Christina Schwarz Yvonne Stoddard January 9 2017 Supreme Court hears oral argument on infringement liability for US exporters Venable LLP | Intellectual Property - USA Christina Schwarz, Yvonne Stoddard Intellectual Property IntroductionFactsSupreme Court briefing and oral argumentCommentIntroductionOn December 6 2016 the Supreme Court heard oral argument on the interpretation and application of 35 USC Section 271(f)(1) in Life Technologies Corporation v Promega Corporation. At issue is whether the export from the United States of a single component of a patented multi-component invention, which is later assembled outside the United States, qualifies as an infringing act under 35 USC Section 271(f)(1).35 USC Section 271(f)(1), which imposes infringement liability on US manufacturers that supply components of patented inventions for use abroad, provides as follows:"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 parties' dispute focuses on the interpretation of the statutory language "substantial portion of the components of a patented invention", and specifically whether determining whether a given component constitutes a 'substantial portion' requires:a quantitative assessment of the number of components;an evaluation of the component's subjective importance; orboth of the above.Petitioners Life Technologies Corporation, Invitrogen IP Holdings, Inc and Applied Biosystems, LLC (collectively, 'LifeTech') argue that, contrary to the Federal Circuit's conclusion, a single commodity component cannot satisfy the 'substantial portion' requirement of the statute. Respondent Promega Corporation contends that the Federal Circuit correctly held that this requirement may be satisfied by a single component where the component is "very important or essential" to the patented invention.FactsPromega owns and licenses patents that relate to DNA amplification, including the 'Tautz patent'. The Tautz patent claims a kit with five components, one of which is a polymerase enzyme with non-infringing uses. Promega's competitor LifeTech manufactures genetic testing kits that contain all five components of the claimed kit. The polymerase component of LifeTech's kits is manufactured in the United States and then shipped to the United Kingdom, where the kits are assembled and sold worldwide.Promega sued LifeTech for infringement in the US District Court for the Western District of Wisconsin. The district court held that LifeTech could not be liable for infringement under Section 271(f)(1) because it exported from the United States only one component of the multi-component kit claimed in the Tautz patent ‒ the polymerase ‒ whereas the statute requires exporting at least two components to satisfy the 'substantial portion' requirement. The district court also vacated an earlier jury verdict awarding Promega $52 million in lost profits for wilful infringement based on worldwide sales of the infringing kits.The Federal Circuit reversed the district court's decision. Relying on the dictionary and ordinary meanings of 'substantial' as 'important' or 'essential', the Federal Circuit concluded that the 'substantial portion' element of Section 271(f)(1) does not require at least two components. Because LifeTech's testing kits would be inoperable without the polymerase component, the Federal Circuit reasoned that the polymerase constitutes a substantial portion of the claimed invention.LifeTech's petition for certiorari to the Supreme Court was granted on the question of whether the Federal Circuit had erred in holding that supplying a single commodity component of a multi-component invention from the United States is an infringing act under 35 USC Section 271(f)(1), exposing the manufacturer to liability for all worldwide sales.Supreme Court briefing and oral argumentIn its Supreme Court briefs LifeTech argues that 'substantial portion' refers to the quantity of components supplied, not their subjective importance. According to LifeTech and the United States ‒ as amicus curiae (friend of the courts) supporting LifeTech ‒ that language means "a large percentage closely approximating all". LifeTech argues that the Federal Circuit's analysis, which considered whether the invention would be operable without the component at issue, cannot be correct, as nearly all inventions will be inoperable without one of their components.LifeTech asserts that its interpretation is supported by Section 271(f)(2), which expressly provides for liability for the supply of "any component" (ie, a single component), but only where 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". As Section 271(f)(1) does not include similar restrictions, LifeTech reasons that it could not have been intended to apply to the supply of a single commodity component, such as the polymerase in this case.Additionally, LifeTech contends that the Federal Circuit's broad application of the statute improperly expands the extraterritorial scope of US patent law and distorts the incentives for multinational companies that supply components from US facilities, potentially causing long-term economic damage and disrupting the international system of patents.Finally, LifeTech argues that liability based on the supply of a single component is in direct contravention of the legislature's intent. According to LifeTech, Congress enacted Section 271(f) to prevent the Deepsouth loophole, where all or substantially all of the components of a patented invention (not merely a single component) are manufactured in the United States and shipped abroad for final assembly.In opposition, Promega responds that Section 271(f) requires a case-specific factual analysis that examines both the number of components and their relative importance to the patented invention ‒ not a rigid numerical threshold. According to Promega, 'substantial' can have both a quantitative and qualitative meaning. Promega argues that a single component that is important to the overall invention may constitute a substantial portion under certain circumstances, and observes that over the course of the district court trial, LifeTech's own witnesses described the polymerase component of its kits as a "main" and "major" component.Further, Promega argues that the 'active inducement' requirement of Section 271(f)(1) was included primarily to prevent US manufacturers from avoiding patent liability by exporting components with the intent to induce the making of a patented invention. According to Promega, entities such as LifeTech which deliberately seek to avoid infringement liability by assembling patented inventions outside of the United States are the specific targets of Section 271(f)(1). Finally, Promega disputes LifeTech's assertion that extraterritoriality is implicated in this case because the Supreme Court is regulating only LifeTech's domestic conduct.Based on questioning from the justices during oral argument, the Supreme Court has concerns about adopting an interpretation of 'substantial portion' that fails to provide notice to US manufacturers, and requires a complex, fact-specific analysis. The justices' questions also demonstrated an interest in how the Supreme Court decision will affect the free flow of commerce and patent rights, both within and outside the United States.CommentUS manufacturers and exporters are closely following this case, seeking clarity on how the courts will assess what constitutes a 'substantial portion' of an invention, what factors will be considered in this analysis and how the Supreme Court decision may affect their global business practices.For further information on this topic please contact Christina Schwarz or Yvonne Stoddard by telephone (+1 212 218 2100) or email (email@example.com or [email protected]). The Fitzpatrick, Cella, Harper & Scinto website can be accessed at www.fitzpatrickcella.com.