Importing products into the United States can be a tricky business especially when intellectual property rights are involved. One must be sure that any products imported into the U.S. are not covered by the claims of a competitor's patent(s) to avoid patent infringement. Not only must one be wary of any patents that apply to an imported product, but a U.S. patent could apply to the process producing the product even if the product is made (and the process is carried out) abroad.
Backing up a bit, 35 U.S.C. 271(a) states that “whoever without authority makes, uses, offers to sell or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent” infringes the patent. This means that for patented processes, infringement under this section requires the process be used or performed wholly within the U.S.
While Section 271(a) covers patented products and processes performed in the U.S., what happens if the imported product is not patented but the process, performed outside the U.S., to make the product is covered by the claims of the patent? Section 271(a) does not cover this type of situation, but luckily (for patentees) a 1988 amendment adding 271(g) does.
271(g) broadly states: “Whoever without authority imports into the United States or offers to sell, sells, or uses within the United States a product which is made by a process patented in the United States shall be liable as an infringer, if the importation, offer to sell, sale, or use of the product occurs during the term of such process patent.” On the other hand, 271(g) qualifies this sweeping language, explaining that a product is not “made” by a patented process if it was “materially changed by subsequent processes” or “became a trivial and nonessential component of another product.” If not “made” by a patented process, there is no infringement.
While this qualifying language seemingly provides a safe haven for accused infringers, for the most part, raising this argument as a defense has been unsuccessful in Federal Courts. One of the few Federal Circuit court cases ruling in favor of a 271(g) exception (i.e., a product not infringing due to a “material change”) is Eli Lilly and Co. v. American Cyanamid Co., 82 F.3d 1568 (Fed. Cir. 1996). This case involved a patent with method claims for producing compounds asserted against a similar compound imported by the Defendants into the U.S. The district court found that the compound in the patent differed significantly from the compound imported into the U.S. such that the process to convert the compound to the claimed compound would require changing “the physical or chemical properties of the product in a manner which changes the basic utility of the product[.]” This case fell under the “materially changed by subsequent processes” clause of 271(g).
Since Eli Lilly, the Federal Circuit has ruled on similar cases attempting to evoke a 271(g) exception. Many of these arguments have failed. In 2001, Defendant Biocorp argued that a 5% increase in the water content of starch-based products after processing constituted a “substantial change.” Biotec Biologische Naturverpackungen GmbH & Co. KG v. Biocorp, Inc., 249 F.3d 1341, 1350 (Fed. Cir. 2001). The Federal Circuit stated there was “substantial evidence whereby a reasonable jury could have found that the product made by the infringing process was not materially changed” thus affirming the infringement verdict and ruling against a 271(g) exception.
In a more recent case, the Federal Circuit again refused to apply a 271(g) exception. In Amgen, Roche imported MIRCERA® into the United States and claimed the imported product was materially different from the product produced by Amgen’s process claims. Amgen Inc. v. F. Hoffman-LA Roche Ltd, 580 F.3d 1340, 1377-79 (Fed. Cir. 2009). Roche compared its drug to the crude product resulting from the claimed processes, and not the FDA-approved Amgen drugs thus making them materially different. Roche also raised evidence its drug had more atoms, bonds, and different pharmacokinetic properties that made it different from Amgen’s drug. The Federal Circuit based its 271(g) decision on whether the differences between MIRCERA® and the product produced by the claims were material. Citing, Eli Lilly, the Court stated that “a significant change in a protein's structure and/or properties would constitute a material change.” Looking to the patent’s specification and asserted claims, the Federal Circuit Court decided the evidence was sufficient such that a jury could conclude the structural and functional differences were not material.
The moral of this story is that an importer of a product into the U.S. should know where his product has come from and how it was produced. Even if the product itself is free and clear of any potential patent entanglements, the process producing the product is a potential landmine especially in these days of nameless Chinese factories producing countless consumer goods for the U.S. market.
From a patentee's perspective, it could be difficult to learn (and to prove) how your competitors’ products are produced in far off lands. If you can prove your patented process is carried out abroad, it is possible to get a verdict of infringement for the knock off of a product produced by the process. This is especially true given the courts' above described reluctance to give a get out of jail free card to those crying their products have been materially changed.