Finding IP Value
Supreme Court Narrows Infringement for Sending Component(s) Abroad – But Only by a Little Bit
Last week, in a near-unanimous opinion rendered without dissent, the Supreme Court emphasized quantity over quality, holding that it is not an infringement under the Patent Act to supply a single component of a multi-component product being manufactured abroad. Life Technologies Corp. v. Promega Corp., No. 14-1538, — S.Ct. –, 2017 WL 685531 (Feb. 22, 2017). The particular section of the Act before the Supreme Court was 35 U.S.C. §271(f)(1), which makes it possible for infringement to arise from “[supplying] or [causing] to be supplied in or from the United States all or a substantial portion of the components of a patented invention.” The purpose of the statute is to prevent a domestic manufacturer from making all, or substantially all, components for an infringing product in the U.S., while shipping the components overseas for assembly. Id. The combining of components overseas must be performed “in a manner that would infringe the patent if such combination occurred within the United States.” 35 U.S.C. §271(f)(1).
In terms of the discrete issue before it, the Supreme Court held that “when a product is made abroad and all components but a single commodity article are supplied from abroad, the activity” does not infringe. Life Technologies Corp., at *8. The product at issue was a genetic testing kit for which one component was shipped from the U.S. overseas, and the other parts of the kit were obtained from abroad. The Supreme Court reasoned that a single component would not satisfy “all or a substantial portion of the components,” and that the phrase “substantial portion” has a quantitative meaning rather than a qualitative one. Id. at *8-9.
However, the Supreme Court did not address the extent beyond a single component a manufacturer would have to go to meet the quantitative test. In making the narrow holding that the Patent Act “does not cover the supply of a single component of a multicomponent invention,” the Supreme Court simply did not address how the courts should determine the number of components that would suffice. Also, the Supreme Court did not allow for qualitative considerations. In fact, the Supreme Court rejected the notion that Congress intended the “substantial portion” requirement to contain any qualitative aspects, such as based on the level of importance a particular component might have to the invention as a whole. Id. at *6.
In holding that one component shipped abroad does not suffice, the opinion narrows the definition of infringement, but only by a little and only within the confines of the exact facts of this case. From the Supreme Court’s majority opinion, one can see that a single component coming from this country, and assembled abroad into a multi-component product, does not infringe §271(f)(1), but that is about all. In cases involving two or more components shipped abroad, it will be up to lower courts to further define infringement under this section.
While the Supreme Court left much undecided, it is interesting to compare infringement under §271(f)(1) to how courts award damages in patent cases when someone uses a patented component in a product. This is because a component’s contribution to the value of the entire product is a factor when considering damages. See, e.g., Ericsson Inc. v. D-Link Sys. Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014) (damages “award must be based on the incremental value that the patented invention adds to the end product.”). As a hypothetical example, a patent on a novel windshield wiper system – just one portion of an automobile – would not allow the patent owner to recover damages based on the total price of the car.
But infringement is different. Although apportioning occurs with a damages calculation, it does not occur with liability determinations. The general rule is that either direct infringement or induced infringement require all acts to occur in this country and to be performed by, directed by, or otherwise attributable to a single entity – not a combination of entities. While §271(f)(1) does provide an exception, it does not contemplate that someone would be 20% or 50% liable as an infringer based on how many components of the final product are being shipped overseas. One either infringes, or one does not. Put simply, a person or company cannot be a little bit infringing. This underscores the importance of having clear, succinct patent claims along with good claim variety – from broad to narrow, and directing the claims to products and components alike – in order to cover the maximum number of potentially infringing activities.