NEWS FROM 1 First St NE

27.02.2017

By Lawrence Hoffman

The U.S. Supreme Court is at it again.

I admit I am a curmudgeon, a founding member of the World society of Grouchy Old Men. My wife says I was a curmudgeon long before I was old enough to qualify as one.

That having been said, I think the nine men and women (ok – eight men and women) who sit on U.S. Supreme Court have one of the hardest job in the U.S. government. They have the unenviable responsibility of providing a constitutional reality check on the legislative and executive branches of the government, and the even less enviable (and perhaps impossible) responsibility for fixing the mistakes of the other two branches in a constitutionally permissible way.

In my mind, SCOTUS does well in cases involving social justice and individual rights but not so well in patent cases. (Think Alice v. CLS Bank if you aren’t sure I am right about patent cases.)

The 22 February decision in Life Technologies v. Promega Corp. is a good example. Laitham Corp. had developed a shrimp deveining machine and had gotten a U.S. patent on it. Deepsouth Packing Co. wanted a piece of the action, but because of the patent, had to limit its greed to the non-U.S. market. Making the machine in the U.S. would have infringed Laitham’s patent so instead, it made the parts in the U.S. and shipped them abroad for assembly by its customers. This didn’t sit well with Laitham and it sued Deepsouth for patent infringement.

The district and appeals courts were sympathetic, but, alas, not SCOTUS. In its 1972 decision in Deepsouth Packing Co. v. Laitham Corp, the Court ruled that Laitham could not enforce its patent against Deepsouth because the claims were not infringed until the components were assembled and that was not done in the U.S.

That doesn’t seem fair, but as Oliver Wendell Holmes, Jr. once said, “this is a court of law, young man, not a court of justice”.

Happily, Congress didn’t like it either, and in 1984, Congress closes the Deepsouth loophole by adding § 271(f) to the U.S. Patent Act. § 271(f)(1) says:

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.

But Congress is very good at creating new loopholes while closing ones it previously created, and § 271(f)(1) turned out not to be an exception as clearly demonstrated by th Supreme Court’s  decision in the Life Tech case.

The facts are not complicated. Promega is the exclusive licensee of a U.S. patent on a genetic testing kit. The kit consists of five components. Life Tech has a non-exclusive sub-license  for the manufacture and sale of the kits for use in certain licensed law enforcement fields worldwide. Life Technologies manufactured one component of the kits in the U.S. which it them shipped to the UK where the kits were assembled.

All went well until Life Tech started to sell the kits to users outside the scope of its sub-license. Promega brought an infringement action, and even though a jury found in its favor, the district court judge tossed the verdict on the ground that the phrase “all or a substantial portion” in § 271(f)(1) does not encompass the supply of a single component of a multi-component invention. On appeal, the Federal Circuit reversed, holding that the dictionary definition of “substantial” is “important” or “essential,” which it read to suggest that a single important component can be a “‘substantial portion of the components’” of a patented invention. That set the stage for the shootout at SCOTUS.

The problem facing the Court was to determine if Congress intended the term “a substantial portion of the components to refer to quality of the portion as determined by the Federal Circuit, or the number of components. Regrettably, there isn’t any real legislative history to go by. All we know is that § 271(f) was intended to overrule the Deepsouth case.

Doing the normal kind of judicial linguistic manipulation (with which I won’t bore my readers), it decided that Congress mean the number. In short, the Court held that “substantial portion” means more than one.

In reaching this result, the Court compared the language of § 271(f)(1) with that of § 271(f) (2) which reads:

Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that 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, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined 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.

The Court was strongly influenced by the use of “any component” in this section versus “substantial portion” in § 271(f)(1).

The Court did not provide any guidance as to how many is enough to be substantial, and totally seems to have missed what would happen in the case of a two-component invention, especially if the one made in the U.S. is a staple article or commodity of commerce suitable for substantial noninfringing use since that would exclude application of § 271(f)(2).

With all due respect, to this observer, the Life Tech decision is even worse than Alice because there’s no room for judicial interpretation. There’s no answer to the two-component system that isn’t covered by § 271(f)(2).

It looks like Congress is going to have to close another loophole.

About the author: Larry Hoffman has a B.S. in Electrical Engineering and Comp. Sci. from Mass. Inst. of Technology and a J.D. from the George Washington University School of Law. He has been a lawyer since 1965 specializing in IP law and product liability defense. He is registered to practice before the U.S. PTO, the U.S. Court of Appeals for the Federal Circuit and the state and federal courts in New York, Maryland, and the District of Columbia. His work includes preparation and prosecution of patents in countries throughout the world, and counseling on IP and product safety matters. He has been involved in the trial of close to 100 lawsuits of various kinds. You can reach him at Lawrence@ipatent.co.il.

 

 

 

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