Patent Territoriality: Is the IP World Getting Flatter?

It 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.