The opinion of the court was delivered by: Judge Nora Barry Fischer
A number of motions are currently pending before the Court in this case. (See Docket Nos. 352, 356, 360, 364, 367, 370, 373). This opinion addresses two of the pending motions because they raise similar issues. The first is the Defendants' (collectively, "Marvell") "Motion for Partial Summary Judgment of No Infringement and No Damages with Respect to Extraterritorial Conduct." (Docket No. 356). In that motion, Marvell requests that this Court determine that it (Marvell) cannot be found liable for infringement of any methods claimed in U.S. Patent Nos. 6,201,839 ("the '839 Patent") or 6,438,180 ("the '180 Patent") (collectively, "the CMU Patents") for chips that are never used in the United States, and that Plaintiff ("CMU") cannot recover for sales of such chips as a matter of law. (Docket No. 357 at 1). CMU challenges this motion, arguing essentially that it is entitled to recover damages for these foreign sales, which only arose due to domestic infringement. (See Docket No. 428 at 1).
The second motion is similar. In that motion, Marvell requests that the Court find that it (Marvell) cannot be found liable for infringement for the use of the patented technology by non- party Seagate Technology. (See Docket No. 360). As with the extraterritorial conduct motion, Marvell also requests that this Court find that it (Marvell) cannot be liable for damages arising from its sales to Seagate. (Id.). As expected, CMU challenges this proposition. (See Docket Nos. 397, 430).
After consideration of the parties' arguments and the filings pertaining to these motions, the Court has determined that both motions (Docket Nos. 356, 360) should be granted, in part, and denied, in part, in accordance with the following.
Much of the factual background of this case has been discussed elsewhere (see Docket Nos. 306, 227), so the Court only addresses here the facts pertinent to the pending motions. The instant motions pertain to Marvell's international activities and its sales to Seagate, so the Court will recount only the facts relevant to those issues.
a.Marvell's Business and Sales Cycle
Marvell produces read channel chips*fn2 which are used in conjunction with hard disk drives ("HDDs"). Marvell's business model revolves around an expensive sales cycle for these chips, during which Marvell "invest[s] significant resources with each potential customer without any assurance of sales to that customer." (Docket No. 402 at ¶¶ 3-4). At the end of a given sales cycle, Marvell achieves a "design win" if "the customer decides to go into production" with Marvell and actually does so. (Id. at ¶¶ 5-6). Such a design win is generally a winner-take-all affair, as a "design win" in the HDD industry typically results in the winner becoming the exclusive supplier for the customer's specific hard drive or generation of hard drives. (Id. at ¶ 7).
At the beginning of Marvell's sales cycle, the company formulates the product's concept and basic design. As Marvell performs the necessary research and development, it uses simulators ("Simulation Programs")*fn3 to test its new designs. (Id. at ¶ 9-10). The Simulation Programs are used throughout the sales cycle to refine and evaluate chip designs. (Id. at ¶ 12). Use of the Simulation Programs allows Marvell to confirm performance gains for a given design before it incurs the expense of producing a test run of actual chips. (Docket No. 402 at ¶ 14). The Simulation Programs are developed and operated within the United States. (Id. at ¶¶ 17-18).
Once a given Simulation Program performs satisfactorily, Marvell sends the specifications to an offshore manufacturer, who then produces engineering samples for Marvell. (Id. at ¶ 26). Marvell and its customers then test the engineering samples, which are Accused Chips, in the United States. (Id. at ¶¶ 30, 31, 34). Marvell's customers must sign off on the qualification of the test samples of the Accused Chips before full production begins. (Id. at ¶ 35). Marvell retains "golden unit" chips in California for each Accused Chip that is developed. (Id. at ¶ 36-37). These golden unit chips are used to test failed production versions of the Accused Chips. (Id. at ¶ 38). After a design is settled upon, Marvell provides "tuning guides," "reference settings," and "Application Notes" to help customers use the Accused Chips. (Id. at ¶¶ 44-47).
It is undisputed that, between March 6, 2003 and March 31, 2010, Marvell sold 1,469,070,073*fn4 Accused Chips. (Docket Nos. 359 at ¶ 1; 402 at ¶ 1). It is also undisputed that only a subset of the Marvell Chips has been installed in products used within the United States. (Docket Nos. 359 at ¶ 2; 402 at ¶ 2). At least some of Marvell's customers do ship their products, which include the Accused Chips, back into the United States. (See Docket No. 402 at ¶¶ 42-43).
The parties dispute the actual location of the sales of the Accused Chips. (Docket No. 440 at 7). CMU's position is that these sales occurred within the United States, and for purposes of the pending motion, Marvell has assumed that the relevant sales do actually take place in the United States. (Id.). Thus, for purposes of the analysis that follows, the Court will assume that Marvell's sales relating to the alleged infringements occur within the United States.
b.CMU's License to Seagate
The parties are in agreement that Seagate and CMU have had an ongoing relationship since the early 1990s. Although there is some dispute as to the details, the parties agree that, beginning on October 1, 1992, Seagate entered into an "Associate Agreement"*fn5 with CMU's Data Storage Systems Center ("DSSC"). (See Docket No. 363 at 1; 398 at ¶ 7). As an Associate Member of the DSSC, Seagate acquired certain rights which are the subject of Marvell's Licensed Use motion. (Docket No. 360).
The Associate Agreement provided Seagate with, among other things, "a worldwide, irrevocable, royalty-free license, to make, have made for their own use, or sell the product of the Inventions." (Docket No. 398 at ¶ 11). The Agreement also required CMU to charge royalty-bearing licenses to third parties who sought licenses for DSSC technologies. (Id.). Marvell does not have a license to use the CMU Patents. (Id. at ¶ 16).
There is nothing in the record evidence to indicate that Marvell's sales cycle with Seagate proceeded differently from the standard procedure described above. Hence, it would appear that Marvell did not legally consummate its relationship with Seagate until after all of the design testing described above. Further, there is no indication in the evidence presently before this Court that Seagate instructed ...