Guest Post by Tim Holbrook, Professor of Law at Emory University School of Law. Professor Holbrook has written extensively on the extraterritorial application of U.S. patent law. – DC
The Supreme Court’s decision in Life Technologies Corp. v. Promega Corp. is fairly straightforward. The Court held that 35 U.S.C. § 271(f)(1) does not apply when only a single component of a patented invention is exported. Instead, more than one component is required to constitute a “substantial portion” of the patented invention. While what the Court said is important, in some ways, what is more interesting is what it didn’t say and omitted.
In particular, most viewed this case as one of a series of cases in which the Court was elaborating on the presumption against extraterritoriality. At oral argument, the questions from the justices suggested that likely was the case as well. The term was used over twelve times in the argument, with the Chief Justice engaging in a colloquy with Carter Phillips about whether this case truly involved extraterritoriality. Although the Chief Justice eventually recused himself from the case, his questions suggested that he was attempting to apply the Court’s recent extraterritoriality decision in RJR Nabisco, Inc. v. European Community. Indeed, in my amici brief before the Court, I criticized the Federal Circuit for giving short shrift to the issue.
Yet, neither the term “extraterritoriality” nor any discussion of the presumption against extraterritoriality appears in the final decision. Instead, in the first line of the decision, Justice Sotomayor describes the case as “concern[ing] the intersection of international supply chains and federal patent law.”
Interestingly, the petitioners did not frame the case in this fashion. The petitioners’ brief never discusses supply chains expressly. Instead, this framing of the issue apparently came from the amicus briefs. Although the brief by Bundesverband der Deutschen Industrie E.V. addressed the issue, Agilent Technologies’ brief is the one that seemed to catch the Court’s attention. That brief had a lengthy discussion of the modern way that supply chains work, and the commensurate potential exposure to patent liability under the Federal Circuit’s interpretation. Justice Kennedy even referenced it during oral argument, bringing the issue of supply chains to the fore.
This concern with these chains – and the risk that some parts of the chain could be exposed to patent infringement liability – may underlie some of the Court’s reasoning. For example, in interpreting the phrase “substantial portion of the components of a patented invention,” the Court adopted a quantitative approach as opposed to one that considered both the quantity of components supplied and their relative importance. The Court seemed concerned with the ability of such actors ability to discern when liability may arise. The Court asked, “How are courts—or, for that matter, market participants attempting to avoid liability—to determine the relative importance of the components of an invention?”
To those who follow the Court’s patent jurisprudence, this sudden concern for public notice and audience seems a bit ironic given the Court’s penchant for eliminating the Federal Circuit’s more predictable, formalistic rules. But it does show the importance of amicus briefs that can bring real-world concerns to the Court.
The Courts silence as to the presumption against extraterritoriality, though, may be more important than it seems. The presumption had been central to § 271(f). Congress adopted § 271(f) to overrule Deepsouth Packing Co., Inc. v. Laitram Corp., which held, in part based on the presumption against extraterritoriality, that manufacturing and exportation of all of the invention’s components for recombination abroad did not constitute patent infringement. The Supreme Court’s first interpretation of this provision in Microsoft Corp. v. AT&T Corp., the Court also relied on the presumption to afford the provision a narrower interpretation. Yet, here….silence.
That silence may reflect a significant shift in the Court’s extraterritoriality jurisprudence. In a decision from its October 2015 term, RJR Nabisco, Inc. v. European Community, the Court provided a two-step analysis for assessing whether the presumption applies. First, a court should assess “whether the presumption against extraterritoriality has been rebutted—that is, whether the statute gives a clear, affirmative indication that it applies extraterritorially.” If the presumption has been rebutted, then the statute is afforded extraterritorial reach. If after step one, however, a court concludes “the statute is not extraterritorial,” then the statute may yet afford protection. Step two is to “determine whether the case involves a domestic application of the statute … by looking to the statute’s ‘focus.’” If the acts involving the statute’s focus occur in the United States, then the statute applies.
Applying this methodology to § 271(f) would appear to end at step one: the statute clearly contemplates extraterritorial application of U.S. law with the hook of domestic manufacture of the components. The silence in Life Technologies may reflect this shift, and a departure from the use of the presumption as a basic statutory interpretation tool.
The Chief Justice’s comments at oral argument suggested that he believed the presumption had no role in this case. He noted:
I’m not sure I agree with your understanding of the extraterritorial principle. I don’t – I mean, do you really take that down into the minutiae of every little clause? It seems to me its once the law applies, then you apply normal principles of statutory interpretation. I think we have cases about that in other – in other areas, which is sort of what is the reach, I think, may be the presumption against infringement in sovereign immunity, is – a case I can’t recall right away that said, well, once you get over it, you know, its over, and then you apply normal principles.
The Chief Justice appears to be referencing the RJR Nabisco approach. Although he ultimately recused himself from the case, perhaps his comments cast a long shadow over the decision. The silence on extraterritoriality, therefore, may be speaking volumes. It may reflect a shift away from the use of the presumption in interpreting particular provisions within a particular statute once the extraterritorial reach of that provision already has been confirmed.