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Halo Electronics, Inc. v. Pulse Electronics, Inc.

United States Court of Appeals, Federal Circuit

October 22, 2014

HALO ELECTRONICS, INC., Plaintiff-Appellant,
v.
PULSE ELECTRONICS, INC. AND PULSE ELECTRONICS CORPORATION, Defendants-Cross Appellants

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[Copyrighted Material Omitted]

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Appeals from the United States District Court for the District of Nevada in No. 07-CV-0331, Judge Philip M. Pro.

WILLIAM R. WOODFORD, Fish & Richardson P.C., of Minneapolis, Minnesota, argued for plaintiff-appellant. With him on the brief were MICHAEL J. KANE of Minneapolis, Minnesota, and CRAIG E. COUNTRYMAN, of San Diego, California.

MARK L. HOGGE, Dentons U.S. LLP, of Washington, DC, argued for defendants-cross appellants. With him on the brief were SHAILENDRA K. MAHESHWARI, CHARLES R. BRUTON, and RAJESH C. NORONHA.

Before LOURIE, O'MALLEY, and HUGHES, Circuit Judges. OPINION filed by Circuit Judge LOURIE. Concurring opinion filed by Circuit Judge O'MALLEY, with whom Circuit Judge HUGHES joins.

OPINION

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Lourie, Circuit Judge.

Halo Electronics, Inc. (" Halo" ) appeals from the decisions of the United States District Court for the District of Nevada (1) granting summary judgment that Pulse Electronics, Inc. and Pulse Electronics Corp. (collectively " Pulse" ) did not sell or offer to sell within the United States the accused products that Pulse manufactured, shipped, and delivered to buyers outside the United States, and thus that Pulse did not directly infringe Halo's U.S. Patents 5,656,985 (the " '985 patent" ), 6,297,720 (the " '720 patent" ), and 6,344,785 (the " '785 patent" ) (collectively " the Halo patents" ); and (2) holding that Pulse's infringement of the Halo patents with respect to certain accused products that Pulse sold and delivered in the United States was not willful. See Halo Elecs., Inc. v. Pulse Eng'g, Inc., 810 F.Supp.2d 1173, 1205-08 (D. Nev. 2011) (sale and offer for sale); Halo Elecs., Inc. v. Pulse Elecs., Inc., No. 2:07-CV-00331, 2013 WL 2319145, at *14-16 (D. Nev. May 28, 2013) (willfulness).

Pulse cross-appeals from the court's decisions (1) construing the claim limitation " electronic surface mount package" in the Halo patents; (2) construing the claim limitation " contour element" in Pulse's U.S. Patent 6,116,963 (the " '963 patent" ) that Pulse asserted in its counterclaim; and (3) holding that the asserted claims of the Halo patents were not invalid for obviousness. See Halo Elecs., Inc. v. Pulse Elecs., Inc., 721 F.Supp.2d 989, 998-1001 (D. Nev. 2010) (claim construction); Halo, 2013 WL 2319145, at *1-7 (obviousness); Halo Elecs., Inc. v. Pulse Elecs., Inc., No. 2:07-CV-00331, 2013 WL 4458754, at *1-3 (D. Nev. Aug. 16, 2013) (obviousness).

Because we conclude that Pulse did not sell or offer to sell within the United States those accused products that Pulse manufactured, shipped, and delivered outside the United States, we affirm the summary judgment of no direct infringement of the Halo patents by those products. In addition, we find Halo's argument on appeal concerning the issue of willfulness unpersuasive and accordingly affirm the judgment of no willful infringement of the Halo patents with respect to products that were delivered in the United States. On the cross-appeal, because we find no reversible error in the contested claim constructions, we affirm the judgment of direct infringement of the Halo patents with respect to products that Pulse delivered in the United States and the judgment of inducement with respect to products that Pulse delivered outside the United States but were ultimately imported into the United States by others, as well as the judgment of noninfringement of Pulse's '963 patent. We also affirm the judgment that the asserted claims of the Halo patents were not invalid for obviousness.

Background

Halo is a supplier of electronic components and owns the '985, '720, and '785 patents directed to surface mount electronic packages containing transformers for mounting on a printed circuit board inside electronic devices such as computers and internet routers. The Halo patents are all derived from an application filed on August 10, 1995. At issue here are claims 6-8 and 16 of the '985 patent, claims 1 and 6 of the '720 patent, and claims 40 and 48 of the '785 patent (collectively " the asserted

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claims" ). Claim 6 of the '985 patent is representative and reads as follows:

6. An electronic surface mount package for mounting on a printed circuit board in an electronic device, said electronic surface mount package comprising:
a one piece construction package having a side wall and an open bottom,
a plurality of toroid transformers carried within said package by a soft silicone material, said toroid transformers each having wires wrapped thereon,
a plurality of terminal pins molded within and extending from the bottom of said package, each of said pins extending through a bottom of said side wall and having a notched post upon which said wires from said transformers are wrapped and soldered thereon, respectively.

'985 patent col. 4 ll. 19-33.

Pulse, another supplier of electronic components, designs and sells surface mount electronic packages and manufactures those products in Asia. Some of Pulse's products were delivered by Pulse to customers in the United States, but the majority of them were delivered outside the United States, for example, to contract manufacturers for companies such as Cisco. Those contract manufacturers incorporated the electronic packages supplied by Pulse into end products overseas, including internet routers manufactured for Cisco, which were then sold and shipped to consumers around the world.

For those products that Pulse delivered abroad, all purchase orders were received at Pulse's sales offices abroad. Halo, 810 F.Supp.2d at 1207. However, Pulse engaged in pricing negotiations in the United States with companies such as Cisco, and Pulse's employees in the United States approved prices that its agents quoted to foreign customers when the quoted prices fell below certain thresholds. Pulse also engaged in other activities in the United States, including meeting regularly with Cisco design engineers, sending product samples to Cisco for pre-approval, attending sales meetings with its customers, and providing post-sale support for its products.

Although Cisco outsourced its manufacturing activities to foreign contract manufacturers, Cisco negotiated with its component suppliers the prices that its contract manufacturers would pay when purchasing component parts. As one of Cisco's component suppliers, Pulse executed a general agreement with Cisco that set forth manufacturing capacity, low price warranty, and lead time terms. J.A. 15135-37. However, that general agreement did not refer to any specific Pulse product or price. Cisco typically sent a request for quote to its component suppliers and Pulse responded with the proposed price and minimum quantity for each product as identified by its part number. After further negotiation, Cisco issued the agreed-upon price, projected demand, and percentage allocation to Pulse for each product for the upcoming quarter. The percentage allocation divided Cisco's projected quarterly demand among its suppliers. Cisco then communicated the price and allocation to its contract manufacturers in Asia, and the contract manufacturers were expected to apply the Cisco price and allocation when ordering components from Pulse and other suppliers.

Upon receipt of purchase orders abroad, Pulse delivered the electronic package products from its manufacturing facility in Asia to Cisco contract manufacturers, also located in Asia, which then paid Pulse. After assembling the end products, the contract manufacturers submitted invoices to Cisco that itemized the cost of Pulse products and other components that were

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incorporated into the Cisco end products. Cisco then paid the contract manufacturers for the end products.

Pulse allegedly knew of the Halo patents as early as 1998. In 2002, Halo sent Pulse two letters offering licenses to its patents, but did not accuse Pulse of infringement in those letters. J.A. 5953-54. The president of Pulse contacted a Pulse engineer, who spent about two hours reviewing the Halo patents and concluded that they were invalid in view of prior Pulse products. Pulse did not seek an opinion of counsel on the validity of the Halo patents at that time and continued to sell its surface mount electronic package products. A Pulse witness later testified that she was " not aware of anyone in the company . . . that made a conscious decision" that " it was permissible to continue selling" those products. J.A. 2245.

In 2007, Halo sued Pulse for patent infringement. Pulse denied infringement and challenged the validity of the Halo patents based on obviousness and other grounds. Pulse also counterclaimed that Halo infringed Pulse's '963 patent directed to microelectronic connectors.

The district court first construed the disputed claim limitations in the Halo patents and Pulse's '963 patent. Relevant to this appeal, the court construed " electronic surface mount package" in the preamble of the Halo patent claims as non-limiting. Halo, 721 F.Supp.2d at 999-1001. The court then further construed the term to mean " an electronic device configured to attach to the surface of a DC voltage only printed circuit board." Id. In addition, the court construed " contour element" in the '963 patent claims to mean " a raised or recessed feature that physically contacts the bend of an electrical lead both before and after the modular plug is inserted into the cavity." Id. at 998-99. In view of that latter construction, the parties stipulated to a judgment of noninfringement of the Pulse '963 patent. Halo Elecs., Inc. v. Pulse Elecs., Inc., No. 2:07-CV-00331, ECF No. 215 (D. Nev. Sept. 2, 2010).

Pulse moved for summary judgment that it did not directly infringe the Halo patents by selling or offering to sell products that Pulse manufactured, shipped, and delivered outside the United States. The district court granted the motion, holding that those products were sold and offered for sale outside the ...


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