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In an opinion issued in May of this year, the Federal Circuit ruled for the first time that the ITC’s decisions regarding trademark disputes—just like its determinations on patent issues—do not have any preclusive effect on subsequent district court proceedings.

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Federal Circuit's First Review of Section 272 of the Patent Act


Time to Read: 5 minutes Practices: Intellectual Property

Background

Section 272 of the Patent Act, entitled "Temporary Presence in the United States", provides in relevant part:

"The use of any invention in any vessel, aircraft or vehicle of any country which affords similar privileges to vessels, aircraft or vehicles of the United States, entering the United States temporarily or accidentally, shall not constitute infringement of any patent, if the invention is used exclusively for the needs of the vessel, aircraft or vehicle and is not offered for sale or sold in or used for the manufacture of anything to be sold in or exported from the United States."(1)

This section, which was added to the patent laws in 1952, offers a safe harbour for the use of foreign-owned means of transport that enter the United States only temporarily under various restrictions.

Nearly a century before the enactment of Section 272, the Supreme Court held in 1857 that:

"The rights of property and exclusive use granted to a patentee does not extend to a foreign vessel lawfully entering one of our ports; and that the use of such improvement, in the construction, fitting out or equipment of such vessel, while she is coming into or going out of a port of the United States, is not an infringement of the rights of an American patentee, provided it was placed upon her in a foreign port, and authorized by the laws of the country to which she belongs."(2)

Section 272 was drafted to codify this holding and to bring the United States into line with its obligations under the International Convention for the Protection of Industrial Property (the Paris Convention).(3) Despite its existence for over half a century, however, Section 272 has seldom been invoked as a defence to patent infringement.

Decision

On January 29 2004 the Federal Circuit issued its first opinion addressing Section 272 in National Steel Car, Ltd v Canadian Pacific Railway, Ltd.(4) Although this defence to a claim of infringement has been considered by district courts on at least two other occasions,(5) the National Steel Car decision marks the first precedential interpretation of Section 272.

The National Steel Car litigation concerned the alleged infringement of US Patent 4,951,575, which is assigned to National Steel Car and is directed to an improved structure for railway cars used to transport lumber. Canadian Pacific Railway employs rail cars that it admitted fell within the literal scope of the claims. These cars are used to transport lumber into the United States from Canada under the power of Canadian Pacific Railway trains. At various interchanges throughout the United States, these cars are then switched to trains powered by locomotives owned by US railways for distribution around the United States. National Steel Car alleged infringement of its patent by virtue of Canadian Pacific Railway's use of these rail cars in the United States. As a defence to infringement, Canadian Pacific Railway invoked the safe harbour of Section 272.

The Eastern District of Pennsylvania held first that a rail car is not a foreign vehicle and not entitled to the non-infringing status created by Section 272.(6) Second, the district court held that the accused rail car would spend the majority of its time delivering lumber to US destinations and that Canadian Pacific Railway would "derive significant benefits from using the accused rail car in the United States".(7) Third, the district court held that rail cars are not used exclusively for the needs of the train.(8) Finally, the district court held that it appeared likely Canadian Pacific Railway's cars would be sold in the United States.(9) Because it concluded that Canadian Pacific Railway had not raised a substantial defence to infringement, the district court issued a preliminary injunction in favour of National Steel Car.(10) Canadian Pacific Railway appealed.

On appeal, the Federal Circuit reversed the district court's findings as to each of the above factors and held that Canadian Pacific Railway's Section 272 defence had substantial merit. Of particular import were the definitions of 'vehicle' and 'temporarily', which the Federal Circuit discussed at some length. Relying on the Dictionary Act's definition of the word 'vehicle',(11) as combined with the dictionary definition of 'carriage', the court concluded that a rail car may be a foreign vehicle.(12) The Federal Circuit then noted

"a concern to leave the channels of international commerce, or more accurately the vessels and vehicles that pass through these channels, free from the excessive burdens that would result if such vessels or vehicles had to conform to the patent laws of all nations that the vessel or vehicle visited during its lifetime."

It therefore determined that "the definition of entering 'temporarily,' as the word is used in Section 272, is entering for a period of time of finite duration with the sole purpose of engaging in international commerce".(13) On this basis the Federal Circuit held that National Steel Car "has not demonstrated that [Canadian Pacific Railway's] Section 272 defence lacks 'substantial merit' because the entering 'temporarily' condition is not satisfied".(14)

Comment

In the future, it is possible that the Federal Circuit's broad interpretation of Section 272, and the 'temporarily' restriction in particular, may increase the availability of that safe harbour. At a minimum, practitioners should be aware of Section 272 as a viable, albeit limited, defence to patent infringement. However, as this recent decision was based on an incomplete factual record, it need not imply that defendants will successfully rely on Section 272 with any greater frequency than they have for the past 50 years.

Endnotes

(1) 35 USC Section 272 (2000).

(2) Brown v Duchesne, 60 US (19 How) 183, 198-99 (1857).

(3) See S Rep 82-1979, at 28 (1952) ("This section follows the requirement [in Article 5-third] of the International Convention for the Protection of Industrial Property, to which the United States is a party, and also codifies the holding of the Supreme Court that use of a patented invention on board a foreign ship does not infringe a patent").

(4) 2004 US App LEXIS 1346, 03-1256 (Fed Cir January 29 2004)

(5) See Cali v Japan Airlines, Inc, 380 F Supp 1120 (ED NY 1974); Hughes Aircraft Co v United States, 29 Fed Cl 197, 29 USPQ2d 1974 (1993).

(6) National Steel Car, Ltd v Canadian Pacific Railway, Ltd, 254 F Supp 2d 527, 556 (ED Pa 2003).

(7) Id.

(8) Id at 557.

(9) Id.

(10) Id.

(11) 1 USC Section 4 (2000).

(12) National Steel Car II, 2004 US App LEXIS at *22.

(13) Id at *30.

(14) Id at *32.

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