Recommendation to Grant Summary Judgment in Favor of Fox and Other Studio Defendants Where Studios Were Selling Products That Incorporated a Process from a Domestic Manufacturer

September 21, 2012

Patent Harbor filed a patent infringement action against Twentieth Century Fox Home Entertainment ("Fox") and other studios, such as The Weinstein Company LLC, Warner Bros. Entertainment Inc., Home Box Office, Inc., and Buena Vista Home Entertainment, Inc. (collectively the "Studio Defendants"). The Studio Defendants allegedly infringed the patent by the use of authoring of scene selection menus included in DVDs and Blu-ray discs. The patent-in-suit describes an improvement to an interactive video system capable of displaying content based on video.

Claim 6 of the patent-in-suit states: "A method for assembling content addressable video, comprising: storing, in addressable memory, a plurality of [frames] of video data in storage locations having addresses, each frame defining a video image having a content for display; storing tags in memory for [frames] of video data in the plurality, the tags indicating the contents of the video images defined by the associated [frames]; executing program steps which assemble and display a content video image in response to the tags, the content video image including positions indicating the content of corresponding [frames] of video data in the plurality; and executing program steps which associate the positions in the content video image with addresses of storage locations storing corresponding frames of video data."

As described by the court, "[t]he Studio Defendants are all domestic distributors of DVDs and Blu-ray discs that have been created by domestic third-party authoring houses using the accused infringing authoring process. . . . As a result, Defendants argue that summary judgment is proper because purely domestic activities cannot be a basis of liability under § 271(g), and Patent Harbor does not dispute that the accused authoring process occurs entirely within the United States."

Section 271(g) provides: " Whoever without authority imports into the United States or offers to sell, sells, or uses within the United States a product which is made by a process patented in the United States shall be liable as an infringer, if the importation, offer to sell, sale, or use of the product occurs during the term of such process patent. 35 U.S.C. § 271(g) (2010)."

As a result, the court framed the issue as follows: "The issue for the Court is whether § 271(g) applies to domestically manufactured and distributed processes. Other courts have previously resolved this issue stating that § 271(g) does not apply to domestically-manufactured goods. For example, in a closely related case, Hughes Aircraft Co. v. Nat'l Semiconductor Corp. 857 F.Supp. 691 (N.D. Cal. 1994), the court held:
Based on its legislative history, it appears that [§ 271(g)] was designed to provide a remedy within the United States for United State process patent holders whose processes were being used in other countries to manufacture goods for importation into the United States. It does not appear to have been designed to provide a basis for holding a domestic, downstream seller of goods ... liable for infringement merely because it has incorporated an allegedly infringing good produced by a domestic, upstream manufacturer ... into its finished product. Id. at 698-99."

The Studio Defendants move for summary judgment because they are "domestic downstream sellers" of an "allegedly infringing good produced by a domestic, upstream manufacturer," they distribute alleged infringing discs manufactured entirely within the United States. Id. (emphasis added) . . . Defendants are the type of downstream domestic distributor not intended to be encompassed by the statutes. Id."

The court then noted that other courts have also declined to apply section 271(g) to domestically-manufactured good and declined "Patent Harbor's invitation to broaden the statute's coverage based on an ambiguity in the legislative history. See Bayer AG v. Housey Pharma., Inc., 340 F.3d. 1367, 1376 (Fed. Cir. 2003) ("[i]n the face of silence in the legislative history ... courts are reluctant to broadly interpret the legislation.")"

Finally, the court recommend that motion for summary judgment should be granted: "As Patent Harbor argues, the plain language of the statute does not expressly preclude liability for domestically-manufactured processes, and Congress did not expressly limit the scope of the statute to non-domestic processes. However, the reason for removal of the non-domestic limitation, set out in both of the authorities Patent Harbor cites, was apparently to refrain from trade discrimination against foreign manufacturers, not to provide a remedy for the domestic distribution of allegedly infringing domestically-manufactured goods. SGS-Thomson Microelec., Inc., 1994 U.S. App. LEXIS at *33-35; S. REP. No. 100-83, at 46-47 (1987). Further, another rationale is that Congress simply "recognized that § 271(g) did not have to address unauthorized domestic uses of patented processes because there are already remedies for such conduct under 35 U.S.C. § 271(a)." Asahi Glass Co., 813 F.Supp.2d at 614. Absent any controlling authority on the issue, this Court finds the analyses of Hughes and its progeny persuasive, and therefore RECOMMENDS GRANTING Defendants' Motion for Summary Judgment on Patent Harbor's § 271(g) claim."

Patent Harbor, LLC v. Twentieth Century Fox Home Entertainment LLC, et al., Case No. 6:10cv607 LED-JDL

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