pleaded complaint establishes either that federal patent law creates the cause of action or that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.” AT&T Co. v. Integrated Network Corp., 972 F.2d 1321.  Applying these principles, the Federal Circuit held that the district court should have resolved GlowProducts’ motion to dismiss without considering whether its products were indeed brought into the U.S.  Rather, Litecubes satisfied jurisdictional requirements of filing a patent or copyright infringement claim by alleging in its complaint that GlowProducts violated 35 U.S.C. § 271(a), which provides that “[e]xcept as otherwise provided . . . whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefore, infringes the patent.” This statute creates a federal cause of action for patent infringement over which the district courts have subject matter jurisdiction under 28 U.S.C. § 1338(a).  The Federal Circuit explained, “This jurisdiction does not depend on whether Litecubes is able to succeed on the merits in proving all of the elements of patent infringement that it alleged in the complaint”.  The Federal Circuit noted that “whether the allegedly infringing act happened in the United States is an element of the claim for patent infringement, not a prerequisite for subject matter jurisdiction.”

The Federal Circuit applied the same principle in resolving GlowProducts’ assertion that the district court had no subject matter jurisdiction over Litecubes’ copyright claims as the U.S. copyright laws have no extraterritorial reach. The parties stated at oral argument that the Patent Act and the Copyright Act should be interpreted consistently, and thus that if the Patent Act’s requirement that the infringing act take place in the United States is not a jurisdictional requirement, the exclusion from the Copyright Act of acts taking place entirely abroad should also not be jurisdictional.  In a unanimous opinion, the U.S. Supreme Court has already stated it is critical to distinguish between a statutory limitation that is truly jurisdictional and one that is simply an element of the claim that must be established on the merits. Arbaugh v. Y & H Corp., 546 U.S. 500 (2006).  Applying this principle, the Federal Circuit determined that whether an accused action is within the extraterritorial limitation should be treated as an element of the claim, not a predicate for subject matter jurisdiction, unless Congress has clearly provided that the limitation is jurisdictional.  See Arbaugh, 546 U.S. at 516.

In addition to the motion to dismiss, GlowProducts filed motions for judgment as a matter of law, arguing that substantial evidence did not support the jury verdicts of infringement for either the copyright or patent claims. In part, these motions were based on the same argument as the motion to dismiss, that Litecubes had failed to establish that any of the allegedly infringing acts took place within United States borders.

The Federal Circuit rejected GlowProducts’ argument, citing North American Philips Corp. v. American Vending Sales, Inc., 35 F.3d 1576 (Fed. Cir. 1994), a personal jurisdiction case where the Federal Circuit rejected the notion that simply because goods were shipped f.o.b., the location of the “sale” for the purposes of § 271 must be the location from which the goods were shipped. Id. at 1579.  In particular, the court found it significant that GlowProducts sold the infringing products directly to customers in the United States.  Since the U.S. customers were in the United States when they contracted for the accused cubes, and the products were delivered directly to the United States, there was substantial evidence to support the jury’s conclusion that GlowProducts sold the infringing cubes within the U.S.  Therefore, the Federal Circuit concluded that there was no basis to overturn the jury verdict of copyright and patent infringement, and that there existed substantial evidence to support such verdict.