Supreme Court limits liability for shipping parts of patented inventions abroad

by Thompson Coburn LLP

Thompson Coburn LLP

Generally, to infringe a U.S. patent, the infringing activity — the unauthorized making, using, offering to sell, selling, or importation — occurs within the United States. However, there are exceptions to this rule. Under 35 U.S.C. § 271(f)(1) and (2), one can infringe a U.S. patent based on activity occurring out of the U.S. in two instances: (1) if “all or a substantial portion of the components of a patented invention” are supplied from the U.S., or (2) if “any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article” is supplied from the U.S.

The recent case of Life Techs. Corp. v. Promega Corp. Slip. No. 14-1538 (U.S. Feb. 22, 2017) from the U.S. Supreme Court, may have limited one of those exceptions. In interpreting the Patent Act of 1952 the Supreme Court clarified that one cannot infringe a U.S. patent under 35 U.S.C. §271(f)(1) by exporting a single component of a patented invention. They held that a single component could not comprise “all or a substantial portion of the components of a patented invention.” Liability for exporting a single component of a patented invention could only be found under 35 U.S.C. § 271(f)(2), and only then, if that component is “especially made or especially adapted for use in the invention.”

The Supreme Court’s analysis

In this case, Promega was the exclusive licensee of a patent covering a genetic testing kit including a variety of components, the component at issue being Taq polymerase. Promega sublicensed the patent to Life Technologies but later sued Life Technologies for selling kits outside the scope of their license. Life Technologies did not manufacture or sell the complete kits within the U.S., but they did manufacture the Taq polymerase component in the U.S. and ship it to the United Kingdom where the entire kit was assembled. Promega therefore based their theory of infringement on 35 U.S.C. § 271(f)(1) alleging that the export of Taq polymerase met the requirements of liability for exporting “all or a substantial portion of the components of a patented invention.”

At the Supreme Court, Life Technologies argued that a single component, the Taq polymerase, cannot qualify as “all or a substantial portion of the components of a patent invention” in the meaning of the statute. Promega’s position, with which the Federal Circuit had agreed, was that a single component can be substantial, qualitatively, if important or essential under the dictionary meaning of the term substantial.

The Supreme Court analyzed the statute at issue and did agree that the term substantial could have a qualitative or quantitative meaning based on the ordinary meaning of the word. However, the Court looked at the context of the term “substantial” within the statute and found that, as used, it could only have a quantitative meaning. The Court looked to the phrase in which the term appears “all or a substantial portion of the components” and noted that “all” and “portion” are quantitative terms. The court further noted that the term “substantial” modified “the components” rather than the “patented invention” which further suggested a quantitative interpretation.

Having resolved the ambiguity in the term “substantial,” the Court refused to adopt the flexible case-by-case analysis proposed by Promega. Rather, the Court determined that with the ambiguity of the term “substantial” resolved, more ambiguity should not be introduced by a case-by-case analysis approach as to the importance or essential nature of a component.

Importantly, the Court held that, as a matter of law, exporting a single component cannot qualify as a “substantial portion” of a patented invention, and therefore exporting a single component cannot trigger liability under 35 U.S.C. § 271(f)(1). In reaching this holding, the Court looked to the language of the statute that referenced “components” in the plural and concluded that “specifying a substantial portion of ‘components,’ plural indicates that multiple components constitute the substantial portion.”

The Court also noted that 35 U.S.C. § 271(f)(2) applies in the case where a single “especially made or especially adapted” component was exported, and therefore an interpretation of § 271(f)(1) that required more than one component be exported allowed the two statutes to work in tandem. In the case of multiple components being exported, liability was controlled by § 271(f)(1) and required all or a substantial portion of the components to be exported. In the case of a single exported component, however, liability was controlled by § 271(f)(2) and required that the exported component be especially made or adapted for use in the invention.

The opinion, and the concurring opinion of Justice Alito, left open the number of components beyond one which would qualify as a substantial portion of the invention’s components.

What’s next?

Going forward, lower courts will be tasked with determining how many components count as a substantial portion of the patented invention, and the courts will have to make this determination without guidance from the Supreme Court.

This case illustrates the importance of having an intellectual property strategy that is driven by business considerations. For example, Promega would likely be better situated if it had sued in the United Kingdom using a domestic patent given the territorial nature of patent law. Gaining patent protection in foreign countries that may be manufacturing sites and/or important sales markets allows infringement suits in multiple jurisdictions rather than relying on the limited scope of 35 U.S.C. § 271(f)(1)-(2). Furthermore, this case illustrates the importance of careful license drafting and consideration of the potential business outcomes of entering into a license agreement with another party. Licensing Life Technologies to manufacture the test kits only in the U.S. may have resulted in different results.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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