En Banc Federal Circuit Limits Scope of Patent Liability for U.S. Exports and Holds That Section 271(f) Does Not Apply to Method Claims

August 20, 2009

In an 11-1 en banc decision issued on August 19, 2009, the Federal Circuit has held that 35 U.S.C. § 271(f), which prohibits exporting the components of patented inventions, does not apply to method claims. In so doing, the en banc court in Cardiac Pacemakers, Inc. et al. v. St. Jude Medical et al. overruled the holding of Union Carbide Chems. & Plastics Tech. Corp. v. Shell Oil Co., 425 F.3d 1366 (Fed. Cir. 2005), which had applied § 271(f) to method claims.  The court’s ruling has important ramifications for all companies that do business both in the United States and abroad.  The parties to this case are competitors in the market for implantable cardioverter defibrillators (ICDs).  Cardiac Pacemakers, Inc. ("CPI") contends that St. Jude Medical’s devices infringe a single claim of U.S. Patent No. 4,407,288, which claims a method for cardioverting the heart.  As relevant here, St. Jude asked the district court to limit any damages to devices sold within the United States, arguing that 35 U.S.C. § 271(f), which imposes liability for the supply from the United States of certain components of patented inventions for combination overseas, does not apply to method or process claims.  The district court disagreed.  On appeal, the panel affirmed on the basis of Union Carbide, which had applied § 271(f) to method claims.

The statute at issue, 35 U.S.C. § 271(f), provides: "Whoever without authority supplies or causes to be supplied in or from the United States 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 United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer."  In Union Carbide, the Federal Circuit held that Section 271(f) applies to the supply of "every component of every form of invention," including a patented method, and held that Shell was liable for exporting a catalyst used for practicing a patented method in a foreign facility.  425 F.3d at 1379.  In Microsoft Corp. v. AT&T Corp., 127 S. Ct. 1746 (2007), however, the Supreme Court undermined this premise by holding that Section 271(f) applies only to those components that are both capable of being combined so as to form the patented invention, and also capable of being supplied from the United States. 

St. Jude petitioned for en banc review based on the conflict between the panel decision and the text, structure, history and aims of Section 271, as well as the inconsistency with the Supreme Court’s interpretation of Section 271(f) in Microsoft v. AT&T.  St. Jude’s merits briefs highlighted these issues as well as the conflict within the Federal Circuit’s own jurisprudence on this issue.  Compare Shell Oil, 425 F.3d at 1379, with Standard Havens Prods., Inc. v. Gencor Indus., Inc., 953 F.2d 1360, 1374 (Fed. Cir. 1992) or NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1321-23 (Fed. Cir. 2005).  St. Jude’s arguments in this case were reinforced by five amicus briefs–filed by companies in a variety of industries, trade associations and academics. 

Largely adopting the arguments advanced in St. Jude’s briefs, the en banc court held that the language of the statute makes clear that it does not extend to method patents.  The court explained that, while both products and methods have "components," a component of a tangible product is a tangible part of the product, whereas the components of a method are the steps of that method.  The court then noted that Section 271 further requires that the "components" be "supplied" and held that this requirement eliminates method patents from the reach of the statute because it is "a physical impossibility" to supply an intangible step of a method.  The court also concurred with St. Jude’s arguments that both the legislative history of the statute and the presumption against extraterritoriality resolved any doubt as to the appropriate interpretation of the application of the statute. 

The en banc opinion is important because it harmonizes and clarifies this area of patent law.  As the Supreme Court’s decision in Microsoft v. AT&T indicates, the scope of liability for extraterritorial infringement under § 271(f) is a matter of significant national and international concern.  Indeed, the en banc court noted that the Supreme Court’s decision in that case "sent a clear message that the territorial limits of patents should not be lightly breached."  En banc resolution of this important question insures that all participants in the patent system may operate with the understanding that overseas activities cannot result in infringement of process claims. 

Gibson Dunn has represented St. Jude throughout the lengthy proceedings in the case, including several previous appeals.  Gibson Dunn has extensive experience in patent appeals, including Section 271(f) issues.  We successfully represented Microsoft in the Supreme Court’s Microsoft v. AT&T case, represented parties or amici in virtually every major patent case in the Supreme Court in the past decade, and we have handled numerous appeals in the Federal Circuit for a wide range of clients in many industries.

 Gibson, Dunn & Crutcher LLP

Gibson, Dunn & Crutcher attorneys are available to assist in addressing any questions you may have regarding these issues.  If you have any questions about the case or would like additional information, please contact Denis Salmon in Palo Alto (650- 849-5301, [email protected]) or Mark Perry in Washington, D.C. (202-887-3667, [email protected]).

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