"Solo Shot: Is Supplying Only One Staple Component of a Patented Invention for Assembly Overseas Enough to Trigger Infringement Liability?" ABA Preview
Solo Shot: Is Supplying Only One Staple Component of a Patented Invention for Assembly Overseas Enough to Trigger Infringement Liability?
CASE AT A GLANCE
Section 271(f)(1) of the Patent Act imposes patent infringement liability for supplying “all or a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components” overseas. The question for decision is whether “substantial portion of the components” requires at least two components to be supplied from the United States or, instead, whether supplying only a single staple component of the patented invention can result in liability.
Life Technologies Corp. v. Promega Corp.
Docket No. 14-1538
From: The Federal Circuit
Argument Date: December 6, 2016
May a supplier who supplies a single, commodity (“staple”) component of a multi-component invention from the United States be held liable for patent infringement under 35 U.S.C. § 271(f)(1), exposing the supplier to liability for all of its worldwide sales?
Respondent Promega Corporation (Promega) is an exclusive licensee under U.S. Reissue Patent No. RE37,984, referred to in the case as “the Tautz patent,” which is directed to a kit for “STR profiling,” useful in forensics, paternity testing, and clinical and research applications. “STR” stands for “short tandem repeat,” which is a repeat of a particular nucleotide sequence occurring at a “locus” of a DNA strand. The number of STRs within a locus varies highly from one person to another; for example, as illustrated by the Federal Circuit, one person may have 11 repeats of the “ATT” sequence at a given STR locus, while another person may have 14 repeats of that sequence at that same locus. Such differences are the source of “polymorphism”— genetic differences between individuals—and allow analysts to determine the likelihood that a DNA sample originated from a given person.
STR profiling identifies STRs at multiple loci, and performing such an analysis requires making copies of the loci to obtain a detectable amount of DNA for analysis. This process of making copies is known as “DNA amplification,” and one method to perform DNA amplification is called a polymerase chain reaction (PCR). In PCR, a pair of primers marks the start and finish of the STR locus to be copied, and an enzyme then replicates the strand of nucleotides between the primers. One such enzyme is “Taq polymerase,” named after the bacterium Thermos aquaticus.
Claim 42 of the Tautz patent is directed to an STR profiling kit that includes five components: (1) a mix of primers; (2) a reaction mix containing the nucleotide building blocks that will produce the copied DNA; (3) a buffer solution, providing the biochemical conditions needed for copying; (4) the above-described enzyme, such as the Taq polymerase; and (5) control DNA to verify the accuracy of the copies. The kit was also covered in four other patents, owned outright by Promega (collectively the Promega patents).
In 2006, Promega granted petitioners Life Technologies Corporation, Invitrogen IP Holdings, Inc., and Applied Biosystems, LLC (collectively LifeTech) a license under the Promega and Tautz patents to make and sell the patented kit for legal proceedings, but not for other uses. Upon discovering that LifeTech then sold the patented kits outside the licensed field of use, Promega sued LifeTech for patent infringement.
LifeTech supplied Taq polymerase to its manufacturing facility in the United Kingdom, which then supplied the remaining four components to produce the patented kits for sale worldwide. Promega contended that this activity constituted infringement of both the Tautz patent and the Promega patents under 35 U.S.C. § 271(f)(1), and sought damages for both domestic and foreign sales.
On summary judgment, the district court ruled that LifeTech’s unlicensed sales of the STR profiling kits constituted direct infringement of claim 42 of the Tautz patent and of certain claims in the Promega patents, and it rejected LifeTech’s invalidity defenses against the Promega patents, as well as a license defense against all the patents based on the 2006 license. LifeTech did not challenge the validity of the Tautz patent.
After a trial on the issues of damages and willful infringement, the jury found: (1) all of LifeTech’s worldwide sales, stipulated at $707,618,247 for the relevant infringement period, resulted from acts constituting infringement under 35 U.S.C. § 271(a) (direct infringement as to domestic sales) as well as under § 271(f)(1) (infringement as to sales overseas); (2) 10 percent of LifeTech’s sales were for unlicensed uses; and (3) Promega was entitled to $52 million in lost profits.
LifeTech then filed a motion for judgment as a matter of law (JMOL), contending that § 271(f)(1) did not apply to its conduct because it shipped only a single, staple component from the United States, and because “to actively induce” under that statute required involvement of a third party. As to the § 271(a) claim, LifeTech contended that Promega did not sustain its burden to prove that kits were made, used, sold, or offered for sale in the United States. The district court agreed, granting the JMOL motion, vacating its prior finding of infringement, and denying Promega’s motion for reconsideration or, in the alternative, a new trial.
Both parties appealed to the United States Court of Appeals for the Federal Circuit. Promega appealed the granting of LifeTech’s JMOL motion and the denial of its own post-trial motions, while LifeTech challenged the rejection of its invalidity and license defenses.
On appeal, the Federal Circuit ruled that all asserted claims of the Promega patents were invalid for failure to comply with the enablement requirement of 35 U.S.C. § 112. As to the Tautz patent, however, the Federal Circuit reversed the grant of JMOL, affirmed the rejection of LifeTech’s license defense, and remanded for a determination of damages based upon infringement of the Tautz patent.
In reversing the grant of JMOL as to the § 271(f)(1) infringement claim, and in rejecting LifeTech’s “third party” argument, the Federal Circuit majority reasoned that § 271(f)(1) “is written such that an activity – ‘the combination’ – is the object of ‘induce,’ not a person.” The Federal Circuit also cited a definition of “induce” that “encompasses the more broad concept of ‘to bring about, to cause.’” Chief Judge Prost, in dissent, disagreed with the majority’s conclusion, asserting that inducement liability does, in fact, require a third party, citing definitions in two previous Supreme Court decisions.
The Federal Circuit next discussed LifeTech’s argument that it could not be liable under § 271(f)(1) because it supplied only a single component of the patented kits from the United States. Discerning the ordinary meaning of the statutory text “all or a substantial portion of the components of a patented invention,” the Federal Circuit cited a dictionary definition of “substantial” as “important or essential,” and found that nothing in that definition “suggests that it necessarily requires a certain quantity or that a single component cannot be a ‘portion’ of a multi-component invention.” The Federal Circuit rejected LifeTech’s argument that use of the term “such components” (plural form) elsewhere in the statute “indicates that more than one component must be supplied outside the United States for § 271(f)(1) to apply,” finding that “such components” refers to “the components of a patented invention,” not what must be supplied from the United States for liability to arise. The Federal Circuit also disagreed with LifeTech’s argument that use of the singular form “component” in § 271(f)(2) meant that the plural form “components” in subsection (f)(1) required more than one component to be supplied, reasoning that subsections (f)(1) and (f)(2) “employ the terms in different contexts, and thus the use of ‘component’ in [subsection (f)(2)] does not control the meaning of ‘components’ in [subsection (f)(1)].”
The Federal Circuit next addressed LifeTech’s statutory construction arguments predicated upon Microsoft v. AT&T Corp., 550 U.S. 437 (2007). In Microsoft, AT&T held a patent on “an apparatus for digitally encoding and compressing recorded speech.” Microsoft denied liability for infringement of that patent as to foreign sales because it did not load the subject software (Windows) on computers and ship them overseas. Instead, Microsoft supplied a master disk to a foreign manufacturer, who then used the master disk to generate copies of Windows that were installed on foreign-made computers sold overseas. The Supreme Court framed the issues on appeal as follows: “First, when, or in what form, does software qualify as a ‘component’ under § 271(f)? Second, were ‘components’ of the foreign-made computers ‘supplied’ by Microsoft ‘from the United States’?” The Supreme Court sided with Microsoft’s position on both issues. As to the first issue, the parties did not dispute the concept that at some point, software could be a “component” under § 271(f). “The parties disagree[d], however, over the stage at which software becomes a component.” “Microsoft and the United States argue[d] that only a copy of software, not software in the abstract, can be a component.” The Supreme Court agreed, holding: “Abstract software code is an idea without physical embodiment, and as such, it does not match § 271(f)’s categorization: ‘components’ amenable to ‘combination.’” As to the second issue, the Supreme Court observed: “[T]he copies of Windows actually installed on the foreign computers were not themselves supplied from the United States.” Addressing AT&T’s arguments, the Court began with the comment: “The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law.” It then reasoned: “If AT&T desires to prevent copying in foreign countries, its remedy today lies in obtaining and enforcing foreign patents.” AT&T had asserted a policy-based argument, asserting that adopting Microsoft’s position would create a “loophole” through which a software manufacturer could easily circumvent § 271(f), by supplying a master to foreign manufacturers, rather than making installation copies in the U.S. The Supreme Court, however, observed that the “loophole” described by AT&T was a matter for Congress, not the Court, to consider. Justice Stevens, the lone dissenter in Microsoft, remarked: “But if a disk with software inscribed on it is a ‘component,’ I find it difficult to understand why the most important ingredient of that component is not also a component,” and: “[I]t seems to me that an indirect transmission via a master disk warehouse is likewise covered by § 271(f).”
LifeTech argued to the Federal Circuit that two footnotes in Microsoft emphasized differences between § 271(f)(1) and § 271(f)(2). In the first cited footnote, the Supreme Court “observed that the two subsections ‘differ, among other things, on the quantity of components that must be ‘supplie[d] . . . from the United States’ in order for liability to attach.’” But the Federal Circuit stated that LifeTech “ignore[d] the next two sentences of the Court’s opinion,” both of which include the phrase “Paragraph (2), like (1)” (emphasis added), and the singular form “component,” thus “tend[ing] to support the conclusion that § 271(f)(1) may apply when a single ‘component’ is involved.” In the next cited Microsoft footnote, the Supreme Court discussed the applicability of § 271(f)(2) to a single component, but the Federal Circuit held that this footnote did not suggest differences between subsections (f)(1) and (f)(2) “in that it [subsection (f)(1) necessarily requires the export of more than one component.” Ending its discussion of LifeTech’s Microsoft-based argument, the Federal Circuit observed that the Supreme Court could have decided the case by ruling according to LifeTech’s construction of § 271(f)(1), but that it chose not to do so. “In the absence of express guidance by the Supreme Court,” concluded the Federal Circuit, “we will not contravene the ordinary meaning of the statute and categorically exclude the ‘supply’ of a single component of a patented invention from the scope of § 271(f)(1).”
Finally, as to § 271(f)(1), the Federal Circuit held that the record supported the jury’s finding that the Taq polymerase supplied by LifeTech was a “substantial portion” of the accused STR profiling kits. It cited trial testimony from a LifeTech witness, who “admitted that the Taq polymerase is one of the ‘main’ and ‘major’ components of the accused kits.” The Federal Circuit commented: “Without Taq polymerase, the genetic testing kit recited in the Tautz patent would be inoperable because no PCR could occur.”
Chief Judge Prost’s dissent only addressed LifeTech’s “third party” argument (discussed supra); it did not address LifeTech’s “single component” argument.
Regarding the direct infringement claim under § 271(a), the Federal Circuit observed that the district court had granted JMOL to LifeTech, despite “acknowledg[ing] that Promega had introduced evidence that at least some of LifeTech’s products infringed under § 271(a),” because “Promega had not shown that all its sales were infringing.” The Federal Circuit reversed the district court because LifeTech “admitted that some of the sales of its accused genetic testing kits in the United States were ‘technically an infringement’ of Promega’s patents” and because “Promega presented evidence to the jury showing sales of LifeTech’s accused kits in the United States.” On that basis, the Federal Circuit held that substantial evidence supported the jury’s verdict that LifeTech’s accused kits infringed the Tautz patent under § 271(a) as well as under § 271(f)(1).
In response to the Federal Circuit’s decision, LifeTech filed a petition for certiorari as to its “third party” and “single component” arguments concerning § 271(f)(1); it did not seek review of the Federal Circuit’s conclusion as to the § 271(a) claim. In October 2015, during the petitioning stage, the Supreme Court invited the Solicitor General “to file a brief in this case expressing the views of the United States.” In June 2016, the Supreme Court granted LifeTech’s petition, but only as to the “single component” argument. In September 2016, LifeTech filed its brief and the United States filed its amicus curiae brief supporting LifeTech. In October 2016, Promega filed its respondent’s brief, addressing arguments in both of the other briefs.
Section 271(f) of the Patent Act provides:
(1) 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.
(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined 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.”
Congress enacted § 271(f) in the Patent Law Amendments Act of 1984, in response to Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972). In that case, the defendant had made all the components of a patented shrimp deveining machine, but had sold those components to foreign manufacturers, for assembly of the components into completed machines that were then sold in foreign countries. In rejecting the patentee’s argument that the defendant’s conduct constituted patent infringement, the Supreme Court reiterated earlier decisions where it held that the patent law “protects only against the operable assembly of the whole and not the manufacture of its parts,” and that it perceived nothing in the law indicating an intent to broaden a patent’s exclusionary rights beyond that stated scope. Further, the Court declared: “Our patent system makes no claim to extraterritorial effect; these acts of Congress do not, and were not intended to, operate beyond the limits of the United States; and we correspondingly reject the claims of others to such control over our markets.”
The legislative history of § 271(f) recognized “the need for a legislative solution to close a loophole in [the] patent law.” As stated by the Federal Circuit in the Life Technologies appeal: “Section 271(f) closed the Deepsouth ‘loophole’ by expanding the reach of the patent statute to capture certain domestic precursors to extraterritorial activity not previously considered infringing.” “Congress,” added the Federal Circuit, “chose language in § 271(f)(1) broader than the particular facts of Deepsouth.” Thus, the statute does not require the supplying of “all” components of a patented invention to trigger liability. In § 271(f)(2), for instance, supplying even only a single component triggers infringement liability if that component “is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use,” intending that it will be combined overseas with other components “in a manner that would infringe the patent if such combination occurred within the United States.”
In Life Technologies, the Supreme Courtis expected to resolve the question: “But could liability still result under § 271(f)(1) as to only a single component, even if that component is a staple article and thus outside the reach of § 271(f)(2)?
Before the Court, LifeTech argues that “all or a substantial portion of the components” should be interpreted to mean “all or a large percentage closely approximating all of the components.” It asserts that the Federal Circuit’s interpretation “allows for worldwide liability based on the U.S. supply of a single commodity component,” and that instead of promoting U.S. manufacturing, which was the purpose in enacting § 271(f), “the Federal Circuit’s overbroad interpretation would have exactly the opposite effect, forcing domestic manufacturers of commodity supplies to either forego selling components to foreign assemblers or to relocate offshore to mitigate or avoid U.S. liability.”
LifeTech asserts that the Federal Circuit’s statutory construction “does violence to the plain text of § 271(f)(1)” because the phrase “substantial portion” modifies “components of a patented invention.” LifeTech characterizes as “breathtakingly broad” the purported construction by the Federal Circuit that “substantial portion” means “any individual component necessary to the operation of the invention” would make virtually every component a “substantial portion,” stating that “[a] component will rarely, if ever, be unnecessary to the functioning of that invention.” LifeTech finds further fault with the Federal Circuit’s construction, arguing that the term “all,” in the phrase “all or a substantial portion of the components,” refers “to the number of components exported, rather than their qualitative importance,” and that the standard definition of “portion” is likewise a quantitative term.
LifeTech also reiterates its arguments, discussed supra, regarding the comparison between subsections (f)(1) and (f)(2), including the footnotes from Microsoft v. AT&T, which it acknowledges as “not essential to the Court’s holding.” Nevertheless, LifeTech asserts that the footnotes “powerfully reflect the most natural way to read these two subsections.”
LifeTech devotes an entire section of its brief arguing that the Federal Circuit’s construction of § 271(f)(1) contravenes the presumption against extraterritoriality mentioned by the Supreme Court in its Microsoft and Deepsouth decisions. According to LifeTech, Microsoft rejected the argument that § 271(f) only addresses conduct within the United States, and that the presumption is therefore inapplicable. LifeTech contends: “[t]he fact that the polymerase component was supplied from the U.S. does not render the presumption inapplicable,” but that it instead, when considered “in conjunction with the language, structure, and purpose of the statute[,] requires more domestic conduct than manufacturing and selling a single component to justify U.S. patent law’s application to foreign conduct.” LifeTech deems the Federal Circuit’s interpretation of § 271(f)(1) as “vastly expand[ing] the territorial reach of the statute,” thereby “undermining the primacy and effectiveness of foreign patent laws within their sovereign territories.”
In its amicus curiae brief, the United States contends that “all or a substantial portion of the components” means “all or something close to all of the components, rather than just one.” The United States expresses that this case involves issues of concern to the Department of Commerce because the questions raised implicate “[t]he application of U.S. patent law to the participation of U.S. exporters in foreign markets,” which “raise issues concerning the competitiveness of American companies abroad and the respective roles of the United States and other nations’ patent laws.”
The United States asserts that “‘all or a substantial portion of the components’ . . . can reasonably be viewed as the functional equivalent of illicitly manufacturing the patented invention in the United States for export,” and that § 271(f)(1) should be interpreted “to reach situations that involve approximately the same degree and kind of evasion as the conduct at issue in Deepsouth,” therefore rendering the statute inapplicable “when the product is made abroad and the domestically-supplied portion is not even close to the total number of components.”
The United States acknowledges that “[a]ny viable interpretation of Section 271(f)(1) accordingly will present some line-drawing problems,” since attempting a bright-line cutoff such as, for instance, 75 percent of the invention’s components, “would invite evasion . . . of a statute that is designed to prevent evasion.” Nevertheless, the United States defends its interpretation as “workable, easy to understand, and faithful to Congress’ anti-evasion purposes.” The United States deems its interpretation superior to that of the Federal Circuit, regarding which it contends “the need for drawing lines would potentially arise in every single-component case.”
In response, Promega asserts positions sharply contrasting with those of both LifeTech and the United States. Promega leads with an argument that “whether a given portion is ‘substantial’ depends not only on the number of components involved, but also on their qualitative importance or value to the invention as a whole.” In support of that argument, Promega cites dictionary definitions of “substantial” and “portion,” and contends that when interpreting similar language in other statutes, “[n]o court has held that to be ‘substantial,’ a ‘portion’ must consist of more than one item, or that it must amount to a ‘quantitatively large percentage’ . . . or ‘something close to all’ . . . of the whole.” Included among Promega’s list of other statutory contexts is the copyright doctrine of fair use, which requires courts to consider, among other factors, the “amount and substantiality of the portion used” (17 U.S.C. § 107), involving a qualitative as well as quantitative evaluation of the copied material. Promega stresses that the question of whether a single component is a “substantial portion” of the invention’s components is fact-intensive, residing within the province of the jury.
Responding to LifeTech’s and the United States’s arguments concerning the presence of the word “all” in § 271(f)(1), Promega argues that “the disjunctive ‘or’ presumptively signals Congress’s intent to give the two statutory terms – ‘all’ and ‘substantial portion’ – their separate, normal meanings.” Promega further argues that nothing in the statute demands that “substantial portion” must have a meaning similar to “all,” and that courts have not construed “substantial portion” in such a manner.
Promega echoes the Federal Circuit in its treatment of LifeTech’s argument regarding the words “such components” in the statute, adding that “[a] word modified by the demonstrative adjective ‘such’ generally refers back to ‘the last antecedent, unless the sense of the passage requires a different construction.’” “Here,” asserts Promega, “the last antecedent is the phrase ‘the components of the patented invention,’ and the statutory context does not require a different result.”
Promega charges that LifeTech and the United States ignored the role of 35 U.S.C. § 271(b) (regarding inducement to infringe) and § 271(c) (regarding contributory infringement) in the framing of § 271(f)(1) and § 271(f)(2), respectively. Specifically, Promega discusses that in a Senate hearing, Gerald J. Mossinghoff, then the USPTO Commissioner, proposed that Congress revise the initial version of the pending bill to incorporate the principles of inducement and contributory infringement. Promega relates that responsive to that suggestion, the bill’s sponsor incorporated the principles codified in § 271(b) and (c). Using that to counter LifeTech’s and the United States’s arguments comparing subsections (f)(1) and (f)(2), Promega states: “there was a very simple reason why Congress used the singular ‘component’ in § 271(f)(2) but not in § 271(f)(1): Section 271(c), which served as the model for § 271(f)(2), is also phrased in the singular.” Promega adds that it is possible to incur liability under both § 271(b) and (c), and thus also under both subsections (f)(1) and (f)(2), when a single component is supplied that is a non-staple component.
In response to LifeTech’s and the United States’s policy arguments warning of negative ramifications on international commerce that would result from adoption of the Federal Circuit’s expansive interpretation of § 271(f)(1), Promega argues that the incorporation of § 271(b) principles into § 271(f)(1) means that application of the statute is confined to cases of intentional conduct, i.e., where an accused infringer possesses both knowledge of the patent and specific intent to combine the domestically-supplied components into the patented invention. Further, Promega asserts that by starting with the text of § 271(b), the violation of which does not require any components, and then adding the requirement of “all or a substantial portion” of the components, Congress was not focused upon a quantitative approach. As a final response to the policy arguments, Promega argues that: (i) LifeTech and the United States cited no evidence of increased litigation or liability resulting from the Federal Circuit’s holding, even though the decision is close to two years old at the time of briefing; and (ii) any increased risk of jobs being moved abroad was inherent in the text of § 271(f) when it was enacted, and is nothing new.
Finally, Promega assails the workability of the statutory interpretations advanced by LifeTech and the United States, and describes what it perceives as the negative result of adopting those interpretations. Promega states: “the supposed predictability and precision of Life Technologies’ purely quantitative rule is a mirage. The only certainty is that fewer culpable actors will be liable for infringement, contrary to congressional intent.” Commenting on the concessions the United States expressed concerning its own interpretation, Promega adds: “a purely quantitative rule does both things to which the government objects: It both encourages circumvention and creates uncertainty.”
A diverse collection of entities filed additional amici briefs in the case. For example, the American Intellectual Property Law Association (AIPLA) filed in support of neither party, though articulating positions aligning with those of Promega. For instance, the AIPLA asserts that “[i]interpreting the statute as mandating a numerical minimum but then leaving that minimum unclear does not assist courts or litigants in assessing infringement under § 271(f)(1).” Another argument advanced by the AIPLA, not advocated by ether party, asserts that claim construction principles should be applied to guide the analysis of whether the accused infringer has supplied a “substantial portion of the components of the patented invention.”
With ever-increasing globalization of business interactions, many who export parts for assembly overseas will cast a watchful eye on how the Supreme Court resolves Life Technologies. Many likely share the same concerns voiced by the government, concerning anticipated impact of the case on the relationship between U.S. patent law and the patent laws of other nations, and whether a decision upholding the Federal Circuit’s interpretation of § 271(f)(1) will have any chilling effect on the willingness of domestic suppliers to export components for assembly overseas.
A decision that upholds the Federal Circuit’s interpretation could theoretically increase litigation activity over international business dealings, and lead to increased damages in cases applying § 271(f)(1), but empirical evidence indicating such results has not been brought to bear in Life Technologies. Furthermore, if such a decision echoes Promega’s view that specific intent is indeed an element that must be satisfied to prevail under § 271(f)(1), such an affirmation would erect a significant hurdle to succeeding under that statute, diminishing the likelihood of a sudden spike of § 271(f)(1) lawsuits being filed in the wake of the Supreme Court’s decision.
Some postulate that the Supreme Court granted certiorari in the case preparatory to again reversing the Federal Circuit, as has occurred frequently over the past few years. However, many of these reversals share a common theme of the Supreme Court discarding a categorical rule in favor of a multi-factor, or totality-of-circumstances, analysis. If that theme continues in Life Technologies, then the Supreme Court will affirm, not reverse, the Federal Circuit this time, since here the Federal Circuit refused to adopt a categorical rule governing the reach of § 271(f)(1).
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