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Here’s a seemingly sure-fire way to avoid violating US patent laws: just don’t make or use your product in the US. Pretty straightforward, right? Maybe not, in the age of modern supply chains and manufacturing.
Today, the US Supreme Court takes up a case that will determine how much help an overseas manufacturer can get from the US without running afoul of US patent laws.
The case originates in a dispute between two competitors in the field of genetic testing.
Both Promega Corporation and Life Technologies (selling through its Applied Biosciences brand) make DNA testing kits that can be used in a variety of fields, including forensic identification, paternity testing, medical treatment, and research. Promega licensed several patents to Applied Biosystems that allowed its competitor to sell kits for use in “Forensics and Human Identity Applications.” The license forbade sales for clinical or research uses.
In 2010, Promega filed a lawsuit in federal court, saying that Life Technologies had “engaged in a concerted effort to sell its kits into unlicensed fields,” thus infringing its patents.
A Wisconsin federal jury found that Life Tech had willfully infringed and should pay $52 million in damages.
But the district judge overseeing the case set aside that verdict after trial, ruling that since nearly all of the Life Tech product had been assembled and shipped from outside the US, the product wasn’t subject to US patent laws.
The Life Tech testing kits had five parts, four of which were made in a manufacturing facility based in the United Kingdom.
The fifth component, called a Taq polymerase, was supplied from the United States. US patent law can apply to products assembled abroad, but only in situations in which “all or a substantial portion” of a product are supplied from the US. In the judge’s view, the generic polymerase that Life Tech was shipping from the US to the UK didn’t meet that standard.
Promega appealed the decision to the nation’s top patent court, the US Court of Appeals for the Federal Circuit.
A split panel of judges at that court held that the polymerase shipments were, in fact, enough to get Life Technologies in trouble. The appeals court held that in this context, “substantial” should be seen as meaning “important” or “essential,” and thus shipping “a single important or essential component” from the US is enough to show patent infringement. Life Technologies pointed out that Taq polymerase is “only one commodity component out of five in the kit,” but the appeals court focused on the fact that “[w]ithout Taq polymerase, the genetic testing kit… would be inoperable.”
Reaching too far?
Life Technologies took its case to the US Supreme Court and argued (PDF) that the Federal Circuit had inappropriately extended US law to reach overseas, violating both the text of the law and the “presumption against extraterritoriality.” Promega countered (PDF) that Life Tech was looking for a “rigid, bright-line rule with no foundation in the statutory text.”
The high court agreed to take the case in June, and Promega will probably have an uphill battle.
First, in recent years, the Supreme Court has been more interested in reeling in patent rights rather than expanding them.
Second, there’s the simple argument that if the Supreme Court had been satisfied with the outcome after the Federal Circuit, they could have simply done nothing and let the ruling stand.
The opinion of the US Solicitor General, who has been asked to weigh in on the case, may be the most influential.
The Solicitor General’s brief (PDF) favors Life Tech, saying that the statute’s use of the word “substantial portion” means “a quantitatively substantial percentage of those components.” In a five-part invention, one part “cannot constitute a substantial portion of the components.”
The US government also argues that the “presumption against extraterritoriality” favors Life Tech.
That’s the presumption that foreign conduct is, generally, governed by foreign law.
In the government’s view, the Federal Circuit’s decision that the Life Tech kits infringe US patents could adversely affect “legitimate… sovereign interests.”
Life Tech also asked the Supreme Court to review another part of the Federal Circuit decision, but the justices declined to do so. The Federal Circuit found that Life Technologies can be liable for “inducing” infringement of a patent, even though no third party was involved.
In other words, the judges held that Life Technologies was inducing itself to infringe. Whether or not it’s possible to be “inducing with yourself” is what Patently-O writer Dennis Crouch called the “Billy Idol question” of patent litigation.
But the Solicitor General didn’t find that question compelling enough to warrant review, and the Supreme Court justices agreed.
The original Promega lawsuit accused Life Tech of infringing five patents that it either owned or licensed.
The Federal Circuit found that four of those patents were invalid, leaving just one remaining patent in the litigation, US Patent No. RE 37,984, which describes a method of “analyzing length polymorphism in DNA regions.”
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