On October 22, 2014, the US Court of Appeals for the Federal Circuit issued an opinion in Halo Electronics, Inc. v. Pulse Electronics, Inc., affirming the US District Court for the District of Nevada's rulings that:

(No. 2013-1472, -1656, (Fed. Cir. Oct. 22, 2014)).

Halo is a supplier of electronic components and owns the three patents at issue in this case. Pulse is another supplier of electronic components, and also designs, sells and manufactures electronic components in Asia. While some of Pulse's products were delivered by Pulse to US customers, the majority of Pulse's products were delivered to customers outside of the US, in particular to contract manufacturers for companies like Cisco. The contract manufacturers would then incorporate Pulse components into end products for Cisco which were then sold and shipped to customers worldwide.

Although all of the purchase orders Pulse received for its electronic components were received in its sales offices abroad, Pulse engaged in price negotiations within the US with companies like Cisco, and Pulse's US employees approved certain agent-quoted prices.

In 2007, Halo sued Pulse for patent infringement. Pulse denied its products infringed Halo's patents and challenged the validity of the Halo patents based on obviousness and other grounds. When Pulse moved for summary judgment, claiming it did not directly infringe the Halo patents by selling or offering to sell products that Pulse manufactured, shipped and delivered outside of the US, the district court granted the motion, holding that the products were sold and offered for sale outside of the US and beyond the scope of 35 U.S.C § 271(a).

After the matter continued to trial, a jury found that:

The district court, however, held that Pulse did not willfully infringe Halo's patents because Pulse reasonably relied on its obviousness defense and the unsuccessful defense was not objectively baseless, so the first prong of the willfulness inquiry was not satisfied.

On appeal, the Federal Circuit reviewed the district court's grant of summary judgment and considered whether Pulse sold or offered for sale the accused products in the US.

After reviewing the relevant caselaw, the Federal Circuit concluded that Pulse did not sell the accused products in the US, reasoning:

The court then considered whether Pulse offered to sell the products within the US. The court's decision in Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors US, Inc. clarified that for an offer to sell to constitute infringement the offer must be to sell a patented invention within the US (617 F.3d 1296 (Fed. Cir. 2010)). Here, the court adopted the reasoning in Transocean and concluded that Pulse did not directly infringe the Halo patents under the "offer to sell" provision because the locations of the contemplated sales were all outside of the US.

Accordingly, the court affirmed the district court's grant of summary judgment of no direct infringement.

The court also affirmed the district court's ruling that Pulse did not willfully infringe Halo's patents because the record did not show that Pulse had acted despite an objectively high likelihood that its actions constituted infringement, as required by In re Seagate Technology, LLC (497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc)). Although Pulse was ultimately unsuccessful in challenging the validity of the Halo patents, Pulse did raise a substantial question as to the obviousness of the patents by presenting evidence that:

Judge O'Malley issued a concurring opinion agreeing with the majority opinion in all respects but urging the full court to reevaluate its willfulness jurisprudence under In re Seagate in view of the US Supreme Court's recent decisions in Highmark Inc. v. Allcare Health Management Systems, Inc. and Octane Fitness, LLC v. ICON Health & Fitness, Inc. (134 S. Ct. 1744 (2014) and 134 S. Ct. 1749 (2014)). For more information on these decisions, see Legal Update, Supreme Court Reverses Federal Circuit's Rigid Fee Shifting Standard in Patent Cases.