Motion to Compel Financial Records for Products Shipped Outside of the United States Denied Where Such Sales Did Not Fall within Section 271 of the Patent Act

December 9, 2011

Internet Machines LLC ("iMac") filed a patent infringement action against Alienware Corporation and PLX Technology, Inc. ("PLX") and several other defendants alleging infringement of two patents pertaining to PCI Express switches. With respect to PLX, iMac moved to compel the production of various sales documentation for all sales of the accused products regardless of whether the products shipped to the United States. PLX produced a sales summary and underlying documents for all PCI Express switches shipped to the United States. PLX declined to produce any additional documentation relating to those switches shipped to international markets.

The primary disagreement centered on whether PCI Express switches which were not shipped to the United States qualify as a "sale" under 35 U.S.C. ยง 271. iMac contended that all sales, whether shipped domestically or internationally, are still accepted by PLX in its Sunnyvale, California office and therefore count as domestic sales and are relevant for calculating damages.

PLX contended that sales of orders not shipping to the United States were merely handled administratively in California and reviewed for accuracy only. After acknowledgement to the customer, the orders were primarily shipped from PLX's warehouse facility in Hong Kong to customer outside of the United States.

Section 271 of the United States Patent Act provides: "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." After reviewing this language, the district court also noted that "[i]t is well established that the reach of section 271(a) is limited to infringing activities that occur within the United States."

The district court then concluded that the products that were never shipped into the United States did not qualify under section 271. "Here, the allegedly infringing products that are ordered by foreign customers were manufactured outside the United States, and distributed to customers outside of the United States. Both performance and the passing of legal title occurred internationally. Accordingly, the sales of the allegedly infringing products to foreign customers fall outside the scope of U.S. patent laws."
Therefore, the district court denied the motion to compel.

Internet Machines LLC v. Alienware Corp., et al., Case No. 6: 10-cv-23 (E.D. Tex. Nov. 29, 2011)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.