For most of us, when we think about patent laws in the context of a foreign country, infringement of a U.S. patent is unlikely to be the first issue that comes to mind. We tend to think that U.S. patent laws, like patent laws of foreign countries, are strongly territorial, with little application beyond their respective national borders. That would be mostly correct, unless you are an exporter in the U.S., supplying your customer in a foreign country components of a patented product. In that case, under 35 U.S.C. § 271(f) (hereinafter, § 271(f)), without authorization from the patentee, you may be infringing a U.S. patent covering the product. Furthermore, the patentee may claim an amount of damage based on your worldwide sales. It would not matter much that you don’t sell the components in the U.S. itself.
271(f) has two parts. § 271(f)(1) imposes liability on supplying from the U.S. all or a substantial portion of the components of a patented invention and § 271(f)(2) imposes liability on supplying a component that is especially made or especially adapted for use in the patented invention and not a staple article or commodity of commerce suitable for substantial noninfringing use. In a previous case, Microsoft Corp. v. AT&T Corp. 550 US 437 (2007), the U.S. Supreme Court cautions against a broad reading of § 271(f), pointing out that § 271(f) is a narrow exception to the general rule against extraterritoriality.
In the 2016-17 term, the U.S. Supreme Court will decide in the case, Life Technologies Corp., et al., v. Promega Corporation, case No. 14-1538, what it means to be “a substantial portion of the components of a patented invention” under § 271(f)(1). Petitioner Life Technologies manufactures a genetic testing kit for DNA profiling that is covered under a U.S. patent (“the Tautz patent”) owned by Respondent Promega. The testing kit contains, among the several other components required under Claim 42 of the Tautz patent, “a Taq polymerase”, which Life Technologies manufactures in the U.S. and ships to its manufacturing facility in the U.K. for inclusion in the testing kits. It is undisputed that the Taq polymerase is a commodity of commerce with numerous noninfringing uses, and is not especially made or especially adapted for the invention at issue, so that Life Technologies is not liable under § 271(f)(2).
The district court held that § 271(f)(1)’s requirement that “all or a substantial portion” of the components be supplied from the U.S. cannot be satisfied by a single component, when several components are required, in view that § 271(f)(2) specifically deals with the case of a single component. Implicitly, the district court reasons that Congress would not, after absolving in § 271(f)(2) a component that is a commodity of commerce with substantial non-infringinguses, only to take it back in § 271(f)(1) as a “substantial portion of the components.”
The Federal Circuit reversed, holding that Life Technologies is liable under § 271(f)(1) because the relevant “dictionary definition of ‘substantial’ is ‘important’ or ‘essential,’” such that “the ordinary meaning of ‘substantial portion’ suggests that a single important or essential component can be a ‘substantial portion of the components’ of a patented invention.” On that basis, the Federal Circuit ruled that the Taq polymerase is a “substantial portion of the components of a patent invention” because “without [the] Taq polymerase, the genetic testing kit recited in the Tautz patent would be inoperable.”
Life Technologies appealed to the U.S. Supreme Court, which granted certiorari on June 27, 2016. The Court framed the issues as: (1) whether a single entity can “actively induce” itself to infringe a patent under § 271(f)(1); and, (2) whether supplying a single, commodity component of a multi-component invention from the United States is an infringing act under § 271(f)(1), exposing the manufacturer to liability for all worldwide sales. On September 1, 2016, Life Technologies filed its brief. The United States Government, Agilent Technologies and a group of intellectual property professors (“the IP Professors”), among others, also filed amicus briefs in support of Life Technologies. Respondent Promega’s brief and supporting amicus briefs are not due until October 24, 2016.
In its brief, Life Technologies first argues that the phrase “all or a substantial portion” in § 271(f)(1) should be interpreted as entirely quantitative – i.e., referring to the number of components exported, rather than the qualitative importance of any of the components. Life Technologies also argues that the Federal Circuit’s interpretation makes §§ 271(f)(1) and 271(f)(2) virtually synonymous, thus impermissibly trivializes — i.e., renders superfluous — § 271(f)(2). Finally, Life Technologies argues that the Federal Circuit’s interpretation “cannot be squared with” the presumption against extraterritoriality.
The U.S. government weighs in on Life Technologies’ side because “the application of U.S. patent law to participation by U.S. exporters in foreign markets also raise issues concerning the competiveness of American companies abroad and the respective roles of the United States and other nations’ patent laws.” The government argues that the Federal Circuit has not given a workable definition to determine when a component is sufficiently important or essential as to be “a substantial portion of the components.” The government also argues that, in legislating § 271(f), Congress’s purpose was to outlaw evasion of a U.S. patent by conduct that tantamount to manufacturing the patented invention in the U.S. for export. The government argues that there is no clear expressed Congressional intent for § 271(f) to reach supplying a single staple article: when the product is made abroad except for such a staple article, Congress left that predominantly foreign conduct to be regulated by foreign law. Finally, the government argues that the presumption against extraterritoriality requires the courts to assume both that “legislators take account of the legitimate interests of other nations” and “foreign conduct is generally the domain of foreign law.” In this regard, the government advocates that avoiding an expansive interpretation “helps the potentially conflicting laws of different nations work together in harmony – a harmony particularly needed in today’s highly interdependent commercial world.” The government argues that the Federal Circuit’s interpretation impinge upon legitimate foreign sovereign interests and undermine the efforts of foreign nations to strike an appropriate balance between allowing open competition and using patents to promote innovation.
Agilent’s amicus brief observes that the Federal Circuit’s interpretation establishes a “qualitative importance test that would significantly impact “widely applied global sourcing and supply chain management systems, where products may include staple elements sourced from numerous countries.” Agilent argues that the Federal Circuit’s interpretation would unduly burden companies by the need to “to factor in the potential for patent liability … whenever they site a component facility in the [U.S.] or consider using a common component sourced in the U.S.” Agilent argues that the Federal Circuit’s qualitative importance test would thus interfere with supply chain management principles and will discourage both investing in U.S.-based manufacturing as well as sourcing components from the U.S.
Like the U.S. government, the IP Professors are concerned with the extension of the extraterritorial reach of a U.S. patent. Citing a string of Federal Circuit decisions, the IP Professors point out that the Federal Circuit has on numerous occasions given short shrift to the presumption against extraterritoriality. The IP Professors argue that the presumption mandates both a narrow interpretation of “a substantial portion of the components of a patented invention” – i.e., “nearly all of the components” – and avoidance of rendering superfluous § 271(f)(2). Finally, the IP Professors propose that courts should explicitly consider foreign patent laws to determine whether enforcement of the U.S. patent would create a conflict with the foreign laws. When there is a conflict, the IP Professors propose that the court consider not granting the patent holder extraterritorial relief. The IP Professors show that similar approaches have been successfully used in the contexts of extradition and federal trademark laws. The IP Professors posit that analysis of foreign patent laws by the courts can lead to “laudable benefits,” including “[acting] as an important and powerful supplement to the public law mechanisms,” and “[providing] reasoning that would help Congress assess whether to amend the Patent Act, particularly if Congress is attempting to implement legislation in the name of harmonization.”
Now that the battle lines are drawn, we wait with bated breath to hear from Promega and the amici curiae on its side. Stay tuned.