The Supreme Court decides how far U.S. patent laws can reach—international suppliers exhale slightly



February 24, 2017

Intellectual Property Alert

 

Author(s): Angelo Christopher, Jeffrey L. Costellia

The Supreme Court recently held that supplying a single component of a patented invention from the United States to be combined with other components overseas does not constitute patent infringement. This alert discusses what businesses—particularly those with international supply chains—need to know.

On February 22, 2017, in an opinion potentially affecting businesses with international supply chains, the Supreme Court held that supplying a single component of a patented invention from the United States to be combined with other components overseas does not constitute patent infringement under 35 U.S.C. § 271(f)(1). Under Section 271(f)(1), it is an infringement to supply “from the United States all or a substantial portion of the components of a patented invention . . . in such a manner as to actively induce the combination outside the United States.” Because it is not an infringement to make or use a patented product outside the U.S., Section 271(f)(1) is an important tool for patent holders to enforce their rights. Interpreting this provision, the Court concluded that the term “substantial portion” is a quantitative measure, rather than a qualitative measure. In other words, regardless of the relative importance of the various components of a patented invention, a single component cannot constitute a “substantial portion.”

The patent and supply chain at issue

Promega Corporation (the plaintiff), was the exclusive licensee of the Tautz patent, which claims a toolkit for genetic testing. Simplifying the technical details, the kit is used to take DNA samples and synthesize multiple copies of a particular nucleotide sequence through a process known as amplification. The kit generates DNA profiles that can be used by law enforcement, clinical and research entities. Importantly for this discussion, the kit contains five components: (1) a mixture of primers for marking DNA; (2) nucleotides for replicating strands of DNA; (3) Taq polymerase (an enzyme); (4) a buffer solution; and (5) control DNA.

Promega sublicensed the Tautz patent to LifeTech (the accused infringer), who manufactured four of the five kit components in the United Kingdom. LifeTech manufactured the other component—Taq polymerase—in the U.S. and shipped it to its U.K. facility to be combined with the other components. Promega sued LifeTech for patent infringement, alleging that Life Technologies was selling kits outside the scope of the license agreement. Specifically, Promega argued that LifeTech’s supply of Taq polymerase from the U.S. triggered liability under Section 271(f)(1).

Supplying a single component does not trigger liability

At trial, the jury found that Taq polymerase was a “substantial portion” of the patented invention, and in 2014, the Federal Circuit affirmed, holding that a single, important component of a patented invention can be a “substantial portion.” In reaching this result, the Federal Circuit reasoned that LifeTech’s expert testified that Taq polymerase was one of the “main” or “major” components of the kit and that the kit would be inoperable without it.

The Supreme Court rejected the Federal Circuit’s approach, instead adopting a bright-line rule that a single component can never be a “substantial portion” of a patented invention under Section 271(f)(1). Relying on various tools of statutory interpretation, the Court concluded that the term “substantial portion” is most reasonably read to require a quantitative measure, rather than a qualitative measure. For example, if a patented invention requires components A, B and C, supplying component A from the United States to be combined with B and C overseas is not patent infringement under the Court’s ruling. One of the Court’s goals for adopting this test was to avoid the uncertainty for courts and market participants caused by the Federal Circuit’s case-specific test. Under this approach, courts do not need to conduct the kind of fact-intensive inquiries that the District Court and Federal Circuit conducted regarding the importance of the Taq polymerase.

Looking ahead

While the Supreme Court provides a bright-line rule that a single component is not a “substantial portion,” it leaves open a number of unanswered questions. For instance, as a threshold matter, how does one parse out the “components” of a patented invention? Because Promega and LifeTech agreed on the components of the toolkit, the Court expressly declined to answer that question, including “whether and how that inquiry relates to the elements of a patent claim.” Further, if supplying a single component is insufficient, how many components would be sufficient? In a short concurrence, Justice Alito raises this question, noting that the majority does not suggest that any number greater than one is sufficient. This, of course, begs the question: would the outcome have been different if LifeTech had supplied two out of the five components? Or, did LifeTech need to supply three or more of the five components? These questions—and potentially others—will have to be answered by the lower courts. Businesses with international supply chains will have to follow these further developments to gain some of the additional certainty the Supreme Court attempted to provide with this ruling.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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