United States: The Pros And Cons Of Asserting U.S. Patents Against Foreign Companies

Stephen McBride and John Presper co-authored an article entitled" The Pros and Cons of Asserting U.S. Patents against Foreign Companies," which is featured in the May/June 2021 edition of IP Litigator. 

In today's global economy, U.S. patent holders are increasingly faced with infringing activities performed by foreign entities with few, if any, direct contacts in the United States. This leaves U.S. patent holders with a decision of whether to sue the foreign entity or another entity (such as a downstream customer or U.S. affiliate) that has more U.S. contacts than the foreign entity.

Suing the entity with more U.S. contacts is much more straightforward with respect to extraterritorial issues, but there are a number of other considerations that might make this impractical. For example, if the U.S. patent holder is a competitor of the foreign infringer, they may both be competing for the same U.S. customers, and the patent holder may want to avoid suing its own potential customers. Similarly, suing the foreign company's downstream customers may not completely stop the foreign company's infringement.

The U.S. patent holder can also sue the foreign infringer directly. While suing a purely foreign entity for patent infringement raises a number of extraterritorial issues, there are a number of available avenues for the U.S. patent holder to assert its patent rights. This article discusses some of the practical considerations for pursuing infringement against a foreign entity.

Personal Jurisdiction

Personal jurisdiction is a threshold question for any lawsuit, especially those involving foreign entities. Before addressing substantive patent law issues, parties should always consider whether a U.S. court can exercise personal jurisdiction over the defendant. In most patent litigations involving multinational corporations or global supply chains, defendants will have some contacts with the United States, but this is not always the case.¹

Fed. R. Civ. P. 4(k)(2) is the federal long-arm statute for the United States. It often applies where a foreign entity lacks minimum contacts with individual states, but has sufficient contacts with the United States as a whole to support personal jurisdiction.² The test for personal jurisdiction under Rule 4(k)(2) considers whether: (1) the defendant purposefully directed its activities at residents of the forum; (2) the claim arises out of or relates to the defendant's activities with the forum; and (3) assertion of personal jurisdiction is reasonable and fair.³

For patent cases, the personal jurisdiction analysis often focuses on purposeful availment.⁴ If the foreign defendant has no actual contacts with the United States (e.g., has no offices or employees in the United States, has not visited the United States, and does not advertise or directly sell into the United States), courts often analyze purposeful availment under the "stream of commerce" theory. Under this theory, a foreign defendant may be subject to personal jurisdiction in the United States simply by placing a product in the stream of commerce anywhere in the world so long as the defendant takes an action that is purposefully directed toward the United States.⁵

A full discussion of personal jurisdiction is beyond the scope of this article, except to emphasize that the analysis should be performed at the outset in every case involving foreign defendants. If potential personal jurisdiction issues exist, patent owners should consider suing alternative entities, such as customers or U.S. affiliates of the foreign entity or bringing suit in an alternative venue such as the International Trade Commission (ITC) as discussed below.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.