Emerson Electric Co. v. Suzhou Cleva Electric Applicance Co., Ltd. et al

Filing 290

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Defendants' Motion for Summary Judgment of Non- Infringement as to Suzhou Cleva and Cleva Hong Kong (Doc. 229 ) is GRANTED IN PART and DENIED IN PART. As to Suzhou Cleva Electric Appliance Co., Ltd., the motion is GRANTED. As to Cleva Hong Kong Limited, the motion is DENIED. Signed by Magistrate Judge Shirley P. Mensah on 5/8/15. (JWD)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

EMERSON ELECTRIC CO.,
Plaintiff,
vs.
SUZHOU CLEVA ELECTRIC
APPLIANCE CO., LTD.,
CLEVA HONG KONG LIMITED,
CLEVA NORTH AMERICA, INC., and
SEARS, ROEBUCK AND CO.,
Defendants.

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Case No. 4:13-CV-01043 SPM

MEMORANDUM AND ORDER
This matter is before the Court on the Motion for Summary Judgment of NonInfringement as to Suzhou Cleva Electric Appliance Co., Ltd. (“Suzhou Cleva”) and Cleva Hong
Kong Limited (“Cleva Hong Kong”). (Doc. 229). Emerson consents to judgment being entered
in favor of Suzhou Cleva but opposes the motion as to Cleva Hong Kong. (Doc. 249). For the
following reasons, I will grant the motion as to Suzhou Cleva and deny it as to Cleva Hong
Kong.
I.

FACTUAL BACKGROUND 1
Emerson is the owner of several patents related to wet/dry vacuum cleaners. Emerson has

brought claims based on six of these patents against Defendants Suzhou Cleva, Cleva Hong
Kong, Cleva North America, Inc., and Sears, Roebuck & Co. Emerson alleges that Defendants
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These facts are taken from Defendants’ Statement of Material Undisputed Facts, Emerson’s
response, and the exhibits cited therein, and they are viewed in the light most favorable to
Emerson. In light of Emerson’s consent to have judgment entered in favor of Suzhou Cleva, the
Court omits the facts that are relevant only to Suzhou Cleva.
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make, sell, offer to sell, or import various wet/dry vacuums (the “Accused Products”) that
infringe Emerson’s patents.
Cleva Hong Kong is a company organized under the laws of Hong Kong. Cleva Hong
Kong purchases Accused Products in China from a manufacturer in China, and it sells various
Accused Products to customers based in the United States, including Sears. For example, Cleva
Hong Kong is a party to a January 2012 Supply Agreement in which the “Seller” is listed jointly
as Cleva Hong Kong and Cleva North America and the “Buyer” is listed as several Sears and
Kmart entities in Illinois. 2 The Supply Agreement states, “Seller agrees to sell to Buyer the
products listed in the attached Exhibit A,” and Exhibit A lists various Accused Products.
Cleva Hong Kong is not directly involved in reaching out to North American customers
or negotiating the terms of sales contracts with those customers; those matters are handled by
Cleva North America. However, Cleva Hong Kong arranges the shipment and delivery of the
Accused Products to Sears and other companies, prepares invoices, and receives payment. For
example, Cleva Hong Kong delivers products directly to Sears, and Sears pays Cleva Hong
Kong. When Cleva Hong Kong delivers products to its U.S.-based customers, the “Destination”
is listed as “USA,” but the shipping is done FOB China or FOB Shanghai. 3 Although the Supply
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In its motion, Cleva Hong Kong maintains that it is not a party to this Supply Agreement. The
language of the contract is somewhat ambiguous concerning whether the party designated as the
Seller along with Cleva North America was Suzhou Cleva or Cleva Hong Kong. (Supply
Agreement, Doc. 135-8, at pp. 1, 15, 24). However, Cleva Hong Kong’s 30(b)(6) deponent
clearly testified that Cleva Hong Kong considers itself a party to the agreement. (Rule 30(b)(6)
Dep. of Cleva Hong Kong, Doc. 249-1, at 19:3-6). Viewing the contract’s language and this
testimony together, in the light most favorable to Emerson as the nonmoving party, there is at
least a genuine issue of fact concerning whether Cleva Hong Kong is a party to the 2012 Supply
Agreement.
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FOB, or “free on board,” is “a method of shipment whereby goods are delivered at a designated
location, usually a transportation depot, at which legal title and thus the risk of loss passes from
seller to buyer.” MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d
1369, 1374 n.3 (Fed. Cir. 2005).
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Agreement lists prices for some products to be shipped FOB Alabama, Cleva Hong Kong’s
corporate deponent testified that those products should be purchased from Cleva North America
and not from Cleva Hong Kong.
II.

LEGAL STANDARD FOR SUMMARY JUDGMENT
The Court shall grant a motion for summary judgment “if the movant shows that there is

no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). “A dispute is genuine if the evidence is such that it could cause a
reasonable jury to return a verdict for either party; a fact is material if its resolution affects the
outcome of the case.” Othman v. City of Country Club Hills, 671 F.3d 672, 675 (8th Cir. 2012)
(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The moving party bears the
initial responsibility of informing the court of the basis of its motion and of identifying those
portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets this initial burden, the nonmoving party must then set forth affirmative evidence from which a jury might return a verdict in
his or her favor. Anderson, 477 U.S. at 256-57. The nonmoving party “may not rest upon mere
allegations or denials of his pleading, but must set forth specific facts showing that there is a
genuine issue for trial.” Id. at 256.
In considering a motion for summary judgment, the Court must view the facts in the light
most favorable to the nonmoving party, and all justifiable inferences must be drawn in favor of
the nonmoving party. Peebles v. Potter, 354 F.3d 761, 765 (8th Cir. 2004). The Court’s function
is not to weigh the evidence, but to determine whether there is a genuine issue for trial.
Anderson, 477 U.S. at 249.

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III.

DISCUSSION
A. Suzhou Cleva
Defendants argue that Suzhou Cleva is entitled to summary judgment on the infringement

claims against it because it is undisputed that Suzhou Cleva does not make, use, sell, offer to sell,
or import any product anywhere. Emerson consents to a judgment of non-infringement being
entered in favor of Suzhou Cleva. Accordingly, I will grant Defendants’ motion with respect to
Suzhou Cleva.
B. Cleva Hong Kong
Defendants argue that Cleva Hong Kong is entitled to summary judgment on the
infringement claims against it because the undisputed evidence shows that it did not sell or offer
to sell any of the Accused Products within the United States. Under 35 U.S.C. § 271, “whoever
without authority makes, uses, offers to sell, or sells any patented invention, within the United
States or imports into the United States any patented invention during the term of the patent
therefor, infringes the patent.” 35 U.S.C. § 271(a). “It is the general rule under United States
patent law that no infringement occurs when a patented product is made and sold in another
country.” Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 441 (2007). For an offer to sell, “the
location of the contemplated sale controls whether there is an offer to sell within the United
States.” Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617
F.3d 1296, 1309 (Fed. Cir. 2010). “Any doubt as to whether [a defendant’s] contracting activities
in the United States constituted a sale within the United States under § 271(a) is resolved by the
presumption against extraterritorial application of United States laws.” Halo Elecs., Inc. v. Pulse
Elecs., Inc., 769 F.3d 1371, 1380 (Fed. Cir. 2014).

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Cleva Hong Kong argues that because all of its sales and contemplated sales to United
States-based customers were for delivery FOB China, with title to the products transferred in
China, it did not sell or offer to sell any goods within the United States. As Emerson points out,
however, the Federal Circuit has squarely rejected the argument that an FOB location outside the
United States establishes that a sale occurred outside of the United States. Litecubes, LLC v. N.
Light Prods., Inc., 523 F.3d 1353 (Fed. Cir. 2008).
In Litecubes, the plaintiff brought a patent infringement suit against a Canadian company.
Id. at 1357-58. At trial, it was shown that the Canadian company had sold and shipped allegedly
infringing products to customers located in the United States, but it did so FOB, with title to the
goods transferring while the goods were still in Canada. Id. at 1358, 1369. The jury found
infringement, and the defendant moved for judgment as a matter of law, arguing that there was
no sale in the United States because the products had been shipped FOB Canada. Id. at 1369. The
Federal Circuit stated that its case law “is inconsistent with such a theory” and found “substantial
evidence of a sale within the United States for purposes of § 271.” Id. It stated:
Since the American customers were in the United States when they contracted for
the accused cubes, and the products were delivered directly to the United States,
under North American Philips and MEMC there is substantial evidence to support
the jury’s conclusion that [the Canadian company] sold the accused cubes within
the United States.
Id. at 1371. See also SEB S.A. v. Montgomery Ward & Co., Inc., 594 F.3d 1360, 1375 (Fed. Cir.
2010) (affirming, on fundamental error review, a jury verdict finding a sale within the United
States where goods were shipped with an FOB term outside of the United States; noting that the
FOB term is not dispositive and suggesting that other relevant factors supporting the jury’s
finding included the foreign defendants’ intention to sell products directly into the United States,
the foreign defendants’ affixing of American trademarks to the products, and invoices

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identifying delivery to U.S. destinations); MEMC Elec. Materials, Inc. v. Mitsubishi Materials
Silicon Corp., 420 F.3d 1369, 1377 (Fed. Cir. 2005) (stating that “simply because an article is
delivered ‘free on board’ outside the forum, a ‘sale’ is not necessarily precluded from occurring
in the forum,” but finding no sale in the United States where the foreign manufacturer sold
products to a foreign intermediary and there was no evidence that title passed directly from the
manufacturer to a U.S. customer). Cf. N. Am. Philips Corp. v. Am. Vending Sales, Inc., 35 F.3d
1576, 1579-80 (Fed. Cir. 1994) (FOB term outside the forum is not dispositive for the purposes
of a personal jurisdiction analysis).
Here, as in Litecubes, there is evidence showing that Cleva Hong Kong entered into sales
contracts with customers in the United States and then delivered the Accused Products directly to
customers in the United States. As in Litecubes, the fact that Cleva Hong Kong delivered the
products FOB China does not establish that the sale did not occur in the United States. Sears and
Target have addresses in the United States, and Defendants do not contend that those companies
were outside the United States when they contracted to buy Accused Products with Cleva Hong
Kong or when they paid Cleva Hong Kong for those products. In addition, as in SEB, Cleva
Hong Kong’s intent to sell the products directly to customers in the United States is apparent
from the Supply Agreement and from the invoices indicating the destination of the Accused
Products was “USA.” Thus, here, as in Litecubes and SEB, there is evidence from which a jury
could reasonably conclude that Defendants offered to sell, and did sell, Accused Products within
the United States.
In their Reply, Defendants attempt to distinguish Litecubes on the ground that “the
determinative fact in Litecubes for purposes of § 271(a) liability was that the accused infringer
delivered the products in the United States.” (Doc. 255, at pp. 9-10). To suggest that the facts

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here are different, they point to a receipt listing Target Corporation as the “importer” of Accused
Products and indicating that a forwarder called “APL Logistics” acted on instructions of Target
stores and issued a forwarder’s cargo receipt as agent for Target Stores. (Doc. 135-5). However,
even assuming that this document is representative of how Cleva Hong Kong shipped all of the
Accused Products, it is not a basis on which to distinguish Litecubes. First, it appears that a
similar situation was present in Litecubes: the district court noted that delivery of the products to
the United States was “at the direction and expense of the purchaser,” Litecubes, No.
4:04CV00485 ERW, 2006 WL 5700252, at *3 (E.D. Mo. Aug. 25, 2006), and the foreign
defendant’s position was that the United States customer was the party who actually imported the
products, 523 F.3d at 1359. Second, the Court finds persuasive the reasoning of the Northern
District of Illinois, which refused to distinguish Litecubes on the ground that the foreign
defendant merely delivered the products to the FOB point and the U.S. customer, “through its
freight forwarder,” shipped them to the United States. See Zimnicki v. Gen. Foam Plastics Corp.,
No. 09 C 2132, 2010 WL 3941869, at *4 (N.D. Ill. Oct. 4, 2010). The court in Zimnicki noted
that that there was no evidence that the U.S. customer had any physical presence in China, stated
that it “d[id] not see why it should matter whose ‘shipper’ the party uses—the ‘sale’ between [the
defendant and the U.S. customer] is still direct,” and noted that “to rule otherwise would
encourage gamesmanship.” Id. Here, similarly, the sales between Cleva Hong Kong and the
U.S.-based customers were direct, there is no evidence that the U.S.-based customers had any
physical presence in China, and Defendant offers no compelling reason why the identity of the
freight forwarder should be dispositive of the question of where the sale occurred.
To support their motion, Defendants rely primarily on the recent case of Halo
Electronics, Inc. v. Pulse Electronics, Inc., 769 F.3d 1371 (Fed. Cir. 2014), which Defendants

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argue involved facts substantially identical to the facts of this case. In Halo, the defendant was a
foreign manufacturer who engaged in some contract negotiations in the United States and
entered a general business agreement (not a binding sales contract) with a company in the United
States. Id. at 1375. All other aspects of the sale of the accused products occurred entirely
overseas, between foreign entities. Id. at 1375-77. The foreign defendant received purchase
orders from a third-party contract manufacturer in Asia, manufactured the accused products in
Asia, delivered the accused products to the third-party contract manufacturer in Asia, and paid
the third-party contract manufacturer in Asia. Id. at 1375. The accused products at issue “were at
no point, in transit or otherwise, in the United States.” Id. at 1379.
In assessing whether the foreign manufacturer had sold the products in the United States,
the Federal Circuit analyzed its prior precedent and stated:
While we have held that a sale is not limited to the transfer of tangible property
but may also be determined by the agreement by which such a transfer takes
place, the location of actual or anticipated performance under a contract for sale
remains pertinent to the transfer of title or property from a seller to a buyer.
Consistent with all of our precedent, we conclude that, when substantial activities
of a sales transaction, including the final formation of a contract for sale
encompassing all essential terms as well as the delivery and performance under
that sales contract, occur entirely outside the United States, pricing and
contracting negotiations in the United States alone do not constitute or transform
those extraterritorial activities into a sale within the United States for purposes of
§ 271(a).
Id. at 1379 (citations and quotation marks omitted). The court found that the evidence presented
was insufficient to establish a sale within the United States, because the agreement formed in the
United States was not a contract to sell any specific products, the foreign defendant received
purchase orders abroad, the products at issue “were manufactured, shipped, and delivered to
buyers abroad,” and the foreign defendant “was paid abroad by the contract manufacturers”
rather than by an entity in the United States. Id.

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Defendants’ reliance on Halo is unavailing. In contrast to Halo, in which the foreign
defendant contracted with, shipped products to, and was paid by buyers abroad, here Cleva Hong
Kong contracted with, shipped products to, and was paid by buyers in the United States. The
Federal Circuit in Halo simply did not address the situation presented here (and in Litecubes), in
which a foreign seller sells products to a buyer in the United States. The district court cases cited
by Defendants are similarly inapplicable, because they involved foreign defendants who
delivered products to entities located entirely outside the United States. See Ziptronix, Inc. v.
OmniVision Techs., Inc., No. C 10-05525 SBA, 2014 WL 5463051, at *5-*6 (N.D. Cal. Oct. 21,
2014) (no sales occurred in the United States where California corporation contracted with
Taiwanese corporation to manufacture components, the Taiwanese corporation delivered the
components to entities located in Taiwan, and the California corporation arranged for other
companies in Asia to combine the components with other components and then arranged for the
finished products to be imported into the United States); Quality Tubing v. Precision Tube
Holdings Corp., 75 F. Supp. 2d 613, 614, 620-21 (S.D. Tex. 1999) (negotiation and execution of
a contract in the United States did not establish a sale in the United States where performance of
the contract involved “the manufacture of tubing outside the United States, for shipment outside
the United States, to a customer outside the United States, for use outside the United States” and
“the allegedly infringing goods will never enter the United States”).
The Court also finds unpersuasive Defendants’ assertion that in Halo, the Federal Circuit
“rejected the analysis it used in its earlier decisions in Litecubes and MEMC.” (Doc. 255, at p. 8).
After reviewing its prior case law, including Litecubes and MEMC, the Federal Circuit in Halo
noted that its analysis was “[c]onsistent with all of [its] precedent.” Id. at 1379. Nothing in the
analysis or holding of Halo calls into question the Litecubes holding.

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In sum, under Federal Circuit law, the fact that Cleva Hong Kong’s sales and
contemplated sales to U.S. customers were for delivery FOB China does not establish that Cleva
Hong Kong did not sell or offer to sell Accused Products in the United States for purposes of
§ 271. Cleva Hong Kong offers no other basis for granting its motion. Therefore, Cleva Hong
Kong has failed to show it is entitled to judgment as a matter of law on the question of
infringement, and its motion for summary judgment will be denied.
IV.

CONCLUSION
For all of the reasons stated above,
IT IS HEREBY ORDERED that Defendants’ Motion for Summary Judgment of Non-

Infringement as to Suzhou Cleva and Cleva Hong Kong (Doc. 229) is GRANTED IN PART
and DENIED IN PART. As to Suzhou Cleva Electric Appliance Co., Ltd., the motion is
GRANTED. As to Cleva Hong Kong Limited, the motion is DENIED.

Dated this 8th day of May, 2015.
/s/ Shirley Padmore Mensah
SHIRLEY PADMORE MENSAH
UNITED STATES MAGISTRATE JUDGE

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