by Dennis Crouch
Life Technologies Corp. v. Promega Corp. (Supreme Court 2016) [LifeTechTranscript]
Today the Supreme Court heard oral arguments in LifeTech v. Promega. The case focuses on the statutory interpretation of 35 U.S.C. § 271(f)(1) (export of components of patented invention). The ordinary rule of U.S. patent law is that patent rights are territorial – a U.S. patent covers only infringement within the US territorial lines. As they say, if you want to sue someone for infringing acts in the UK, then get a UK patent (or perhaps soon an EPO patent). Section 271(f) of the US patent act pushes a bit against the extra-territorial limitation by creating liability for unauthorized supply or export from the US of “all or a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the US in a manner that would infringe the patent if such combination occurred within the US.”
The case at hand involves a patented genetic test being performed in the UK. The accused infringer had exported from the US a commodity enzyme (Taq polymerase) necessary for the test. LifeTech argues: “the only contact that any of this has with the United States is the fact that a single, commodity product is shipped to England as part of the process for the fabrication of these particular kits.” As a point of fact, there was some debate at oral arguments about whether, at the time when infringement began, quality Taq was available from non-US sources.
The question before the Supreme Court is whether this single commodity component can satisfy the statutory test of “all or a substantial portion of the components” of the patented invention.
Issue: Whether the Federal Circuit erred in holding that supplying a single, commodity component of a multi-component invention from the United States is an infringing act under 35 U.S.C. § 271(f)(1), exposing the manufacturer to liability for all worldwide sales.
Because the Federal Circuit sided with the patentee (finding infringement) oral arguments began with petitioner (adjudged infringer) represented by Carter Phillips. The Obama Administration (DOJ brief not signed by PTO) sided with the petitioner and was represented by Zachary Tripp; and Seth Waxman represented the patentee-resondent.
Although I see this is a statutory interpretation question Carter Phillips began the discussion with a statement that this is “largely an international trade case.” The purpose of that focus is to remind the court of its prior international trade jurisprudence, including Microsoft v. AT&T, where it tends to interpret US law in order to limit extraterritorial application.
On the actual statutory interpretation, Justice Alito asked “Does ‘substantial portion’ mean a majority?” Phillips replied: “I think it means substantially more than a majority. I would say that it has to be approximating or very close or tantamount to all. [In the case at hand] I would have thought at least four [of the five components] would have to be [exported]. But you know, in many instances, my guess is the right answer may well be five [out of five].” The US Gov’t largely agreed with this – arguing that there should never be 271(f)(1) liability for exporting a single component but instead the export must reach “all or something tantamount to all of the components.”
Returning to the “substantial portion” language, Justice Kagan offered the following hypothetical:
JUSTICE KAGAN: If I said to you, Mr. Tripp, a substantial portion of my former clerks have gone into government work, how many would I mean?
MR. TRIPP: I think with any of these things, the interpretation of substantial depends entirely on its context and its purpose, and — and — and so this term is used in just, like, a countless array of ways in the law.
JUSTICE KAGAN: So you’re not pinning this on the — on the language here, the substantial portion means almost all?
MR. TRIPP: Well, no —
Essentially, the Goverment’s response here matches with LifeTech’s argument that “substantial portion” is rather ambiguous and so the court must supply a meaning while keeping in mind the principle against extra-territorial application.
Carter Phillips interpretation that a “substantial portion” means “approximately all” comes from the background behind the enactment of 271(f) — that is the overruling of Deepsouth where all the components were being exported but in an unassembled fashion.
JUSTICE KAGAN: Where — where do you get that from? What’s the principle there?
MR. PHILLIPS: Because all Congress wanted to do was to close a loophole [created by Deepsouth] where you’re essentially doing nothing but violating U.S. patent law and avoiding it by simply offloading it at the last second.
JUSTICE KAGAN: Well, how do we know that that’s all Congress wanted to do?
MR. PHILLIPS: [Changing the subject] the presumption against extraterritoriality would drive you in the opposite direction. Even if you could reasonably read the language either way.
MR. TRIPP: [answering the same question] So we’re trying to give a gloss on substantiality in light of the context and purpose of this statue as — as we understand all of 271(f) is designed to shore up the basic restrictioning and is actually making a patented invention in the United States and then shipping it abroad. Both of the provisions get at that. We think (f)(1) [should be limmited to] situations that resemble the Deepsouth paradigm.
Mr. Waxman rejected this analysis and instead argued that the statute “can be read in a commonsense way.” In addition, Mr. Waxman noted that 271(f)(2) itself overturns Deepsouth.
LifeTech has also argued for a “quantitative” approach to finding “substantial portion” of the components — counting the number of components — rather than a qualitative approach. Pushing-back, Chief Justice Roberts noted “It seems to me that the significance of the component would be the most important consideration.” Mr. Tripp responded that the “significance” question would be a “black hole that’s not going to get you anywhere.” Of course, the Court has entered into this black hole on several occasions. Consider, for instance Quanta, where the court focused on the inventive or core aspects of the claims.
Regarding the quantitative approach, Mr. Waxman interjected here with a pharmaceutical example:
MR. WAXMAN: Let’s assume that you have a patented pharmaceutical, a tablet that, you know, remediates a disease. As is commonplace in these combinations, it has one active ingredient, and it has five inert ingredients that are as easy to pick up as you can imagine. The thing that is exported the factory overseas, which by the way is never liable under the statute because the statute only applies to conduct in the United States, they they’re happy to go down to their local warehouse and get the the five inert ingredients. But the molecule that does all the work, they import from the United States.
Under the approaches proposed by Lifetech and the US Gov’t, the exporter here would not be liable (perhaps rightly so). One thing that Mr. Waxman failed to argue was an actual positive test for what counts as a “substantial portion.” His approach instead would be to simply give the case to the jury to decide whether a substantial portion had been supplied or exported. As a back-up, perhaps instruct the jury that “‘substantial’ means considerable in importance and/or amount.”
In Microsoft, the Supreme Court suggested that “components” for 271(f) purposes are the elements of a claimed invention. Focusing on that point, Justice Sotomayor astutely asked “When a [patent] claim is [issued], how is the determination made of what the elements are? Do the elements’ determinations sort out the common from the uncommon in a patent claim?” My answer here is that there is no specific definition by the patent office of what counts as an element or component and what is simply a limitation associated with a component. Responding, the US Gov’t simply said that “in most cases it actually won’t be that difficult.” For the case-at-hand, the parties apparently agreed that the patent lists five components.
Perhaps channeling the Samsung v. Apple decision also released on December 6, 2016, Justice Breyer challenged the US Gov’t approach as too complex:
JUSTICE BREYER: But why do we have to go into the details here? I mean, it did strike me as an instance where maybe the less said by us the better. I mean, would you be happy if we say ‘it means what it says?’
‘All or substantially all’ means a whole lot. Or what you said, tantamount to all.
Of course, as is his wont, Justice Breyer here confused the language. The statute does not require “all or substantially all” but instead “all or a substantial portion.” Mr. Tripp did not correct Justice Breyer on this even though he had full opportunity. Mr. Waxman did offer the correction “And, Justice Breyer, I do want to correct one thing. You — you inadvertently kept saying this is all or substantially all. It’s not ‘all or substantially all’ – It’s ‘all or a substantial portion.'” As a point of interpretation, Mr. Waxman indicated that many statutes do use the term “substantially all” and that should be seen as more rigorous of a standard than “a substantial portion.”
As with all Federal Circuit patent cases before the Supreme Court, reversal is likely. However, I expect the reversal to be primarily a rejection of a hard-line interpretation of the Federal Circuit opinion. I do not expect the Supreme Court to impose a quantitative limit on “substantial” but instead leave that question as one that must be proven to a jury as an element of infringement under Section 271(f).