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Reassess Your Patent License Positions and Strategies Going Forward: Supreme Court Rejects Federal Circuit’s Standard for Extraterritorial Reach of §271(f)(1)

February 2017
Client Alerts/Reports

The United States Supreme Court has rejected a long-standing standard applied by the Federal Circuit for patent enforcement under U.S. patent laws for inventions made outside the country. The Court’s Feb. 22, 2017, decision in Life Technologies Corp. v. Promega Corp. reversed a Federal Circuit decision from 2014 interpreting 35 U.S.C. §271(f)(1) as permitting extraterritorial patent enforcement based on export of a single component of a multicomponent invention. The Supreme Court held “when as in this case a product is made abroad and all components but a single commodity article are supplied from abroad, this activity is outside of the scope of the statute.” Understanding this decision is important for analyzing patent license scope and assessing patent enforcement strategies.

Although single-component exports may still be actionable under another part of the statute (which applies to non-staple components specially made or adapted for use in a patented combination), the Court held that the supply of a single staple component (here Taq polymerase) of a multicomponent invention is not an infringement under §271(f)(1). This statute permits a U.S. patent owner (or, in this case, a licensor) to assert extraterritorial patent rights when another supplies “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 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 . . . .” 35 U.S.C. §271(f)(1) (emphasis added).

The Supreme Court held that “a substantial portion of the components” solely means “large in number.” Reversing the Federal Circuit’s qualitative statutory interpretation of “substantial,” the Supreme Court unanimously held there can be no infringement under §271(f)(1) by export of a single component even if it is deemed an “important” or “essential” component of the multicomponent invention.

Two justices wrote separately and emphasized that while more than one component of a multicomponent invention must be exported to constitute a §271(f)(1) act of infringement, the Court left open the question of how many components, or what percentage of components, must be exported. Careful evaluation of enforcement strategies and patent license terms is warranted in view of this decision.