March 22, 2017
On February 22, 2017, the Supreme Court issued its decision in Promega v. Life Technologies, holding that the supply from the United States of a single component of a patented invention to be assembled overseas does not constitute patent infringement under 35 U.S.C. § 271(f)(1). Life Technologies, Corp. v. Promega Corp., No. 14—1538, slip. op. at 1 (2017). The Promega decision reversed the holding of the Court of Appeals for the Federal Circuit, and may affect patent owners and manufacturers in a range of industries. Below, we provide a brief review the Promega case and possible effects of the Supreme Court’s decision. Gibson Dunn’s intellectual property, transactional, and appellate attorneys are available to discuss these issues in more detail at your convenience.
Promega Corp. holds the exclusive license to U.S. Patent No. RE 37,984 ("the Tautz patent"), which relates to DNA amplification technology. Certain claims in the Tautz patent cover DNA testing kits made up of several components, including a polymerizing enzyme such as Taq polymerase. In 2006, Applied Biosytems, a wholly owned subsidiary of Life Technologies Corp. ("LifeTech"), entered into a licensing agreement with Promega allowing LifeTech to use patents, including the Tautz patent, to manufacture genetic DNA testing kits. LifeTech manufactured one component of its kits – Taq polymerase – in the United States, and then shipped that one component to a LifeTech manufacturing facility in the United Kingdom, to be assembled there into DNA kits and sold worldwide.
Four years later, Promega sued LifeTech, alleging that LifeTech had committed patent infringement by selling testing kits outside of the terms of the license agreement. The case went to a jury trial, and the jury returned a verdict against LifeTech. However, after the verdict the district court granted LifeTech’s motion for judgment as a matter of law, holding that Promega did not present sufficient evidence of infringement to sustain a jury verdict under section 271(a) or section 271(f)(1). Both parties appealed the district court’s decision.
The Court of Appeals for the Federal Circuit reversed, in part, the district court’s grant of LifeTech’s motion for judgment as a matter of law, and held that substantial evidence supported the jury’s finding of infringement of the Tautz patent under section 271(a) and section 271(f)(1). Promega Corp. v. Life Technologies Corp., 773 F.3d 1338, 1357 (Fed. Cir. 2014). The court also held that other patents asserted by Promega were invalid for lack of enablement. Id. at 1350.
The Federal Circuit noted that some of LifeTech’s products, by admission, were sold in the United States, and, therefore, some of their sales infringed the Tautz patent under section 271(a). 773 F.3d at 1357. In addition, the court held that LifeTech had infringed the patent under section 271(f)(1) because LifeTech supplied Taq polymerase from the United States to be incorporated into an infringing product. Id.
Section 271(f)(1) states:
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, where such components are uncombined in whole or in part, 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.
35 U.S.C. § 271(f)(1). LifeTech argued (1) that it could not be held liable for infringement under section 271(f)(1) because it was not inducing any third party to combine the components of the patented invention, and (2) that supplying a single component did not constitute a "substantial portion." The Federal Circuit rejected the first argument, holding that section 271(f)(1) does not require involvement of third party. 773 F.3d. at 1351. Further, the Federal Circuit held that supplying a single component of a multicomponent invention combined outside of the United States can meet the "substantial portion" requirement and lead to liability under section 271(f)(1). Id. at 1353. Here, the court wrote that substantial evidence supported the jury’s finding that Taq polymerase was a "substantial portion" of the components of the patented invention, because it was a "’main’ and ‘major’ component," and "[w]ithout Taq polymerase, the genetic testing kit recited in the Tautz patent would be inoperable." Id. at 1356. Therefore, the Federal Circuit remanded the case to the district court "to determine damages due to LifeTech’s infringement of the Tautz patent." Id. at 1358.
LifeTech petitioned the Supreme Court for certiorari on two questions: (1) Whether the Federal Circuit erred in holding that a single entity can "actively induce" itself to infringe a patent under 35 U.S.C. § 271(f)(1); and (2) 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.
The Court accepted LifeTech’s petition, but only as to the second question presented. In its decision on February 22, 2017, the Court reversed the Federal Circuit, and held that "a single component does not constitute a substantial portion of the components that can give rise to liability under section 271(f)(1)." Life Technologies, Corp. v. Promega Corp., No. 14—1538, slip. op. at 1 (2017).
First, the Court determined that "a substantial portion" requires a quantitative rather than a qualitative measurement. No. 14—1538, slip. op. at 8. Although "substantial portion" was not defined by the text of the statute, the Court observed that the statute’s context suggests a quantitative meaning. Id. at 5—6. The Court further noted it "should favor an interpretation that gives meaning to each statutory provision," which only the quantitative method accomplishes. Id. at 6, citing Hibbs v. Winn, 542 U.S. 88, 101 (2004). The Court explained not only that the "statute’s structure provides little support for a qualitative interpretation," but in addition, a qualitative measurement may "complicate the factfinder’s review." Id. at 7. Although the Federal Circuit had ruled that the Taq polymerase component was qualitatively substantial because the kit could not function without it, the Supreme Court noted that "[f]ew inventions, including the one at issue here, would function at all without any one of their components." Id.
Second, the Court held that because the "substantial portion" requirement involves a quantitative analysis, a single component cannot constitute a "substantial portion of the components of a patented invention." No. 14—1538, slip. op. at 8. The Court reasoned that the text of section 271(f)(1) specifies components, plural; by contrast, section 271(f)(2) refers specifically to the singular component. Id. at 8-9. In addition, if section 271(f)(1) were read to include any single component, then section 272(f)(2), which references "any component" that is "especially adapted for use in the invention," would become largely duplicative of section 271(f)(1). Id. at 9.
Holding that supply of a single component abroad could not constitute patent infringement under section 271(f)(1)’s "substantial portion" requirement, the Supreme Court remanded for further proceedings. No. 14—1538, slip. op. at 11. The Court noted that its decision does not determine "how close to ‘all’ of the components ‘a substantial portion’ must be," but instead left that issue open for future cases. Id. at 10.
The Promega decision is likely to affect different industries in different ways, but there are several potential implications for the patent system as a whole.
First, the Promega decision will undoubtedly lead to litigation over the question expressly left unresolved by the Supreme Court: what number or percentage of the components of a patented invention constitutes the minimum required to be considered a "substantial portion" under section 271(f)(1)? The Court held that a single component is not sufficient, but did not identify a threshold beyond that. Thus, Promega does not appear to foreclose litigation under section 271(f) where the defendant supplies two or more components for assembly abroad.
Second, the Promega decision may allow further outsourcing by certain parties. However, the Promega decision does not provide a full safe harbor for manufacturers sending one component abroad. Section 271(f)(2) (contributory infringement) still prohibits supply of "any component" from the United States when the component "is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use," if the supplier knows that the component "is so made or adapted," and intends the component to be "combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States." 35 U.S.C. § 271(f)(2).
Finally, because the Promega decision is based on the statutory text of the Patent Act rather than on Constitutional concerns, Congress is free to alter the statute in response to the Court’s decision. Congress initially enacted section 271(f) in response to the Supreme Court’s decision in Deepsouth Packing Co. v Laitram Corp., 406 U.S. 518 (1972), which had held that manufacturing all of the components of a patented invention in the United States and then shipping the components overseas to be assembled did not constitute patent infringement. The Promega decision, like Deepsouth, could spur Congressional action to amend the statute. The congressional agenda for 2017 already contemplates some patent reform proposals, though it is not yet clear whether any bills will reach a vote. See, e.g., Press Release, House Representatives Judiciary Committee, Goodlatte Announces Agenda for 115th Congress (Feb. 1, 2017) available at https://judiciary.house.gov/press-release/goodlatte-announces-agenda-115th-congress/.
The following Gibson Dunn lawyers assisted in the preparation of this client update: Stuart Rosenberg and Chelsea Thomas.
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