Cardiac Pacemaker v. Jude: Challenging 271(f) Liability for Components of a Method

Cardiac Pacemakers v. St. Jude Medical (On motion for en banc rehearing)

35 U.S.C. § 271 defines various types of patent infringement including direct infringement and contributory infringement. Section 271(f) details a special cause of action that captures some transnational activities. In particular, Section 271(f) creates a cause of action for supplying components of a patented invention to be assembled abroad.

In 2007, the Supreme Court ruled on a 271(f) case — finding that software per se cannot be considered a “component” under the statute. Microsoft v AT&T, 550 U.S. 437 (2007). In December 2008, the Federal Circuit decided Cardiac Pacemaker and held that the Microsoft v. AT&T did not overrule a prior precedential ruling that Section 271(f) does extend to cover components of a claimed method. “[T]he Supreme Court’s decision does not alter [the] holding” that “271(f) applies to components used in the performance of patented methods and processes.” The precedent in question is Union Carbide v. Shell. Although the Federal Circuit denied a request to rehear the Union Carbide case, Judges Lourie, Michel, and Linn, argued then that the issue was ready for en banc review. Judge Dyk also dissent from the en banc denial in Union Carbide.

In their decision, the panel (Judges Newman, Mayer, & Lourie) practically begged for en banc rehearing: “As a panel, we cannot reverse the holding of another panel of this court. We thus affirm the district court’s decisions relating to damages.” [Link] Of course, Judge Mayer signed-on to Judge Rader’s original Union Carbide opinion.

Now, the defendant (St. Jude) has asked for a rehearing en banc. If unsuccessful, we can expect a petition for a writ of certiorari. The FCBA and AIPLA joined forces in an amicus brief supporting the rehearing en banc and for a reversal of the Union Carbide analysis. Writing on behalf of Cisco, Intel, Microsoft, Oracle, and Symantec, Ed Reines also argues that the rule should be overturned. The tech companies argue in particular that the limit on exports creates major adverse economic incentives.

“A very common business arrangement is for United States companies to export instructions, materials, recipes, and other knowledge-exports to Asian and other off-shore locations where manufacturing processes takes place. An overbroad extraterritorial interpretation of § 271(f) to apply to process patents creates potential worldwide liability for companies based in the United States that export anything that can properly be considered a process step. Yet, if their competitors exist outside the United States, they are not exposed to liability for United States patent infringement for supporting foreign manufacturing processes.”

A good handful of judges have at least loosely indicated that they would support an en banc rehearing — making this a very likely candidate.



14 thoughts on “Cardiac Pacemaker v. Jude: Challenging 271(f) Liability for Components of a Method

  1. 14

    Dennis, I’m a little less convinced that en banc rehearing is likely here. It’s reasonable to assume that Judge Lourie “practically begged for en banc rehearing”, given his dissent from the denial of the en banc petition in Union Carbide. However, he alone could have sought initial en banc determination (perhaps he did and lost the vote).

    Furthermore, the panel made its decision nonprecedential. This makes en banc rehearing much less compelling, and it raises serious doubts that Judges Newman and Mayer desire en banc determination.

    See Fed. Cir. R. 35, Practice Notes: “NONPRECEDENTIAL OPINIONS. A petition for rehearing en banc is rarely appropriate if the appeal was the subject of a nonprecedential
    opinion by the panel of judges that heard it.”

  2. 13

    All Seeing Eye, bad faith is what generally gets you out of Noerr-Pennington land, but it’s usually an extremely high bar to clear.

  3. 12

    It is completely unacceptable that the FedCir is not forced to post everything in PACER like every other district court – for all to see!

    Come on FedCir, open up and get with the program, what do you have to hide?

  4. 11

    “Does this mean anyone can export reagents, etc. for use in the patented process abroad and import the information/product resulting therefrom to the US with impunity?”

    If it’s information, there is no preventing its importation with the patent system. If it’s an actual (unpatented) product made by a patented process, you can still export the reagents. And my understanding is that you can import the product of the patented process unless there’s no other way to make the product.

  5. 10

    In LG v. Quanta, the SC didn’t think the difference between process and device claims should affect the application of exhaustion. The Supremes wanted to discourage arful claim drafting. Maybe they’ll apply that same line of reasoning here and uphold the FC interpretation.

    As long as the exported device is a concrete component and is not software or “instructions”, “recipes”, or “knowledge-exports” (“materials” shouldn’t be excepted) and doesn’t have a significant non-infringing use, then I think Microsoft and Co really ought to be woofing at Congress to reign in 271(f).

    Bayer v. Housey attacks the same portion of 271(g) that Microsoft v. AT&T does, namely what constitutes a component. The question of what constitutes a patentable invention is different.

  6. 9

    What about cases where the process has no patentable “product” that could itself be protected? I’m thinking specifically of Bayer v. Housey, where information was held to not be a product of a patented process. Does this mean anyone can export reagents, etc. for use in the patented process abroad and import the information/product resulting therefrom to the US with impunity?

    In this sense Union Carbide ties in well with Bilski and Prometheus.

  7. 8

    anonymous, EG-
    You raise good arguments, but I still have a hard time reading Microsoft v. AT&T and believing that Union Carbide will survive.

    All Seeing Eye-
    I doubt the current Supreme Court would extend Noerr-Pennington by way of the California Motor Transport case. The trend for years now has been to whittle away at antitrust until there is almost nothing left. Remember in Verizon v. Trinko where Justice Scalia paid homage to monopoly. Also remember not very long ago a majority of the Court gave their blessing to vertical price fixing, overruling a 100-year old precedent. I’d bet the farm that antitrust would not apply to the so-called Coalition for Patent Fairness.

  8. 7

    Addressing whether the holding of Union Carbide remains viable would be a good idea. But it isn’t necessarily a forgone conclusion that 271(f) is inapplicable to patented processes. Standard Havens, which is cited in the posted amicus briefs addressed the impact of 271(g), not 271(f). Also, if Congress intended 271(f) to be limited to articles/machines/compositions, they could have said that. Instead, Congress said “patented invention.” In 271(e), there was a similar view that “patented invention” was limited to drugs, but SCOTUS ruled in Eli Lilly v Medtronic that the Hatch-Waxman safe harbor applied to “medical devices,” so I would be careful about saying that “patented invention” excludes “processes.”

    The comments in these briefs about restricting the “extraterritoriality effect” of 271(f) perpetuate one of the weakest aspects of SCOTUS’s holding in Microsoft v. AT&T. As the Federal Circuit held in Waymark v. Porta Systems, a correct interpretation of 271(f) requires no “extraterritorial effect” as the mere act of shipping the “component” with “intent” that it be combined or used in the patented invention triggers infringement liability. The thought, also expressed by SCOTUS in Microsoft v. AT&T, that Congress didn’t intend to abrogate the presumption against “extraterritorial effect” of Deepsouth Packing in 271(f) doesn’t hold up either. SCOTUS invited Congress to overrule Deepsouth Packing, which is what Congress did in enacting 271(f0

  9. 6

    California Motor Transport v. Trucking Unlimited, 404 U.S. 508 (1972), the United States Supreme Court held that the Noerr-Pennington doctrine did not apply where defendants had sought to intervene in licensing proceedings for competitors, because the intervention was not based on a good-faith effort to enforce the law, but was solely for the purpose of harassing those competitors and driving up their costs of doing business.

  10. 5

    JAOI and All Seeing Eye, look up the Noerr-Pennington doctrine. Basically, the Supreme Court has said that trade associations and lobbying groups aren’t subject to antitrust liability when they ask the government to restrict competition for them. If the CPF just a group that files briefs and lobbies the government for patent reform, then no antitrust liability. If CPF is fixing prices without the government’s help, then there might be an antitrust problem, but I’m not aware of any suggestion that they’ve been doing that.

    smashmouth, sometimes Congress passes legislation to solve a specific problem, but the words they use in the statute go beyond the specific problem they tried to address. “Components of a patented invention” would seem to cover only products and not methods, though.

    I wouldn’t be surprised if the CAFC takes this case en banc. Microsoft probably didn’t address Union Carbide directly, but the CAFC should take the opportunity to revisit Union Carbide. The issue seems cleanly presented here.

  11. 4

    I think the appellant has the better legal argument. 271(f) was a direct response to an early 70’s case called Deepsouth, involving the offshore assembly of a shrimp de-veiner using components manufactured domestically. I don’t see how it covers a process patent.

    As a policy matter, unfortunately, if the appellant prevails, the result will be appalling–another kick in the teeth to the vanishing American middle class.

  12. 3

    6 says: “I’m pretty sure you can’t say that a lobbying group is a “cartel”…”

    I see a BigGulp with your name on it. Now get busy.

    JAOI is correct. Any group such as a trade association or organized or disorganized group of officers or representatives of companies that gather to conspire to manipulate prices can come under anti-trust scrutiny, which I might add, now has the sharp teeth of criminal sanctions.

  13. 2

    Bilski has been docketed I do believe.

    JAOI, I’m pretty sure you can’t say that a lobbying group is a “cartel” nor would it be subject to “anti-trust” scrutiny. What is their monopoly over? Everything that those companies make?

  14. 1

    Has anyone heard the rumor that Attorney General Eric H. Holder Jr. is looking into the legality of the Coalition for Patent Fairness cartel? Members include Cisco, Intel, Microsoft, Oracle, and Symantec.

    Personally, I don’t think Coalition for Patent Fairness stands up to anti-trust scrutiny.

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