Supreme Court to Weigh In on Extraterritorial Scope of Patent Law and Laches

scotus-supreme-court-columnsOn the heels of a busy term last year, the stage is set for the Supreme Court to review two more important issues regarding utility patents during the October term.  The first issue involves one aspect of the Federal Circuit’s decision in Promega Corp. v. Life Technologies Corp., 773 F.3d 1338 (Fed. Cir. 2014) — i.e., whether a party who supplies a single, commodity component of a multi-component invention from the United States can be liable for infringement.  The second issue arises from SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 807 F.3d 1311 (Fed. Cir. 2015) (en banc), to determine whether laches remains a viable defense to patent infringement with respect to pre-litigation damages in certain circumstances.  The outcome of these cases may impact the scope of liability for extraterritorial acts and the strategy and pace of patent licensing negotiations, respectively.

Promega Corp. v. Life Technologies Corp.

Promega is the exclusive licensee of a patent relating to kits for genetic testing including multiple components.  Life Technologies is a competitor of Promega, and admits to manufacturing and selling such kits.  One component of each kit is made in the United States, and then shipped to a manufacturing site abroad where the kits are assembled.  The kits are sold worldwide, and it is undisputed that sales within the United States constitute infringement under § 271(a).  However, a jury awarded Promega damages for sales outside the United States as well, on the theory that these foreign sales likewise constitute infringement of the U.S. patent under § 271(f)(1).  After the verdict, the District Court concluded that Promega failed to prove infringement as a matter of law, based largely on its interpretation of § 271(f)(1).  Promega Corp. v. Life Techs. Corp., No. 10-CV-281-BBC, 2012 WL 12862829 (W.D. Wis. Sept. 13, 2012).  Promega appealed this decision to the Federal Circuit.

In relevant part, § 271(f)(1) creates liability for infringement for a person who supplies “all or a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States.”  The Federal Circuit concluded that Life Technologies’ actions could constitute infringement under § 271(f)(1).  Promega Corp., 773 F.3d at 1356.  The Federal Circuit analyzed two aspects of the statutory provision: first, whether Promega could “actively induce” itself to assemble the kits and, second, whether a single component can be “a substantial portion.”

Regarding the first aspect, the Federal Circuit reasoned that the statute requires only specific intent to cause the components to be combined.  Id. at 1351.  The Supreme Court did not grant certiorari on this issue, and as such, the Federal Circuit’s decision will stand.  With respect to the second aspect, the Federal Circuit concluded that a supplier of a single component can be liable, reasoning that a single component is “a portion” of all components and stated that Taq polymerase is a substantial component, even by itself, in part because the kit is inoperable without it.   Id. at 1356.  In doing so, the court rejected Life Technologies’ argument that § 271(f)(2) is the only relevant subsection for the export of a single component, and as such, it is improper to apply § 271(f)(1).  The Supreme Court granted certiorari to answer “whether supplying a single, commodity component of a multi-component invention from the United States is an infringing act.”  Life Techs. Corp. v. Promega Corp., 136 S. Ct. 2505 (2016).

Notably, the Solicitor General filed an amicus brief urging the Supreme Court to grant certiorari as to this question and impose a quantitative test for infringement under § 271(f)(1).  Promega similarly urges a quantitative test, arguing that the Federal Circuit’s analysis reads a qualitative requirement into the statute, when in fact, the word “substantial” conveys a quantitative requirement, for example, a high percentage of the number of components.  Brief for Petitioners at 15-17, Life Techs. Corp. v. Promega Corp., No. 14-1538 (U.S. Sept. 1, 2016).  Promega argues that the structure of the two subsections of § 271(f) reinforces this understanding, and that the Federal Circuit has improperly extended the extraterritorial scope of the patent law, contrary to the presumption against extraterritoriality and congressional intent.

Time will tell whether the Supreme Court will uphold the Federal Circuit’s understanding, but this case will have important ramifications for U.S. suppliers of commodity components, particularly those who supply components to manufacturers abroad.  Already, the Supreme Court’s partial denial of certiorari as to whether a third party is required for inducement means that integrated manufacturers are not shielded from infringement under § 271(f)(1).

SCA Hygiene v. First Quality Baby Products LLC

In SCA Hygiene Products, a heavily divided Federal Circuit reaffirmed en banc that laches can be a defense to patent infringement with respect to pre-litigation damages in certain circumstances.  To reach its conclusion, the court considered the language of 35 U.S.C. § 282, its legislative history, and commentary by one of the draftspersons of the 1952 Patent Act.  It also distinguished the Supreme Court’s “raging bull” decision Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014), which found laches inapplicable to copyright cases.

Although both the copyright statute at issue in Petrella and the patent statute at issue in SCA Hygiene included Congress’ statement on the timeliness for bringing a claim, the Federal Circuit found that patent law is different since Congress also codified a laches defense in § 282.  Accordingly, while “there is no room for a judicially created timeliness doctrine,” in copyright law, there is no separation of powers issue in finding that laches was preserved by the patent act.  SCA Hygiene Prods., 807 F.3d at 1329.  The statute itself lists categories of defenses – “[n]oninfringement, absence of liability for infringement or unenforceability” – rather than specific defenses.  The court also cited to House and Senate Reports, as well as influential commentary stating that the statute would include laches. While the court recognized that there may be tension between § 286 and § 282, it had “no authority to substitute [its] views for those expressed by Congress in a duly enacted statute.”  Id. at 1329-30.

The Supreme Court granted certiorari to answer the question: “Whether and to what extent the defense of laches may bar a claim for patent infringement brought within the Patent Act’s six-year statutory limitations period, 35 U.S.C. § 286.”  SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 136 S. Ct. 1824 (2016).  Petitioner argues that the plain meaning of Section 286 directs a six year limitations period, and thus courts are not at liberty to apply laches to shorten that period.  Brief for Petitioners, SCA Hygiene Prods., LLC,  No. 15-927 (U.S. July 15, 2016).  Not surprisingly, Petitioner also argues that the case is indistinguishable from Petrella, and that the Supreme Court’s analysis in that decision should apply to both copyright and patent settings.  Petitioner further argues that the Federal Circuit decision undermines statutory policies of clarity, predictability, notice and dispute resolution.

Respondents reply by arguing that laches was codified as a defense to damages, citing to pre-1952 law and Congressional acquiescence since 1952.  Respondents also distinguish Petrella and dismiss the Petition’s policy arguments.  Brief for Respondents, SCA Hygiene Prods.,  No. 15-927 (U.S. Sept. 12, 2016).  Nine amicus curiae briefs have also been filed, including by several well-known bar associations.  With oral argument scheduled for November 1, 2016, both patent owners and institutions which regularly receive patent assertion letters will look for resolution of an issue that may impact both the strategy patent licensing negotiations and the availability of substantial damages in many cases.

The Author

Paul Ragusa

Paul Ragusa s a partner in the Intellectual Property section of the Baker Botts New York office. His practice encompasses high technology and Hatch-Waxman patent litigation, patent portfolio management, counseling and licensing. His diverse technical experience spans audiovisual compression and transmission, semiconductor device fabrication, nanotechnology, software, techniques for delivering pharmaceutical products and medical devices. He was part of the team that drafted the patent licensing agreements directed to the MPEG-2 digital video compression standard, and continues to focus on Standards Setting Organizations (SSOs) and related licensing, including 802.11, ATSC, AVC, Blu-ray, DASH, HEVC, LTE, MVC and UHD-BD.

Paul Ragusa

Daniel Hulseberg is a partner with Baker Botts. He as developed an extensive intellectual property law practice with several Fortune 500 corporations, handling transactions, product development, patent prosecution, and litigation strategy. Mr. Hulseberg regularly counsels clients and supervises due diligence reviews on proposed transactions, and negotiates and drafts agreements for acquisitions, licenses, and technology transfers. He also develops and implements strategies to merge and integrate acquired technology for synergistic results and cost efficiencies.

Paul Ragusa

Allyson Mackavage is an Associate at Baker Botts. Her ractice includes a range of intellectual property matters, including patent prosecution, counseling, freedom to operate assessment, and worldwide patent portfolio management. Her experience spans diverse fields, including chemistry, biotechnology, medical devices, pharmaceuticals, and consumer products and packaging.

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Discuss this

There are currently 1 Comment comments.

  1. Anon September 26, 2016 7:40 am

    You raise an interesting point in that the first part of the decision below will stand.

    Given that the remaining argument appears to be solely the “quantitative” one, is not the notion of “extraterritoriality” then already surrendered?

    As you note about “not being shielded,” that in itself means that the extraterritorial aspects are already accepted (for the substantial in the quantitative cases)?

    If accepted there, where stands the argument at all?

    This then comes down to a statutory construction argument and the notion of singular/plural – but that has long been decided.

    I also am unaware of any support that “substantial” (especially in the IP sense – vis a vis copyright), MUST have a quantitative meaning.