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Inducement of Patent Infringement by Export – One is Never Enough

March 15, 2017

In its most recent foray into patents, the Supreme Court continued its recent line of decisions interpreting laws to limit the international reach of U.S. intellectual property protection.  The holding can be summarized in what sounds like a song title: “One is Never Enough”…at least when considering whether export of a single component for foreign assembly constitutes inducement of infringement of a U.S. patent.  The opinion in Life Technologies Corp. et al. v. Promega Corp. (Case 14-1538, Feb. 22, 2017) also continued another common theme – the unanimous reversal of the Federal Circuit, the U.S. Court of Appeals tasked with reviewing patent cases.

Promega owned a patent for DNA test kits.  The patented kits required five components; Life manufactured four in Europe, while the fifth (and most important) was made in the U.S.  Life shipped the final component to Europe for inclusion in the kits that were then also sold there.  Promega asserted Life owed royalties (Life already had a license to Promega’s patent for U.S. kits) because Life’s activities in the U.S. were enough to constitute an infringing act with respect to the European kits and thus, it argued, those kits should also be considered part of the royalty base.

The statute at issue was Section 271(f)(1) of the Patent Act, an extraterritorial counterpart of an earlier section of that statute dealing with domestic patent inducement.  Section 271(f)(1) prohibits supplying from the United States “all or a substantial portion of the components of a patented invention” with an intent those components be combined outside the U.S. in a way that would have infringed the patent if combined here.

The crux of the case was whether the term “substantial” was qualitative, and thus a matter of importance, or quantitative, and thus purely numerical.  The Federal Circuit and the Supreme Court both recognized an ambiguity in the term “substantial” in light of dictionary definitions that encompassed both possibilities.  The Federal Circuit applied a qualitative reading on the basis that the statute’s alternative reference to “all components” would be superfluous if a purely quantitative meaning was intended.

The Supreme Court unanimously found the Federal Circuit was incorrect, holding instead that the term was purely quantitative.  It reached that decision by looking at Section 271(f)(2), a counterpart to 271(f)(1), that addresses what domestically would be considered contributory infringement.  Section 271(f)(2) specifically refers to “any component” that was specially made or adapted and that is not a staple article.

Ultimately, because Life supplied only a single component, it necessarily did not meet the statutory language of 271(f)(1) and thus did not have an infringing product on which royalties would be due under its license.  The Supreme Court did not, however, determine how many components are necessary to be a substantial number, only that it could never be just a single component.  Additionally, although Section 271(f)(2) was apparently not at issue in this case (presumably because the important component made in the U.S. was not specially made or adapted for use in the patented invention), companies should use caution and consult experienced patent counsel to consider the implication of all sections of the Patent Act that could result in prohibited activities within the U.S., even when the final product is being assembled abroad.

The Promega decision is just one of several over the past few years in which the Supreme Court has construed statutes to limit the reach of U.S. patent and other intellectual property laws beyond the U.S. border.  Whether this trend continues as other unresolved issues come before them, such as patent exhaustion based on licenses to foreign patents, remains to be seen.

© 2017 McNees Wallace & Nurick LLC
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