Patent Territoriality: Is the IP World Getting Flatter?

By Tamany Bentz
December 19, 2016

Flat worldIt is a ubiquitous concept that United States intellectual property rights cannot extend beyond the territorial borders of the U.S.  An exception to this concept of territoriality is being tested in Life Technologies Corporation, et al. v. Promega Corporation (No. 14–1538) currently pending before the Supreme Court. The Supreme Court is specifically set to consider if supplying a component to a foreign manufacturer of a patented product creates liability under 35 U.S.C. § 271(f)(1).

The Federal Circuit in Promega Corp. v. Life Technologies Corp., 773 F.3d 1338 (Fed. Cir. 2014), held Life Technologies Corporation (“Life Technologies”) liable for patent infringement for a genetic test that was assembled in the U.K. and sold outside the United States.

Life Technologies manufactures genetic testing kits that include primer mix, polymerase chain reaction mix, buffer solution, control DNA, and a polymerase enzyme called Taq.  Life Technologies manufactured Taq in the United States and shipped it to its facilities in the U.K. where it was incorporated into the accused genetic tests.  As anyone who has done any work in genetics or with DNA will recognize, Taq is the driver of the polymerase chain reaction used for genetic tests, but not an inventive component of any test.  In fact, Taq has been well-known for over 20 years and was Science Magazine’s first “Molecule of the Year” in 1989.  Ruth Levy Guyer and Daniel E. Koshland, Jr., The Molecule of the Year, vol. 246, Issue 4837 (Dec. 22, 1989).

Life Technologies admitted that genetic tests sold in the United States would infringe the only patent that survived the litigation.  However, Life Technologies did not agree that sales outside the United States infringed the patent since the assembled genetics tests would never have been within any United States territory.

The Federal Circuit found Life Technologies liable under 35 U.S.C §271(f)(1) which states:

Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, 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, shall be liable as an infringer.

The battle over territoriality at the District Court and Federal Circuit called into question the two bolded Congressional statements in §271(f)(1).

The District Court found that “substantial portion” in the first bolded provision required at least two components be supplied from the United States and, therefore, Taq was not a “substantial portion”.  The Federal Circuit disagreed and held that “substantial portion” did not require a specific quantity of components.  And, according to the Federal Circuit, Taq is a “substantial portion” because it is essential to the operation of the genetic tests.  The Federal Circuit did not address the fact that Taq is well-known and not an inventive component of the claimed invention.

The District found that “actively induce the combination” in the second bolded provision required another actor as one could not actively induce themselves.  The Federal Circuit disagreed here too because the statute is written such that an activity – ‘the combination’ – is the object of ‘induce,’ not a person.”  Chief Judge Prost dissented on this point.  As she pointed out, the Supreme Court has twice held that inducement liability requires a third party, as inducement under 35 U.S.C. § 271(b) requires another infringer for there to be liability.  While the majority opinion considered the legislative history behind 35 U.S.C. §271(f), it failed to consider that the legislative history indicates “the term ‘actively induce’’ in 271(f)(1) was expressly “‘drawn from existing subsection 271(b)’”.

After the Federal Circuit decision, Life Technologies filed a petition for certiorari on two questions:

  1. Whether the Federal Circuit erred in holding that a single entity can “actively induce” itself to infringe a patent under 35 U.S. 271(f)(1).
  2. Whether the Federal Circuit erred in holding that supplying a single, commodity component of a multi-component invention from the United States is an infringing act under 35 U.S.C. 271(f)(1), exposing the manufacturer to liability for all worldwide sales.

With respect to the first question, Life Technologies argued the Federal Circuit decision was counter to the Supreme Court decisions regarding what “induce” means in 35 U.S.C. § 271(b).  The Supreme Court disagreed, however, and did not grant cert on this question.  Accordingly, one can induce themselves under 35 U.S.C. §271(f)(1).

With respect to the second question Life Technologies asserted “substantial portion” must be a quantitative limitation that is not subject to the importance or relative significance of a single component.  Among other things, “substantial portion” follows “all” in that statute and “all” of course is a quantitative term and not a qualitative term.

The Supreme Court granted cert on this second question and heard arguments on this question on December 6th.

If the Supreme Court adopts the qualitative standard, then any component in a patent will trigger liability.  Patent claims by design do not include nonessential components.  If a patent claim included a nonessential component, then it would be easily subject to others inventing around the claim simply by dropping the nonessential component.

If a qualitative standard is adopted then it will be easy for intentional infringers to flaunt the provisions of the statute by simply making no more than one component in the United States.  This may not achieve the Congressional objective behind the statute.  Congress enacted the provision to close a perceived loophole in the patent statute that allowed domestic actors to avoid liability.  In 1972, the Supreme Court considered whether a patent covering a shrimp deveining machine was infringed when a U.S. company made the components for the machine, shipped them to customers abroad, and then the customers assembled the components into the infringing machine.  The Supreme Court in Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972), held that this was not patent infringement under the patent statutes at that time. And, Congress then enacted § 271(f) to address instances where a domestic actor should be liable for foreign infringement.   While the defendant in Deepsouth shipped all of the components out of the country, Congress clearly intended something less than all to trigger liability under § 271(f)(1).

If the Supreme Court upholds the Federal Circuits decision, then it will change the way companies engage in domestic and international business.  A domestic producer of components will now have to worry about what international users do with the component.  And, a manufacture of foreign products will have to worry about whether any of its own components come from U.S. facilities.  If a well-known, non-inventive commodity like Taq can create liability under 35 U.S.C. §271(f), then any simple, common component will do the same.

The Author

Tamany Bentz

Tamany Bentz is a partner in the Los Angeles office of Venable LLP, where she focuses her practice on intellectual property litigation, including patent, trade secrets, trademarks and copyright litigation.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 4 Comments comments.

  1. Trump Fan December 19, 2016 12:00 pm

    Just as doctors worry that we live in a post-antibiotic era, we are already living in the post-patent era, and this is a good thing. Google didn’t need a patent to become huge; neither did Facebook. Elon Musk stated that the patents that Tesla got were a waste of time. Face it guys, opening up the field to more participants will result in the progression of humanity. Sorry crybaby patent owners, if your invention was really groundbreaking, you wouldn’t have to rely on patents. The product would speak for itself…

  2. Gene Quinn December 19, 2016 12:14 pm

    Trump Fan-

    You are factually incorrect, which makes your conclusions wrong.

    Google did need patents. In fact, Google filed their primary patent applications BEFORE ever acquiring the domain name Google.com. Without those critical patents Google would never have gotten off the ground.

    With respect to Tesla, as we have explained in multiple articles, Elon Musk is a shrewd businessman. He can say that he doesn’t need or want patents, but every company he is involved with files for patents. He only opened his patents (to the extent that he did that) once Toyota had informed Tesla that they were not going to be using the Tesla battery any more and had developed their own proprietary battery technology. Musk had built a factory to make the batteries so he opened the patents (to some extent) so he could keep his factory in business. He also only opened his patents to the extent that he, at his sole discretion, thought you were playing fair. He reserved the right to bring patent infringement lawsuits at his discretion. Not exactly donating his patents to the public as was erroneously reported in the popular press.

    Of course, being factually wrong about everything you said brings you to a truly ignorant conclusion.

    -Gene

  3. Trump Fan December 19, 2016 1:08 pm

    You’re wrong about Elon Musk:

    https://www.techdirt.com/articles/20150217/06182930052/elon-musk-clarifies-that-teslas-patents-really-are-free-investor-absolutely-freaks-out.shtml

    As to Google, you are correct that they did have patents but that in no way means that they needed them to become successful. In fact the original technology was patented by Stanford. This just proves my point that patents hinder innovation. Had Stanford not been generous in allowing a license to Google our world would be a much different place. Perhaps this blog wouldn’t even be here.

    Finally, you failed to mention a response to my statement about Facebook so I’ll take it you concede that point.

    Of course, being factually wrong about everything you said brings you to a truly ignorant conclusion. Wait, am I allowed to say that last sentence, or would I be “copying” you?

  4. Inventor Woes December 20, 2016 9:14 am

    Hmm interesting about Elon Musk. According to that interview in that link, it seems he really does want to open up Tesla’s patents.