In Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc, 617 F.3d 1296 (Fed. Cir. 2010), the Federal Circuit reversed a district court’s summary judgment decision that no patent infringement occurred when a US company made an offer to sell to another US company when the sale negotiations occurred outside of the US.

Transocean filed suit for infringement of patents related to an improved apparatus for conducting offshore drilling. In order to drill for oil and other offshore resources, drilling rigs must lower several components to the seabed including the drill bit, casings, BOB’s, and the drill string. A conventional offshore drilling rig utilizes a derrick with a single top drive and drawworks that can only lower one element at a time in a time consuming process. Transocean patented a specialized derrick to improve the efficiency of lowering the above components. The specialized derrick included “two stations – a main advancing station and an auxiliary advancing station that can each assemble drill strings and lower components to the seabed.” Id. at 1301. This duel-activity rig could significantly decrease the time required to complete a borehole. Id at 1302. Transocean sued Maersk rig for infringement of the specialized derrick patent.

35 U.S.C. Section 271(a) states that “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States … infringes [a] patent.” Maersk had negotiated an offer to sell with another company to deliver a rig to the United States that infringed upon Transocean’s patent. However, the offer to sell was negotiated in Norway. Maersk argued that for there to be an “offer to sell within the United States,” the offer activities must occur within the U.S. The district court agreed with Maersk, holding that since the contract was negotiated and executed outside the United States, it was not an offer to sell within the United States.

Thus, one of the questions before the Federal Circuit was whether an offer to sell, made in Norway by a U.S. Company to another U.S. company, to sell a product within the U.S. for delivery and use within the U.S. constituted an offer to sell “within the U.S.” under the definition of Section 271(a). Ultimately, the Federal Circuit determined that the focus should not be the location of the offer; rather, the focus must be on the location of the future sale that would occur pursuant to the offer. There was no question that the patent infringing rig was to be delivered to the US and utilized in the Gulf of Mexico. As such, the Federal Circuit vacated the district courts summary judgment of non-infringment noting the real harm that would be created by such a decision because U.S. companies could simply travel and contract abroad to avoid patent infringement. Id at 1309-10.

On remand, a jury found on April 21, 2011 that Maersk infringed Transocean’s valid patent and awarded Transocean $15 million. 2011 WL 2604769 (S.D. Tex 2011). Transocean’s victory was short-lived as on June 30, 2011, Judge Hoyt found pursuant to Fed. R. Civ. P. 50(b) that Maersk did not infringe the patents because the evidence did not support the jury’s findings.

Also of interest is a potential conflict between the prior decisions of the Federal Circuit and Judge Hoyt. The Maersk contract contained a provision allowing for the design to change if needed to avoid patent infringement. The Federal Circuit stated that schematics attached to the contract could support a finding of an infringed sale and that subsequent alterations were irrelevant. 617 F.3d at 1311. Judge Hoyt found that the contract anticipated alteration and therefore “no rig was offered for sale, or sold in violation of 35 U.S.C § 271(a).” 2011 WL 2604769 at 5. Further, Judge Hoyt found that under such circumstance, awarding a reasonable royalty would be unconscionable if the delivered drilling rig was altered to avoid infringement as Transocean would suffer no harm.

This article first appeared on the Louisiana Law Blog here