United States: Infringement Under Section 271(F)(1): More Than One Piece Of The Puzzle Required

In patent cases where the accused infringer supplies some or all of the component parts of an accused product from the United States to an overseas location for final assembly, Section 271(f) of the Patent Act, 35 U.S.C.A. § 271(f), gives the patentee an opportunity to recover damages from the infringer based on the export of only a part of the patented invention.To potential infringers, this provision creates the potential for exposure to substantial damages even when only a fraction of the invention is made, sold or used in the U.S. This "windfall" effect can be perceived as particularly prejudicial to the accused infringer when the exported component is a staple or commodity article not "especially made" for the invention. In this light, the U.S. Supreme Court's decision in Life Technologies Corp. v. Promega Corp., 137 S. Ct. 734 (2017), is a welcome development in the court's doctrine for accused and potential infringers. The decision limits the extraterritorial reach of U.S. patents—and the patentee's ability to recover damages for international sales—by holding that the supply of a single component of a multicomponent invention for manufacture abroad cannot give rise to infringement under Section 271(f)(1).

The technology at issue in the case relates to multiplex amplification methods that generate DNA profiles. The profiles can be used by law enforcement agencies for forensic identification and by clinical and research institutions. Promega owned four patents in this space and held an exclusive license for a fifth. Promega sublicensed the fifth patent to Life Tech for the manufacture and sale of genetic kits for use by licensed law enforcement personnel.1 Each kit includes five components. Life Tech manufactured four of the components in the United Kingdom. It produced the remaining component, Taq polymerase, in the U.S. The kits were assembled in the U.K. and sold outside the U.S..

District Court: One Piece Is Not Enough

Four years into the license, Promega brought a patent infringement lawsuit against Life Tech arising from the sale of the kits to clinics and markets outside of the licensed fields of use. More specifically, Promega claimed Life Tech's supply of Taq polymerase from the U.S. to the U.K. facility constituted an act of infringement under Section 271(f)(1). In relevant part, that section reads:

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.

During trial—and over the objection of Life Tech—the District Court instructed the jury to consider liability under both Section 271(a) and Section 271(f)(1), explaining that "United States sales" included "all kits made, used, offered for sale, sold within the United States or imported into the United States, as well as kits made outside of the United States where a substantial portion of the components are supplied from the United States." The jury found that Life Tech had willfully infringed the patent and awarded Promega $52 million. Life Tech moved for judgment of noninfringement as a matter of law, arguing that the phrase "all or a substantial portion" in Section 271(f)(1) does not encompass the supply of a single component of a multicomponent invention. The court granted the motion, explaining that the statute's reference to "a substantial portion of the components" does not embrace the supply of a single component.

Federal Circuit: One "Essential" Piece Will Do

On appeal to the U.S. Court of Appeals for the Federal Circuit, Life Tech argued infringement under Section 271(f)(1) requires that at least two components be supplied from the U.S.. The Federal Circuit explained that nothing in the ordinary meaning of the word "portion" suggests that it requires "a certain quantity or that a single component cannot be a 'portion' of a multicomponent invention." Indeed, the Federal Circuit concluded 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 multicomponent patented invention within the meaning of the statute. Relying on expert testimony from Life Tech's witnesses that Taq polymerase was the "major" or "main" component of the accused kits—and noting that the kits could not operate without it—the Federal Circuit found the evidence supported the jury's conclusion that a "substantial portion" of the components of Life Tech kits were manufactured in the U.S..

Supreme Court: "Substantial" Is Quantitative

The sole question posed to the Supreme Court was whether "supplying a single, commodity component of a multicomponent invention from the United States is an infringing act under 35 U.S.C.A. § 271(f)(1)." In an opinion by Justice Sonia Sotomayor, the court answered "no" to this question, thus reversing the Federal Circuit's decision and remanding the case for further proceedings.2

The court held that the term "substantial portion" in Section 271(f)(1) has a quantitative, not a qualitative, meaning. More specifically, the court held that the phrase "substantial portion" in the statute does not cover the supply of a single component of a multicomponent invention.

After concluding that the U.S. Patent Act does not define the term "substantial," the court began its statutory construction analysis by examining the term's ordinary meaning. The court acknowledged that the term may, in isolation, refer to qualitative importance or quantitative size. But it said that a reading of the term in the context of the statute points to a quantitative meaning. The court noted that the terms "all" and "portion"—both used within the same sentence where "substantial" appears—refer to determinations of quantity, not quality. Furthermore, it noted that the phrase "substantial portion" is modified by the phrase "of the components of a patented invention." The grammatical structure suggests that it is the supply of all or a substantial portion "of the components" of a patented intention that triggers liability for infringement, the court reasoned. According to the court, a qualitative reading would render the phrase "of the components" unnecessary the first time it is used in the section. Following canons of statutory construction, the court favored the quantitative reading, which provided meaning to each term in the statutory provision. Following canons of statutory construction, the court favored the quantitative reading, which provided meaning to each term in the statutory provision.

The court also declined to follow the "case specific" approach that Promega had advocated. By doing so, it refused to task juries with interpreting the meaning of the statute on a case-by-case basis to determine whether a single component is a "substantial portion." Further, the court said Promega's suggested case-specific approach may not necessarily help resolve close cases because, as the court explained, "few inventions ... would function at all without any one of their components." In light of that reality, the court asked, "How are courts—or, for that matter, market participants attempting to avoid liability—to determine the relative importance of the components of an invention?"

The court next addressed whether, as a matter of law, a single component can constitute a "substantial portion" so as to trigger liability under Section 271(f)(1). It concluded that the statute's use of the term "components"—in the plural form— indicates that multiple components constitute the "substantial portion." The court also found that analysis of the statutory structure and the interplay between Sections 271(f)(1)and (2) suggests that reading Section 271(f)(1) to refer to more than one component allows the two sections to work in tandem. In relevant part, Section 271(f)(2) provides that to supply or cause to supply a noncommodity component "especially made or especially adapted for use in the invention" in or from the U.S. constitutes an act of infringement. In view of this, reading Section 271(f)(1) to cover any single component would not only leave little room for Section 271(f)(2), but would also undermine Section 271(f)(2)'s reference to a single component that is "especially made or especially adapted for use in the invention." Thus, the court concluded that one component does not constitute "a substantial portion" of a multicomponent invention under Section 271(f)(1).

Lastly, the court explained that the history of the statute supported its conclusion. It noted that Section 271(f)(1) was enacted to fill a gap in the enforceability of patent rights by reaching components that are manufactured in the U.S. but assembled overseas. That gap was created when the court ruled in Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972), that no infringement could be found where all the components of a multicomponent invention were manufactured in the U.S. but assembled into the claimed invention abroad. According to the court, its decision comports with Congress' intent to hold a supplier liable:

under Section 271(f)(1) for supplying from the United States all or a substantial portion of the components of the invention, when those components are combined abroad. The same is true even for a single component under Section 271(f)(2) if it is especially made or adapted for use in the invention and not a staple article or commodity.

The court said that when all but a single commodity component of the invention are supplied from abroad, the statute does not apply. As noted by Justice Samuel Alito, Congress' intent was not just to fill the gap created by Deepsouth but to go a little further. How much further, Justice Alito noted, is not explained by the history of the statute or by the court's decision in this case. Thus, the question of how much more than one component—or how close to all the components—is necessary to establish "a substantial portion" of a multicomponent invention remains to be resolved.

Strategic Considerations

The case is important not only with respect to litigation, but also for patent prosecution and licensing practices. Whenever possible, it is critical for prosecutors to draft product and device claims in a way that takes accounts for how the invention will be practiced. For example, if the patent drafter knows that the device or product is manufactured and assembled or formulated in different countries, incorporating claims of varying scope as to the number of components required to infringe may provide the patentee breadth with respect to the manner in which infringement theories can be formulated. In addition, it is advisable to consider obtaining patent protection not only in the countries where the invention is sold, but also in countries where the invention is known—not just to the patentee but to competitors—to be important for manufacturing or assembling the components. Similar care should be taken when drafting licensing agreements. Where possible, companies licensing technology should consider broad approaches to location and fields of use. For example, the underlying license between Life Tech and Promega was construed to be limited to the supply of the kits for "live" law enforcement. The District Court concluded that such use excluded sales of kits for use in training technical personnel in educational and other training settings for educating technical personnel on the appropriate use of the kits. Certainly, more expansive language carving out the use of the kits not just during an active investigation, but also during reasonably related training, would have gone a long way to avoid protracted litigation. Similarly, licensees should aim to obtain licenses that cover not only the locations where the licensed products are expected to be made and sold, but also places where intermediate activities, such as assembly and perhaps event intermediate storage, take place.

In litigation, the decision has particular importance for companies that engage in distributed manufacturing in the U.S. and abroad. In theory, the ruling limits contributory liability for accused multinational infringers, as it requires the supply of more than a single component to support a finding of infringement. Accused infringers exporting more than one component that can be characterized as a staple or commodity of a multicomponent system are left to await further developments on what constitutes a "substantial portion" under the statute. Further clarification about how to quantify components is needed to determine what evidence is required to avoid liability. Plaintiffs considering infringement theories based on the export of a single component, on the other hand, may want to refocus their inquiry on whether the component may fall within the scope of Section 271(f)(2) as an "especially made" component. If an argument under Section 271(f)(2) is not available but the single component is key to the operation of the patented invention, plaintiffs may have a more challenging time making their case.

Endnotes

1. The parties to the original license were Promega and Applied Biosystems. Applied Biosystems, was also a defendant and petitioner in the case, and is now a wholly owned subsidiary of Life Tech.

2. Justice Alito and Justice Clarence Thomas concurred with the opinion in all but one part. Chief Justice John Roberts did not take part in the decision.

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