U.S. Supreme Court Justice Stephen Breyer. (Photo: Diego M. Radzinschi/ALM)
The justices signaled a fairly resolute position that supplying a single component of a patented invention for assembly overseas cannot trigger the extraterritorial application of U.S. patent laws. If that’s where the court comes out, it will be a relief to U.S.-based electronics and medical component suppliers, while costing Wisconsin-based Promega Corp. a $52 million jury award.
Justice Stephen Breyer suggested that no matter how important one component may be — in this case Taq polymerase, an enzyme used in DNA profiling kits — it cannot represent “all or a substantial portion of the components of the patented invention.” That is the statutory language for proving induced infringement abroad under Section 271(f)(1) of the Patent Act.
“Why do we have to go into the details here?” Breyer asked Zachary Tripp of the solicitor general’s office. “All or substantially all’ means a whole lot. Or what you said, tantamount to all.”
“If you said that one [component] was never enough and it needs to be a whole lot, we would be quite happy,” Tripp said.
“End of the case,” Breyer replied.
Promega and Life Technologies Corp., a division of Massachusetts-based Thermo Fisher Scientific Inc., market competing kits for amplifying and identifying genetic markers in a person’s DNA. The kits are used by law enforcement and in clinical research. Promega accuses Life Technologies of shipping Taq polymerase to its plant in London, combining it with at least four other components there and marketing the finished, allegedly infringing, kits worldwide.
Promega won a $52 million jury award based on Life Technologies’ global sales, but U.S. District Judge Barbara Crabb of Wisconsin set it aside. The U.S. Court of Appeals for the Federal Circuit restored the award, saying that, while it’s only one component, the Taq polymerase could be considered “a substantial portion of the components” that make up the kit.
Sidley Austin partner Carter Phillips argued for Life Technologies on Tuesday that Section 271(f) is designed to prevent American manufacturers from creating an almost-infringing invention but leaving the last step for completion overseas to avoid liability. Given that context, a “substantial portion” of the components must mean “approximating or very close to or tantamount to all,” he told the court.
Not all of the justices sounded completely sold. Justice Elena Kagan asked if “a substantial minority” of components would meet the test. Justice Samuel Alito asked if one very important U.S. component combined with nine off-the-shelf products abroad would qualify.
Phillips argued that numerical certainty is critical. Otherwise, “all of the trolls in the world” are “going to go through the entire supply chain of every putative infringer” looking to gin up a lawsuit, he said.
Wilmer Cutler Pickering Hale and Dorr partner Seth Waxman, representing Promega, expanded on Alito’s hypothetical, saying one could imagine a pharmaceutical company shipping a key molecule that “does all the work” overseas and combining it there with unimportant inert ingredients to get around the statute.
But Alito pointed out that the statute refers to components, not the invention itself. “If I were to ask, ‘What is a substantial portion of the pages of your brief?’ I think someone would think that’s a quantitative determination” — not a question about which pages were the most important, Alito said.
Justice Anthony Kennedy said he found Agilent Technologies’ amicus curiae brief ”instructive” about supply chains. “That seems to me to give some help to [Life Technologies], because it shows that a quantitative test is simply a good baseline” and that egregious attempts to circumvent liability would be covered by other parts of the statute, Kennedy said.
Baker Botts partner Wayne Stacy, who’s not involved in the case, said electronics companies that provide chips for assembling into computers and smartphones overseas are watching the case closely. Lurking behind the arguments is the question of whether judges or juries will determine a violation of 271(f), he said. A bright-line minimum number of components that must be supplied to trigger the statute would make the issue easier to resolve on summary judgment, he said.
“The only bright-line test I see getting out of this decision is one is not enough,” Stacy said. If that’s as far as the court goes—and Stacy emphasized that even that outcome is far from certain—it may take future cases to decide “what is enough, and then who gets to determine that.”