M-I Drilling Fluids Uk Ltd. v. Dynamic Air Ltda. , 890 F.3d 995 ( 2018 )

United States Court of Appeals
for the Federal Circuit
______________________
M-I DRILLING FLUIDS UK LTD., M-I LLC,
Plaintiffs-Appellants
v.
DYNAMIC AIR LTDA.,
Defendant-Appellee
______________________
2016-1772
______________________
Appeal from the United States District Court for the
District of Minnesota in No. 0:13-cv-02385-ADM-HB,
Judge Ann D. Montgomery.
______________________
Decided: May 14, 2018
______________________
SEAN DANIEL JORDAN, Jackson Walker LLP, Austin,
TX, argued for plaintiffs-appellants. Also represented by
PETER CARL HANSEN; CRYSTAL J. PARKER, Houston, TX;
SCOTT J. PIVNICK, Alston & Bird LLP, Washington, DC.
J. DEREK VANDENBURGH, Carlson, Caspers, Vanden-
burgh, Lindquist & Schuman, P.A., Minneapolis, MN,
argued for defendant-appellee. Also represented by ALAN
GARY CARLSON, NATHAN D. LOUWAGIE, TODD S. WERNER.
______________________
Before REYNA, HUGHES, and STOLL, Circuit Judges.
2 M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA.
Opinion for the court filed by Circuit Judge HUGHES.
Concurring opinion filed by Circuit Judge REYNA.
HUGHES, Circuit Judge.
M-I Drilling Fluids U.K. Ltd. and M-I LLC sued Dy-
namic Air Ltda. in the U.S. District Court for the District
of Minnesota, alleging infringement of five U.S. patents.
The district court dismissed the case for lack of personal
jurisdiction. Because Rule 4(k)(2) of the Federal Rules of
Civil Procedure supports the exercise of specific personal
jurisdiction over Dynamic Air Ltda., we reverse and
remand for further proceedings.
I
M-I Drilling is a private limited company organized
under the laws of the United Kingdom and has its princi-
pal place of business in the United Kingdom. M-I LLC
(together with M-I Drilling, M-I) is a U.S. company incor-
porated in Delaware with its principal place of business in
Texas. M-I supplies systems and equipment used in
handling drilling waste created, for instance, around oil
rigs in offshore oil exploration platforms.
Relevant here, M-I Drilling owns five U.S. patents—
U.S. Patent Nos. 6,702,539 B2, 6,709,217 B1, 7,033,124
B2, 7,186,062 B2, and 7,544,018 B2 (the asserted pa-
tents). M-I LLC is an exclusive licensee of the asserted
patents. The patents are generally directed to methods,
systems, and apparatuses used in the collection, convey-
ance, transportation, and storage of drilling waste created
around undersea oil wells. The patents are claimed to
cover, among other things, pneumatic conveyance systems
installed around oil drilling rigs and used to transfer drill
cuttings from the oil rigs to receiving ships.
Dynamic Air Ltda. (DAL) is a corporation organized
under the laws of Brazil and has its principal place of
business in Brazil. DAL is a subsidiary of Dynamic Air
M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA. 3
Inc. (DAI), a Minnesota corporation with its principal
place of business in Minnesota.
Between October 2011 and January 2012, the Brazili-
an state-owned oil company Petróleo Brasileiro S.A.
(Petrobras) requested proposals for the installation of
pneumatic conveyance systems on ships to assist in the
removal of waste created by drilling undersea oil wells.
M-I Swaco do Brasil – Comércio Serviços e Mineração
Ltda., M-I Drilling’s “sister company and customer” in
Brazil, and DAL both submitted their proposals. J.A. 13.
DAL won the bid and thereafter designed, manufactured,
and operated at least three pneumatic conveyance sys-
tems. In February 2013, DAL installed a conveyance
system that pneumatically conveyed drill cuttings from
“P-59,” an offshore oil drilling rig, onto the HOS Resolu-
tion, a U.S.-flagged ship. In August 2013, DAL installed a
similar conveyance system on board the HOS Pinnacle,
another U.S.-flagged ship, to remove drill cuttings from
“P-III,” another offshore oil drilling rig.
M-I then sued DAL in the U.S. District Court for the
District of Minnesota, alleging that DAL infringed the
asserted patents by making, selling, and operating pneu-
matic conveyance systems such as those on the HOS
Pinnacle and the HOS Resolution. DAL moved to dismiss
for lack of personal jurisdiction under Rule 12(b)(2),
arguing that the district court could not exercise specific
personal jurisdiction over it under Rule 4(k)(2) consistent
with due process. The district court granted that motion
and dismissed the case after finding that, although the
alleged infringing activities took place on U.S.-flagged
ships that are themselves U.S. territory, the contract
between Petrobras and DAL did not identify the ships on
which DAL would be required to make installations.
As such, in the district court’s view, DAL did not purpose-
fully avail itself of the privilege of conducting activities
within the United States because its contacts with the
HOS Pinnacle and the HOS Resolution were exclusively
4 M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA.
due to the unilateral activity of Petrobras. J.A. 19–20.
The court also concluded that the exercise of specific
personal jurisdiction over DAL would neither be reasona-
ble nor fair. J.A. 22–25.
M-I appeals. We have jurisdiction under 28 U.S.C.
§ 1295(a)(1).
II
Personal jurisdictional issues in patent infringement
cases are reviewed de novo and under our precedent.
Synthes (U.S.A.) v. G.M. Dos Reis Jr. Ind. Com de Equip.
Medico, 563 F.3d 1285, 1293 (Fed. Cir. 2009).
Where, as here, a “district court’s disposition as to the
personal jurisdictional question is based on affidavits and
other written materials in the absence of an evidentiary
hearing, a plaintiff need only to make a prima facie
showing that defendants are subject to personal jurisdic-
tion.” Elecs. for Imaging, Inc. v. Coyle, 340 F.3d 1344,
1349 (Fed. Cir. 2003). Moreover, “[i]n the procedural
posture of a motion to dismiss, a district court must
accept the uncontroverted allegations in the plaintiff’s
complaint as true and resolve any factual conflicts in the
affidavits in the plaintiff’s favor.” Id.; see Graphic Con-
trols Corp. v. Utah Med. Prods., Inc., 149 F.3d 1382, 1383
n.1 (Fed. Cir. 1998) (noting that the district court’s task in
evaluating whether the plaintiff has made a prima facie
showing of personal jurisdiction over the defendant re-
quires construing the pleadings and affidavits in the light
most favorable to the plaintiff).
Rule 4(k)(2) allows “a court to exercise personal juris-
diction over a defendant if (1) the plaintiff’s claim arises
under federal law, (2) the defendant is not subject to
jurisdiction in any state’s courts of general jurisdiction,
and (3) the exercise of jurisdiction comports with due
process.” Synthes, 563 F.3d at 1293–94. “The third
requirement under Rule 4(k)(2)—the due process analy-
M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA. 5
sis—contemplates a defendant’s contacts with the entire
United States, as opposed to the state in which the dis-
trict court sits.” Id. at 1295. “Rule 4(k)(2), therefore,
serves as a federal long-arm statute, which allows a
district court to exercise personal jurisdiction over a
foreign defendant whose contacts with the United States,
but not with the forum state, satisfy due process.” Id. at
1296.
Here, the parties only dispute the third require-
ment—whether exercise of personal jurisdiction over DAL
comports with due process. “[D]ue process requires only
that in order to subject a defendant to a judgment in
personam, [the defendant must] have certain minimum
contacts with [the forum] such that the maintenance of
the suit does not offend ‘traditional notions of fair play
and substantial justice.’” Int’l Shoe Co. v. Washington,
326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311
U.S. 457, 463 (1940)). “Depending on their nature and
number, a defendant’s contacts with a forum can provide
a court with general jurisdiction or specific jurisdiction.”
Synthes, 563 F.3d at 1297. M-I asserts only specific
personal jurisdiction. Relevant to that determination, we
apply a three-part test considering whether: (1) the de-
fendant purposefully directed its activities at residents of
the forum; (2) the claim arises out of or relates to the
defendant’s activities with the forum; and (3) assertion of
personal jurisdiction is reasonable and fair. Id. The
plaintiff bears the burden as to the first two require-
ments, and if proven, the burden then shifts to the de-
fendant to “present a compelling case that the presence of
some other considerations would render jurisdiction
unreasonable.” Burger King Corp. v. Rudzewicz, 471 U.S.
462, 477 (1985); Grober v. Mako Prods., Inc., 686 F.3d
1335, 1346 (Fed. Cir. 2012).
The district court found here that DAL’s contacts with
the HOS Pinnacle and the HOS Resolution were “due to
the unilateral activity of [Petrobras] and random insofar
6 M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA.
as [they were] completely dependent on Petrobras’s direc-
tion.” 1 J.A. 19. Because Petrobras “had exclusive control
over where the accused systems were installed,” id., the
district court concluded that DAL had not “‘purposefully
availed itself of the privilege of conducting activities’
within the United States,” J.A. 19–20. To bolster its
analysis, the court relied on Bellisio Foods, Inc. v. Prodo
Pak Corp., a breach of contract action in which the district
court concluded that the defendants had not purposefully
directed their activities to Minnesota because the plaintiff
asked for contract performance in Minnesota after negoti-
ations over the contract formation had concluded. No. 07-
CV-4520(PJS/JJG), 2008 WL 4867352, at *6–9 (D. Minn.
1 The district court decided in a related action be-
tween M-I and DAI (DAL’s parent entity) that U.S. terri-
tory extends to the HOS Pinnacle and the HOS
Resolution. DAL did not dispute that issue in its Rule
12(b)(2) motion. J.A. 18 n.14; see also J.A. 421. “It is the
general rule . . . that a federal appellate court does not
consider an issue not passed upon below.” Singleton v.
Wulff, 428 U.S. 106, 120 (1976). Our precedent generally
counsels against entertaining arguments not presented to
the district court. Sage Prod., Inc. v. Devon Indus., Inc.,
126 F.3d 1420, 1426 (Fed. Cir. 1997) (“In short, this court
does not ‘review’ that which was not presented to the
district court.”); see also Harris Corp. v. Ericsson Inc., 417
F.3d 1241, 1251 (Fed. Cir. 2005) (“An appellate court
retains case-by-case discretion over whether to apply
waiver.”). Because M-I alleged that U.S.-flagged ships
themselves are U.S. territory for the purposes of patent
law; DAL affirmatively assumed so in its motion to dis-
miss for lack of personal jurisdiction; the district court
accepted that assumption in deciding the motion; and
DAL’s brief here does not provide any reason why it failed
to argue this issue below, we deem the issue waived.
M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA. 7
Nov. 4, 2008). M-I argues that the court’s analysis is
inconsistent with our relevant precedent. We agree.
Our subject matter jurisdiction over this appeal is
grounded in the commercial tort of patent infringement,
not a contract dispute between the parties. In patent
infringement disputes, our precedent makes clear that
“the jurisdictional inquiry is relatively easily discerned
from the nature and extent of the commercialization of
the accused products or services by the defendant in the
forum.” Avocent Huntsville Corp. v. Aten Int’l Co., 552
F.3d 1324, 1332 (Fed. Cir. 2008) (emphasis added).
We have held, for instance, that a Brazilian defendant
purposefully directed its allegedly infringing activities to
the United States where its representative brought the
accused products into the United States from Brazil to
display the items at a trade show. Synthes, 563 F.3d at
1297–98; accord Nuance Commc’ns, Inc. v. Abbyy Soft-
ware House, 626 F.3d 1222, 1234 (Fed. Cir. 2010) (“Abbyy
Production has purposefully imported the accused prod-
ucts into California, made those products available for
sale through an established distribution chain, and the
cause of action for patent infringement is alleged to arise
out of these activities. No more is required for specific
jurisdiction.”); Beverly Hills Fan Co. v. Royal Sovereign
Corp., 21 F.3d 1558, 1565 (Fed. Cir. 1994) (“The allega-
tions are that defendants purposefully shipped the ac-
cused fan into Virginia through an established
distribution channel. The cause of action for patent
infringement is alleged to arise out of these activities. No
more is usually required to establish specific jurisdic-
tion.”). Indeed, “even a single contact with a forum state
may suffice for personal jurisdiction if it is directly and
substantially related to the plaintiff’s claim” of patent
infringement. Red Wing Shoe Co. v. Hockerson-
Halberstadt, Inc., 148 F.3d 1355, 1359 (Fed. Cir. 1998).
Here, it is undisputed that DAL installed pneumatic
conveyance systems on the HOS Pinnacle and the HOS
8 M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA.
Resolution. DAL then deliberately continued to engage in
the allegedly infringing activities aboard the ships even
after M-I had cautioned DAL that its systems infringed
the asserted patents. J.A. 1344 ¶ 33; see also J.A. 392
¶¶ 25–26, 35, 38; J.A. 1341 ¶¶ 23–24. Nothing more is
required to show that DAL purposefully directed its
activities at the United States.
The district court erroneously focused on the contract
between Petrobras and DAL. Even if the contract di-
rected where the accused systems were installed and
operated, DAL controlled the specifics of its own contin-
ued performance under the contract. There is no evi-
dence, for instance, that Petrobras contractually required
DAL to use allegedly infringing components when the
latter fabricated the pneumatic conveyance systems on
the U.S.-flagged ships. Moreover, DAL, not Petrobras,
kept the systems operating on the HOS Resolution
through September 2015, and on the HOS Pinnacle
through August 2015. J.A. 1341 ¶¶ 23–24. Such deliber-
ate presence of DAL and its systems in the United States
enhance its affiliation with the forum and “reinforce the
reasonable foreseeability of suit there.” Burger King, 471
U.S. at 476. Far from being “random, fortuitous, or
attenuated,” id. at 480, the totality of DAL’s contacts
aboard the ships compels the conclusion that DAL pur-
posefully directed its activities at the United States.
Although the district court did not address the issue,
it is undisputed that M-I’s claims for patent infringement
arise from or relate to DAL’s accused infringing activities
in the United States. Accordingly, M-I has met its burden
to make a prima facie showing that DAL is subject to
specific personal jurisdiction in a U.S. court.
Because DAL’s activities were purposefully directed
at the United States and the claim of patent infringement
arises out of those contacts, the burden now shifts to DAL
to present a “compelling case that the presence of some
M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA. 9
other considerations would render jurisdiction unreason-
able.” Id. at 477. In determining whether the exercise of
specific personal jurisdiction over a defendant would be
reasonable and fair, we consider five due process factors:
(1) the burden on the defendant; (2) the forum’s interest
in adjudicating the dispute; (3) the plaintiff’s interest in
obtaining convenient and effective relief; (4) the interstate
judicial system’s interest in obtaining the most efficient
resolution of controversies; and (5) the shared interest of
the states in furthering fundamental substantive social
policies. Id. Given that M-I LLC, one of the allegedly
injured parties and the exclusive licensee of the asserted
patents, is a U.S. domiciliary, it has a paramount interest
in obtaining convenient and effective relief in a U.S. court.
Indeed, Synthes, a close factual analog to the instant case,
compels that conclusion.
Synthes involved a patent infringement suit filed by a
U.S. plaintiff against a Brazilian company (GMReis). 563
F.3d at 1297. GMReis had no office, subsidiary, or licen-
see in the United States. We applied Rule 4(k)(2), and
held that the entire United States was an available
forum. Id. at 1300. We acknowledged that the burden on
GMReis was “significant,” given that it would have been
“required to traverse the distance between its headquar-
ters in Brazil and the district court in California,” and
would have been “required to submit itself to a foreign
nation’s judicial system.” Id. at 1299. We observed,
however, that “progress in communications and transpor-
tation has made the defense of a lawsuit in a foreign
tribunal less burdensome.” Id. (quoting World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 294 (1980)).
Balancing the factors, we held that any burden on
GMReis was “sufficiently outweighed by the interest of the
United States in adjudicating the dispute and the interest
of Synthes [the patent owner] in obtaining effective and
convenient relief, the second and third due process fac-
tors. The United States has a ‘substantial interest’ in
10 M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA.
enforcing the federal patent laws.” Id. (emphasis added).
So too here. Because M-I LLC is a U.S. plaintiff trying to
enforce its U.S. patents for alleged infringing activity in a
U.S. territory, 2 in light of Synthes, the first three factors
strongly favor exercising specific personal jurisdiction
over DAL. See N. Am. Philips Corp. v. Am. Vending
Sales, Inc., 35 F.3d 1576, 1580 (Fed. Cir. 1994) (noting
that the forum “clearly has an interest in prohibiting the
importation of infringing articles into its territory”);
Beverly Hills Fan, 21 F.3d at 1568 (holding that the
forum’s interest in discouraging injuries within its territo-
ry extends to patent infringement actions).
The fourth and the fifth due process factors “are con-
cerned with the potential clash of substantive social
policies between competing fora and the efficiency of a
resolution to the controversy.” Synthes, 563 F.3d at 1300.
But the forum here is the entire United States, so no
competing U.S. forum is available to M-I for its infringe-
ment claims. As such, no other U.S. forum exists with
respect to which there is a clash of social policies or with
which to compare the efficiency of a resolution. And to
the extent we give any weight to the procedural and
substantive interests of other nations in the context of
Rule 4(k)(2), “we have no reason to believe that ‘the
Federal Government’s interest in its foreign relations
policies’ with Brazil will be hindered by allowing the
district court to exercise personal jurisdiction” over DAL.
Id. (quoting Asahi Metal Indus. Co. v. Super. Ct. of Cal.,
480 U.S. 102, 115 (1987)).
2 As noted in footnote 1, DAL waived its argument
that the alleged infringing activity occurred outside the
United States.
M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA. 11
On balance, this is not one of those “rare cases” in
which fair play and substantial justice defeat the reason-
ableness of a U.S. court exercising personal jurisdiction
over a defendant. Id.; cf. Tech. Patents, LLC v. Deutsche
Telekom AG, 573 F. Supp. 2d 903 (D. Md. 2008) (finding
that due process limits the court from exercising personal
jurisdiction over 131 foreign defendants because haling
those telecom defendants into the court for the action of
its subscribers would have a “chilling effect” given the far-
reaching nature of the messaging technology that would
ensnare nearly every telecom company in the world),
aff’d, 700 F.3d 482 (Fed. Cir. 2012), cert. denied, 134 S.
Ct. 67 (2013). Accordingly, DAL has not met its burden to
present a compelling case that the assertion of personal
jurisdiction over it is unreasonable or unfair under the
five due process factors.
III
For the foregoing reasons, we conclude that exercising
specific personal jurisdiction over DAL under Rule 4(k)(2)
comports with due process. We thus reverse the district
court’s dismissal for lack of personal jurisdiction and
remand for further proceedings.
REVERSED AND REMANDED
Costs to appellants.
United States Court of Appeals
for the Federal Circuit
______________________
M-I DRILLING FLUIDS UK LTD., M-I LLC,
Plaintiffs-Appellants
v.
DYNAMIC AIR LTDA.,
Defendant-Appellee
______________________
2016-1772
______________________
Appeal from the United States District Court for the
District of Minnesota in No. 0:13-cv-02385-ADM-HB,
Judge Ann D. Montgomery.
______________________
REYNA, Circuit Judge, concurring.
I join the majority and agree that Rule 4(k)(2) sup-
ports finding that the district court can exercise specific
personal jurisdiction over Dynamic Air Ltda. (“DAL”) in
this case. Fed. R. Civ. P. 4(k)(2). I also agree that DAL
has waived the issue of whether U.S. patent laws extend
to U.S.-flagged ships on the high seas, but find that the
broader issue of territoriality still weighs heavily in this
case. I write to provide additional reasoning why the
exercise of personal jurisdiction here does not offend
traditional notions of fair play and substantial justice.
See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476
(1985).
2 M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA.
“The unique burdens placed upon one who must de-
fend oneself in a foreign legal system should have signifi-
cant weight in assessing the reasonableness of stretching
the long arm of personal jurisdiction over national bor-
ders.” Asahi Metal Ind. Co., v. Superior Court of Cal.,
Solano Cty., 480 U.S. 102, 114 (1987) (emphasis added).
This emphasis on “national borders” is central to Rule
4(k)(2)(B) considerations. For example, prong three of the
Rule 4(k)(2)(B) inquiry (i.e., the requirement that asser-
tion of personal jurisdiction must comport with due pro-
cess) requires the court to consider five factors: (1) the
burden on the defendant; (2) the forum’s interest in
adjudicating the dispute; (3) the plaintiff’s interest in
obtaining convenient and effective relief; (4) the interstate
judicial system’s interest in obtaining the most efficient
resolution of controversies; and (5) the shared interest of
the states in furthering fundamental substantive social
policies. Burger King, 471 U.S. at 477. Each of these
factors raises the issue of the relationship between terri-
toriality and U.S. patent law. The majority opinion also
emphasizes the interest of the United States in enforcing
its patent laws within its territories, an assertion that, in
particular, implicates the territoriality issue. See Maj.
Op. at 9–10.
U.S. PATENT LAW ON THE HIGH SEAS
The crux of DAL’s position that U.S. patent laws do
not extend to U.S.-flagged ships in international waters
rests on the notion that “the law of the flag doctrine ‘is a
figure of speech, a metaphor,’” and therefore a merchant
ship is not part of the territory of the country whose flag
she flies. 1 Appellee’s Br. 52 (quoting Cunard S.S. Co. v.
1 The alleged infringement in this case occurred in
the exclusive economic zone (“EEZ”) of Brazil. The EEZ is
“‘an area beyond and adjacent to the territorial sea’ which
‘shall not extend beyond 200 nautical miles from the
M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA. 3
Mellon, 262 U.S. 100, 123 (1923)). DAL thus seeks a
categorical rule that because general statutes do not
normally apply extraterritorially, U.S. patent laws can
never apply to U.S.-flagged ships in international waters.
I disagree with DAL’s all-or-nothing argument.
There is no dispute that a ship’s flag does not trans-
form a ship into terra firma of the country whose flag she
flies. That this “floating island” metaphor was once used
does not displace the law of the flag’s well-settled role in
determining what nation’s law applies to disputes aboard
a ship. See William Tetley, Q.C., The Law of the Flag,
“Flag Shopping,” and Choice of Law, 17 Tul. Mar. L.J.
139, 140–47 (1993). Accordingly, the Supreme Court has
recognized that the “well-established rule of international
law that the law of the flag state ordinarily governs the
internal affairs of a ship.” McCulloch v. Sociedad
Nacional de Marineros de Honduras, 372 U.S. 10, 21
(1963); see Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306,
312 (1970) (recognizing the “well-settled principle that the
law of the country whose flag a ship flies governs ship-
board transactions, absent some ‘clear expression’ from
Congress to the contrary”). This sentiment is echoed by
baselines from which the breadth of the territorial sea is
measured.’” Elizabeth I. Winston, Patent Boundaries, 87
Temp. L. Rev. 501, 508 (2015) (quoting the United Na-
tions Convention on the Law of the Sea, Dec. 10, 1982,
1833 U.N.T.S. 397, 418–19 (arts. 55, 57)). The United
States has adopted the same definition of the exclusive
economic zone in 1983 by Presidential Proclamation. Id.
(citing Proclamation No. 5030, 48 Fed. Reg. 10,605 (Mar.
10, 1983)). In the EEZ, a nation has minimal sovereign
rights. For example, the United States “possesses sover-
eign rights in economic exploitation of natural resources
and jurisdiction over marine scientific research.” Patent
Boundaries, 87 Temp. L. Rev. at 508.
4 M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA.
the Restatement (Third) of Foreign Relations Law
§ 502(2) (Am. Law Inst. 1987), which provides that “[t]he
flag state may exercise jurisdiction to prescribe, to adjudi-
cate, and to enforce, with respect to the ship or any con-
duct that takes place on the ship.” The law of the flag
also holds a long-standing role in determining the juris-
diction of disputes on the high seas. See Patent Bounda-
ries, 87 Temp. L. Rev. at 522 (“The law of the flag does
protect United States-flagged ships, which have long
represented an extension of the sovereignty of the United
States to the high seas.”); see also Cunard, 262 U.S. at
123 (stating that the law of the flag is “chiefly applicable
to ships on the high seas, where there is no territorial
sovereign . . .”); United States v. Sanford Ltd., 880 F.
Supp. 2d 9, 16 (D.D.C. 2012) (recognizing that the law of
the flag serves “as a tiebreaker of sorts for areas of the
world (e.g., the high seas) where there is no territorial
sovereign”).
In the seminal maritime case Lauritzen v. Larsen, the
Supreme Court identified the law of the flag as one of
seven factors for a court to consider in choosing which law
governs aboard a ship, stating:
This Court has said that the law of the flag super-
sedes the territorial principle, even for purposes of
criminal jurisdiction of personnel of a merchant
ship, because it “is deemed to be a part of the ter-
ritory of that sovereignty (whose flag it flies), and
not to lose that character when in navigable wa-
ters within the territorial limits of another sover-
eignty.” On this principle, we concede a territorial
government involved only concurrent jurisdiction
of offenses aboard our ships. Some authorities re-
ject, as a rather mischievous fiction, the doctrine
that a ship is constructively a floating part of the
flagstate, but apply the law of the flag on the
pragmatic basis that there must be some law on
shipboard, and it cannot change at every change
M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA. 5
of waters, and no experience shows a better rule
than that of the state that owns her.
345 U.S. 571, 585 (1953) (citation omitted). The dispute
in Lauritzen involved a suit for a Danish seaman’s negli-
gent injuries against a Danish owner of a Danish vessel
anchored in Cuban waters off Havana, Cuba. Id. at 573.
Despite the fact that the injuries occurred in Cuban
waters, the Court found Danish law applied chiefly based
on the law of the flag, stating the doctrine has “such
weight,” that “it must prevail unless some heavy counter-
weight appears.” Id. at 586. In addition to the law of the
flag, the Lauritzen Court identified six other factors for a
court to consider in determining what law applies aboard
a ship: (1) place of the wrongful act; (2) allegiance or
domicile of the injured; (3) allegiance of the ship owner;
(4) place of contract; (5) inaccessibility of foreign forum;
and (6) the law of the forum. Id. at 583–91. Lauritzen
calls for a case-by-case, not a categorical, approach, to the
question at hand—here, whether the specific U.S.-
registered and flagged ships at issue, the HOS Pinnacle
and HOS Resolution, are U.S. territory for purposes of the
Patent Act.
International and maritime law also provide support
for using the law of the flag as a dispositive factor in
deciding whether a ship constitutes “territory” for purpos-
es of jurisdiction. While the United States is not a party
to the United Nations Convention on the Law of the Sea,
the document is nevertheless informative. Article 92
provides that “[s]hips shall sail under the flag of one State
only and save, in exceptional cases expressly provided for
in international treaties or in this Convention, shall be
subject to its exclusive jurisdiction on the high seas.” Dec.
10, 1982, 1833 U.N.T.S. 397, 433 (emphasis added). In
that same current, U.S. vessel registration requirements
to obtain that flag amplify the law of the flag’s importance
in determining a merchant ship’s nationality. See Lau-
ritzen, 345 U.S. at 584 (“Each state under international
6 M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA.
law may determine for itself the conditions on which it
will grant its nationality to a merchant ship, thereby
accepting responsibility for it and acquiring authority
over it. Nationality is evidenced to the world by the ship’s
papers and its flag.”). The United States has the most
stringent registration requirements in the world. See H.
Edwin Anderson, III, The Nationality of Ships and Flags
of Convenience: Economics, Politics, and Alternatives, 21
Tul. Mar. L.J. 139, 151–52 (1996). For example, on a
U.S.-flagged ship, only an American citizen may serve as
captain, chief engineer, radio officer, deck watch officer
and engineering officer. Id. In addition, only twenty-five
percent of the unlicensed crew may be foreign. Id. To
that effect, U.S. Coast Guard regulations provide that a
Certificate of Documentation for a ship “serves as evi-
dence of a vessel[’s] nationality.” 46 C.F.R. § 67.1. And a
Certificate of Documentation for a vessel may only be
issued to vessels “which are wholly owned by United
States citizens.” Id. § 67.30. Thus, a ship’s flag and
corresponding registration requirements are critical when
assessing what nation’s law applies to conduct, or a
dispute, on a ship.
Turning to the Patent Act itself, 35 U.S.C. § 154(a) de-
fines a patent owner’s right to “exclude others from mak-
ing, using, offering for sale, or selling the invention
throughout the United States, or importing the invention
into the United States . . . .” Section 100(c) defines the
“United States” to mean “the United States of America,
its territories and possessions.” Prior to the enactment of
the 1952 Act, the only authority speaking on whether U.S.
patent laws apply to U.S-flagged ships on the high seas
was Gardiner v. Howe, an 1865 case from then-existing
Circuit Court of the District of Massachusetts. 9 F. Cas.
1157 (C.C.D. Mass. 1865). In Gardiner, the asserted
patent claimed an improvement in the sails of vessels. Id.
at 1157. The accused infringer allegedly used the im-
provement on the sails of his U.S.-flagged vessel while on
M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA. 7
the high seas and argued at trial that he could not be held
liable for infringement because U.S. patent laws did not
apply on the high seas. Id. The court disagreed, stating
that the U.S. patent laws “extend[] to the decks of Ameri-
can vessels on the high seas, as much as it does to all the
territory of the country, and for many purposes is even
more exclusive.” Id. at 1158. The court reasoned that any
contrary ruling would render valueless “patents for im-
provements in the tackle and machinery of vessels, or in
their construction . . . .” Id. Our predecessor court recog-
nized the vitality of Gardiner in Marconi Wireless Tele-
graph Co. of America v. United States, when it held that
U.S. patent laws extend to infringing acts at the Ameri-
can Legation at Peking in China. 99 Ct. Cl. 1, 67–68
(1942).
Nothing in the legislative history of the 1952 Patent
Act evidences congressional intent to narrow the territo-
rial scope of the patent laws from that articulated in
Gardiner. See S. Rep. 101-266 (1990), as reprinted in
1990 U.S.C.C.A.N. 4058, 4060 (noting that the language
of § 100(c) was “intended to be descriptive rather than
limiting”). Rather, the sole justification given for includ-
ing § 100(c) was “to avoid the use of long expressions in
various parts of the revised title.” S. Rep. 82-1979 (1952),
as reprinted in 1952 U.S.C.C.A.N. 2394, 2409. To that
point, when Congress considered the 1952 Act, Senator
Pat McCarran explained that the legislation was not
intended to change existing law in any way, but to “cod-
if[y] the present patent laws.” 98 Cong. Rec. 9323 (daily
ed. July 4, 1952). Absent evidence that Congress intend-
ed the 1952 Act to alter the territorial reach of the U.S.
patent laws, Gardiner remains persuasive. Midlantic
Nat. Bank v. N.J. Dep’t of Environ. Prot., 474 U.S. 494,
501 (1986) (“The normal rule of statutory construction is
that if Congress intends for legislation to change the
interpretation of a judicially created concept, it makes
8 M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA.
that intent specific.”); Shaw v. Railroad Co., 101 U.S. 557,
565 (1879) (similar).
In 1990, Congress applied the logic expressed by the
Gardiner court in drafting legislation to extend U.S.
patent law to U.S. spaceships. 1990 U.S.C.C.A.N. 4058,
4060–62. Specifically, in passing the Inventions in Outer
Space Act, Congress recognized that absent language
extending U.S. patent laws to U.S. spaceships, patent
owners would be “unable to enjoin or collect damages for
infringing activities in outer space,” which “may chill
prospects for commercial investment in outer space re-
search and manufacturing.” Id. at 4062. Section 105 of
Title 35 thus provides that “[a]ny invention made, used or
sold in outer space on a space object or component thereof
under the jurisdiction or control of the United States shall
be considered to be made, used or sold within the United
States for the purposes of this title . . . .” Congress’s logic
in extending U.S. patent laws to U.S.-spaceships in outer
space lends strong support for finding U.S. patent laws
extend to U.S.-flagged ship on the high seas.
DAL may view that any holding on this issue is com-
pelled by the traditional understanding that U.S. patent
laws do not apply to foreign activities. See Microsoft
Corp. v. AT&T Corp., 550 U.S. 437, 454–55 (2007). But
DAL would be missing an important waypoint in that,
given that the nationality of a U.S. flagship is “American,”
it would be incorrect to say that the activities upon her
deck are foreign. Even so, the Supreme Court has warned
against adopting categorical holdings based on general
guiding principles. In Spector v. Norwegian Cruise Line
Ltd., the U.S. Court of Appeals for the Fifth Circuit cate-
gorically held that Title III of the Americans with Disabil-
ities Act of 1990 (“ADA”) does not apply to foreign vessels
in U.S. ports based on the principle that a general statute
does not apply to the internal operations of a foreign
vessels in U.S. waters absent clear congressional intent.
545 U.S. 119, 127 (2005) (plurality opinion). Even though
M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA. 9
Title III does not contain any provision expressly permit-
ting its application to foreign-flag vessels, the Supreme
Court reversed. Id. at 127–28. It reasoned that, if ap-
plied in a sweeping manner to the whole of Title III, the
principle that general statutes do not apply to the inter-
nal affairs of foreign ships in domestic waters “is unlikely
to reflect congressional intent” because such an all-or-
nothing approach could nullify other applications of the
statute. Id. at 132, 139. Instead, the Court explained
that it is necessary to consider each disputed provisions
separately to assess whether there is the potential for
interference with the internal affairs of the foreign-
flagged ship. Id. 132–33.
Here, DAL seeks to convert the principle that patent
laws do not apply to foreign activities into the categorical
rule that U.S.-patent laws can never extend to U.S.-
flagged ships in international water. DAL’s argument
fails to consider the possibility for extraterritorial applica-
tions or for applications involving the internal affairs of a
U.S.-flagged ship. Case law shows that these possibilities
are not so remote. For example, in Brown v. Duchesne,
the Court held that U.S. patent laws did not apply to a
French-flagged ship in the port of Boston. 60 U.S. (19
How.) 183, 198–99 (1856). The patented technology
claimed an improvement in the construction of the gaff of
sailing vessels, a gaff being an integral part of the ship.
Id. at 188, 193. Because the gaff was part of the ship’s
construction and was attached to the ship in France, the
Court held that U.S. patent laws would not apply to any
potential infringement occurring in U.S. ports. Id. at
198–99. The holding in Duchesne suggests that whether
an infringement dispute involves the internal affairs of a
ship may depend on the patented technology itself. DAL’s
proposed categorical rule fails to account for such possibil-
ities, possibilities that are as infinite as the sea.
Lastly, it is worth recognizing the Supreme Court’s
increasing interest in international activity that bears on
10 M-I DRILLING FLUIDS UK LTD. v. DYNAMIC AIR LTDA.
U.S. patent laws, indicating that we should cautiously
consider cases presenting extraterritoriality questions. In
Impression Products Inc. v. Lexmark International, Inc.,
the Court held that a patent owner’s exclusive rights in
its invention or improvement can be exhausted through
its international sales and recognized that U.S. patent
laws do not traditionally apply abroad. 137 S. Ct. 1523,
1536 (2017). The Court concluded that a patent owner
cannot assert infringement liability against a party
importing its foreign-sold patented inventions into the
United States. Id. The Court recently heard argument in
WesternGeco LLC v. ION Geophysical Corp., No. 16-1011
(S. Ct.), which presents the question of whether a patent
owner, after proving a domestic act of infringement, can
obtain damages for lost profits for failure to win service
contracts to be performed on the high seas. While the
location of damages is at issue in WesternGeco, and loca-
tion of liability is at issue in the instant case, both grapple
with the question of how to ensure that a U.S. patent
owner can recover from the harm of infringement for
patented technology that involves activity in international
waters.
What is particularly troubling in this case is that if
U.S. law does not apply to infringing activity on a U.S.-
flagged ship in international water, then it is possible no
law applies. DAL seeks to promote the exploitation of this
loophole by instructing potential infringers to take to the
high seas, modern day privateers armed with letters of
marque from the U.S. government. That view is distinct-
ly harmful where, as here, the patented invention oper-
ates exclusively on the high seas. With continuing
advances in deep sea technology and the increasing
accessibility of international waters, and the far reaches
of outer space, we should consider the scope and protec-
tions of U.S. patent law without resorting to categorical
rules.