Is the shipment of one commodity component from the United States for the foreign assembly and unauthorized sale of a patented, multi-component invention a violation of 35 U.S.C. § 271(f)(1)?
Under 35 U.S.C. § 271(f)(1), when a party, without the authority to do so, ships from the United States either “all or a substantial portion of the components of a patented invention” or “any component . . . that is especially made or especially adapted for use in the invention” in a way that would induce another party abroad to combine the component(s) to form the patented invention, that party commits patent infringement. Section 271(f)(1) prevents parties from evading domestic patent law when engaging in international transactions. The parties differ on how broad § 271(f)(1) should be construed. Life Technologies Corporation argues that courts should construe § 271(f)(1) narrowly to refer to the percentage of components for the invention that a party ships abroad. Promega Corporation, on the other hand, argues that the statute takes into account a combination of quantity and relative importance of the component(s) shipped abroad. The outcome of this case will determine the limits of 35 U.S.C. § 271(f)(1) and, consequently, the limits of private action in shipping materials abroad.
Questions as Framed for the Court by the Parties
35 U.S.C. § 271(f)(1) provides that it is an act of patent infringement to “suppl[y] . . . in or from the United States 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 the United States.” Despite this Court’s clear dictate that section 271(f) should be construed narrowly, Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007), the Federal Circuit held that Life Technologies is liable for patent infringement for worldwide sales of a multi-component kit made abroad because just a single, commodity component of the kit was shipped from the U.S.
The question presented is:
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 of its worldwide sales.
Promega Corporation (“Promega”) owns four patents for methods of amplifying particular “short tandem repeats” (“STR”) loci in a DNA strand and has an exclusive license over a fifth method for the same. Promega Corp. v. Life Technologies Corp., No. 10-cv-0281, at 5 (Fed. Cir. Dec. 15, 2014). The patents not only encompass protection for the methods of amplification but also for the determinations of which STR loci can be successfully amplified. See id. at 3–4. Each of these methods carry out the amplification process with the main goal of determining the multiple alleles in a person’s DNA. See id. at 3. Ultimately, these methods can be used to “create a DNA ‘fingerprint’ unique to [a particular] individual,” that can be used for genetic testing. Id.
Life Technologies Corporation et al. (“Life Technologies”) manufacture genetic testing kits that provide the several components needed to amplify STR loci. See Promega Corp. at 8–9. Law enforcement uses these kits for forensic investigations, and clinical and research institutions use them for medical purposes. See id. at 9. Several of the STR loci combinations that these kits can amplify are protected by the Promega patents. See id. at 8–9. One component that the kit contains is called Taq polymerase, which is the only component that Life Technologies manufactures in the United States. See id. at 9. After production of the Taq polymerase, Life Technologies then ships the component to its manufacturing facility in the United Kingdom for assemblage and sale worldwide. See id.
In 2006, Promega granted a Life Technologies subsidiary a non-exclusive cross license to use the patents for “Forensics and Human Identity Applications.” See Promega Corp. at 9. This license limited Life Technologies’ use of these patents to activities involving legal proceedings. See id. In 2010, Promega sued Life Technologies for selling the kits to parties who used them for activities not covered by the license. Id. at 9–10. The United States District Court for the Western District of Wisconsin held, among other things, that under the relevant statute Life Technologies did not “actively induce” another party to combine the components nor did Life Technologies ship a “substantial portion” of the components of the kits abroad. See id. at 22.
The United States Court of Appeals for the Federal Circuit reversed the trial court on both issues. See Promega Corp. at 22–23, 32. Specifically, the Federal Circuit held that the phrase “all or a substantial portion” does not exclusively refer to quantity of components but can also encompass the necessity of a component to the assembled, patented invention. See id. at 32. Further, it held that although to “induce” usually implies to induce another party, “inducement” may also mean to cause or to bring about. See id. at 23. Based on this interpretation, the Federal Circuit found that Life Technologies did induce the components’ assembly abroad. See id. Life Technologies appealed to the United States Supreme Court.
THE TEXT AND STRUCTURE OF 271(f)(1)
Life Technologies argues that the word choice and the structure of the text in § 271(f)(1) requires that courts read § 271(f)(1) in a quantitative way, as opposed to a qualitative way. See Brief for Petitioners, Life Technologies Corporation, et. al, at 15. Life Technologies posits that a quantitative interpretation of § 271(f)(1) asks courts to focus on the number of components supplied as opposed to the individual significance of the components. See id. at 16. Life Technologies argues that the structure and text of § 271(f)(1) supports a quantitative reading for several reasons. See id. at 15–17. First, Life Technologies argues that while “substantial” can be used to mean “important,” it is also often used synonymously with “large.” See id. at 16. Second, Life Technologies points out that in § 271(f)(1), the term “substantial” follows the term “all” and that “all” is a “quantitative term.” See id. at 17. Because of the order of “all” and “substantial,” Life Technologies posits that the only logical interpretation of § 271(f)(1) requires the court to look to the number of components as opposed to the importance of the components. See id. at 17. To bolster this argument, Life Technologies also notes that other federal statutes have similar language to § 271(f)(1), such as the Hydroelectric Power Development Act, and that the language in the those statutes has been interpreted in a quantitative way. See id. at 18.
To counter, Promega argues that § 271(f)(1)’s text requires a “case-specific factual analysis” regarding whether a component of an invention constitutes a “substantial” component. See Brief for Respondent, Promega Corporation at 16. To support this qualitative and quantitative reading of § 271(f)(1), Promega points to the statutes use of the terms “substantial” and “portion.” See id. at 18. Promega posits that the term “portion” means “a part of any whole” and thus a “substantial portion” is an important part of a whole. See id. Thus, Promega argues that under § 271(f)(1), a court must focus on both the number of components that make up the invention and the importance of the individual components. See id. at 19. To bolster its argument, Promega points out that there are statutes with similar language that have been interpreted to require both qualitative and quantitative significance. See id. As an example, Promega notes that the Internal Revenue Code defines a “tax return preparer” as a person who prepares all or “a substantial portion of a return or claim for refund.” See id.
THE PURPOSE OF 271(f)(1)
Life Technologies also maintains that the purpose of § 271(f)(1) requires the statute to be interpreted only with regards to quantity. See Brief for Petitioners at 33. Life Technologies argues that the Federal Circuit improperly construed the relationship between § 271(f)(1) and the Supreme Court’s decision in Deepsouth Packaging Co. v. Laitram Corp., 406 U.S. 518 (1972). See id. at 34. Life Technologies asserts that Deepsouth stood for the proposition that U.S. patent law did not apply when all of the components of a U.S. patent-protected invention were produced in the United States and then sold and assembled abroad. See id. Life Technologies also argues that § 271(f)(1) was enacted in clear response to Deepsouth. See id. Thus, Life Technologies contends that the purpose of § 271(f)(1) was to preclude instances when either all or important components of a patented invention were manufactured in the United States and not when only trivial components were manufactured in the United States. See id. at 35. Therefore, Life Technologies argues that the purpose of § 271(f)(1) is not to prevent single components from being manufactured in the United States and shipped abroad to be used in the assembling of a multi-component invention. See id. at 36.
In response, Promega argues that § 271(f)(1) was meant to not only close the “loophole” created in Deepsouth but also to go further and prevent individuals from circumventing U.S. patent law by sending components abroad for assembly. See Brief for Respondent at 27. Promega suggests that looking at Senate hearings and legislative history demonstrates that Congress intended § 271(f)(1) to be broader than the Supreme Court’s holding in Deepsouth. See id. at 29, 31. Thus, Promega argues that Congress never intended to limit § 271(f)(1) to only those instances when a certain number of components are produced within the United States. See id. at 30. Therefore, Promega contends that Congress intended § 271(f)(1) to prevent parties from circumventing U.S. patent law regardless of the number of components being produced in the United States. See id.
DOES THE PRESUMPTION AGAINST EXTRATERRITORIALITY APPLY?
The presumption against extraterritoriality is a form of statutory interpretation. When a Court invokes the presumption against extraterritoriality, it is noting that while Congress has the power to regulate U.S. citizens outside of the country, it will not assume that Congress intended its power to extend beyond the country’s borders. Thus, a court will only apply U.S. law to regulate citizens outside of the United States if Congress has made it clear that the statute is intended to apply outside of the country’s borders.
Life Technologies argues that the presumption against extraterritoriality applies with great force in the patent law context. See Brief for Petitioners at 25. Further, Life Technologies notes that U.S. patent law is not meant to “rule the world” or operate outside of the United States, except in very limited circumstances. See id. at 26. While Life Technologies concedes that § 271(f) expands U.S. patent law into foreign markets, Life Technologies maintains that it does so in a very limited way. See id. Thus, Life Technologies suggests that § 271(f)(1) should be interpreted in a way that would limit its international impact. See id. at 27. Life Technologies posits that § 271(f)(1) would have a minimal international impact if it is applied in a quantitative way. See id. Life Technologies argues that a more expansive reading of § 271(f)(1) would result in the U.S. patent law impacting foreign countries and governments’ access to products protected by U.S. patents. See id. at 29. Therefore, Life Technologies concludes that Promega’s expansive reading would potentially “lead to a type of U.S. patent imperialism.” See id. at 30.
On the other hand, Promega argues that presumption against extraterritoriality is not applicable in this case. See Brief for Respondent at 44. Promega notes that when enacting § 271(f), Congress focused on domestic suppliers who wanted to circumvent U.S. patent law. See id. Thus, Congress wanted to regulate the activity of domestic producers, not the sale of international products. See id. Promega furthers its argument by noting the two-step test that the Supreme Court adopted to determine whether the presumption against extraterritoriality weighs in favor of finding the presumption not to apply. See id. at 45. Promega focuses on the second prong of this test, which asks “whether the conduct relevant to the statute’s focus occurred in the United States.” See id. Promega argues that this prong is dispositive that the presumption against extraterritoriality should not apply because Congress, in enacting § 271(f) was only focusing on conduct that occurred domestically. See id.
EXTRATERRITORIALITY IN PATENT LAW
A group of intellectual property professors (“IP Professors”) argues that the United States has a strong policy against passing laws that will apply beyond the territorial boundaries of the United States. Brief of Amici Curiae Intellectual Property Professors, in Support of Petitioners at 2. Furthermore, IP Professors assert that this presumption is particularly strong in the context of patent law. See id. at 3. Although conceding that Congress does have the authority to regulate acts beyond the territorial limits of the United States, IP Professors assert that the presumption against extraterritoriality should hold “unless a contrary intent appears.” See id. This means, according to IP Professors, that Congress must specifically make a clear statement that the law applies outside the United States in order for a court to construe it as such. See id. at 3–4. IP Professors contend that the Federal Circuit has consistently failed to apply this presumption against extraterritoriality, not just in this case but in many others as well. See id. at 5. IP Professors conclude, then, that because Congress has not expressly noted its intention to regulate behavior abroad, the Supreme Court should uphold this non-extraterritoriality presumption. See id. at 9–10.
The New York Intellectual Property Law Association (“NYIPLA”) responds to IP Professors’ argument by contending that the presumption against extraterritoriality applies to conduct abroad, not to the impact abroad that occurs from actions within the United States. Brief of Amicus Curiae New York Intellectual Property Law Association ("NYIPLA"), in Support of Respondent at 12. That presumption, however, is not triggered in this case, NYIPLA continues, because the statute only addresses materials that are “supplie[d] . . . from the United States.” See id. So, NYIPLA contends, because the conduct in question is the shipping of materials from the United States, the extraterritoriality doctrine should not be implicated at all. See id. NYIPLA concludes that Life Technologies’ claimed worry about extraterritoriality is really a way to veil its concern that the broader reading of § 271(f)(1) will affect trade and foreign commerce. See id. at 5.
DO MODERN SUPPLY CHAIN SYSTEMS CIRCUMVENT UNITED STATES PATENT LAW
Agilent Technologies, Inc. (“Agilent”) denies the claim that extraterritorial shipping conduct, such as in the present case, is just a way to circumvent United States patent law. Brief of Amicus Curiae of Agilent Technologies, Inc., in Support of Petitioners at 17–18. Rather, Agilent contends, this is characteristic of the “supply chain management system,” a business model that was developed at least two years before Congress passed § 271(f)(1). See id. at 18–19. Agilent says that this model has helped to cut costs and mitigate the inefficiencies caused by natural disasters and other disruptions. See id. at 20–21. The use of a globally-sourced component-supply chain system, Agilent argues, has developed to competitively deliver high-quality products, and not to circumvent the law. See id. at 23–24. Therefore, Agilent concludes that to interpret § 271(f)(1) as the Federal Circuit has done would “profoundly affect companies that manufacture components in the United States.” See id. at 29.
NYIPLA disagrees, stating that Congress passed § 271(f)(1) specifically to close up the loophole of circumventing United States patent law by shipping components to a protected invention abroad for assembly. Brief of NYIPLA at 7. To construe the statute to allow such conduct, NYIPLA argues, would lead to “frustrate the purpose of the statute.” Id. at 9. NYIPLA asserts that it would encourage gaming the system by, for example, allowing a party to ship the most important components of an invention abroad in order to actively induce its combination, thereby getting around United States patent law. See id. at 10. This, NYIPLA says, is contrary to the purpose of the statute. See id. at 9.
- Angélique McCall, Life Technologies Corp. v. Promega Corp. makes its way to the Supreme Court, IPWatchdog (July 7, 2016).
- Dennis Crouch, Supreme Court to Decide Patent Export Case: Life Tech v. Promega, Patently-O (June 27, 2016).
- Dennis Crouch, Life Tech v. Promega: Inducing with Yourself, Patently-O (Oct. 15, 2015).