Noted With Interest: Export Infringement Under the Patent Act

The Patent Act authorizes actions for infringement relating to both domestic activities, see 35 U.S.C. §§ 271(a)-(c), and foreign activities, see id. § 271(f).  The former include making, using, selling or importing a patented invention “within the United States,” whereas the latter include exporting the unassembled components of an invention for final assembly “outside of the United States.”  Notably, the vast majority of patent suits are brought under only the Act’s domestic infringement provisions.  See Daniel Moffett, et al., Overlooked Patent Cases: Foreign Activity Liability, Damages, Law360 (Sept. 30, 2021).  Over the last three years, for example, § 271(f) has been cited in only four published cases across all jurisdictions, whereas §§ 271(a)-(c) have been cited in more than one-hundred published cases. Although there are several reasons for this trend—including that patentees may be sleeping on their rights, whereas risk-averse competitors may be overestimating the scope of those rights—all seem to reduce to a common theme: stakeholders lack sufficient information about § 271(f). See id.; Katie E. Hyma, Legislative Ballast: The Case for Repealing 35 U.S.C. § 271(f), 69 Syracuse L. Rev. 155, 183 (2019).  This article targets that issue by outlining the relevant history and current state of the law under § 271(f).  As political and economic forces converge towards a historic resurgence of manufacturing activity in the United States, understanding the Patent Act’s provisions governing the export of domestic products may be more important now than ever before.

I. Closing the Deepsouth Loophole

Any approach to the law of § 271(f) requires understanding its statutory genesis.  Indeed, the Supreme Court has on multiple occasions relied on the provision’s “history” and “intent” to interpret its scope.  Life Techs. Corp. v. Promega Corp., 580 U.S. 140, 151-52 (2017). This is likely because § 271(f) was a direct legislative response to a controversial Supreme Court decision, Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972).

Deepsouth involved a dispute over shrimp deveiners.  The accused infringer, Deepsouth, did not dispute that its machine violated the patents-in-suit if made or used domestically.  It argued, however, that nothing in U.S. patent law prevented it from manufacturing the unassembled parts of that machine and shipping them abroad for final assembly.  The Court agreed.  Neither Deepsouth nor its foreign customers were making, using, or selling a patented invention “within the United States,” which was all the Patent Act prohibited at the time.  After all, the invention was the fully assembled product, not its component parts.  And because the full assemblies were completed abroad, they were beyond the scope of the Act.  This reasoning, known today as the “Deepsouth loophole,” led directly to the enactment of § 271(f), which effectively overruled the decision.  See Promega Corp. v. Life Techs. Corp., 773 F.3d 1338, 1352 (Fed. Cir. 2014) (“Section 271(f) closed the Deepsouth ‘loophole’”).  As the Supreme Court recently explained, paragraph (f) “fill[ed] a gap in the enforceability of patent rights by reaching components that are manufactured in the United States but assembled overseas and that were beyond the reach of the statute in its prior formulation.”  Life Techs., 580 U.S. at 151-52. Interpreting the provision today, courts thus consider whether a proposed interpretation “comports with” that Congressional “intent.” Id.

II. Text of Section 271(f)

Textually, § 271(f) addressed the Deepsouth loophole by “expand[ing] the definition of infringement to include supplying from the United States a patented invention’s components.” WesternGeco LLC v. ION Geophysical Corp., 138 S. Ct. 2129, 2134 (2018).  Thus, domestic assembly is no longer required; it is enough if the alleged infringer supplied the unassembled components of an invention for final assembly abroad. The provision operates through two subsections “that work in tandem by addressing different scenarios.”  Id.  “Section 271(f)(1) addresses the act of exporting [all or] a substantial portion of an invention’s components,” whereas § 271(f)(2) “addresses the act of exporting components that are specially adapted for an invention.”  Id. at 2134-35. In full, the provision reads:

(1) 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.

(2) 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.

Those familiar with the Patent Act’s indirect infringement provisions, §§ 271(b) and (c), will notice a great deal of overlap—indeed, § 271(f) intentionally “mimics the language” of those provisions.  Zoltek Corp. v. United States, 672 F.3d 1309, 1334 n.6 (Fed. Cir. 2012) (Dyk., J., dissenting).  As the legislative history clarifies, “[t]he term ‘actively induce’ [in paragraph (f)(1)] is drawn from existing subsection 271(b),” whereas “[t]he passage in paragraph (f)(2) reading ‘especially made or especially adapted for use’ . . . comes from existing section 271(c).”  Section–by–Section Analysis of H.R. 6286, 130 Cong. Rec. 28069 (1984); see also Microsoft Corp. v. AT & T Corp., 550 U.S. 437, 445 (2007) (citing Section-by-Section Analysis).  But there are also important differences between § 271(f) and the indirect infringement provisions.  For example, because § 271(f)(1) applies only to the supply of all or a substantial portion of an invention’s components, it is narrower than paragraph (b) and excludes, for example, liability for providing expertise or consultation. 3 Moy’s Walker on Patents § 12:29 (4th ed. Dec. 2020 Update).  Similarly, § 271(f)(2), unlike paragraph (c), requires a specific intent to assemble an infringing combination “outside of the United States.” Id.

A. Elements of Section 271(f) – Settled and Unsettled law

Given the substantial linguistic overlap between §§ 271(b)-(c) and § 271(f), one might expect the case law to carryover, and for much of the law on § 271(f) to be correspondingly settled.  Not so.  To take one example, courts have divided over whether “actively induced” has the same meaning in § 271(f)(1) as it does in § 271(b). No doubt such conflicts contribute to a lack of clarity among relevant stakeholders.  In an effort to demystify the law (where possible) and sharpen the issues (where not), the remainder of this article sets out some of the key elements of §§ 271(f)(1) and (f)(2), summarizes relevant case law, and clarifies the questions that remain unanswered and why they matter.

III. Section 271(f) Elements

First and foremost, § 271(f) targets “supplying . . . components.”  WesternGeco, 138 S. Ct. at 2134.  Supplying refers to “the act of exporting,” id., and “the transfer of a physical object,” Cardiac Pacemakers, Inc. v. St. Jude Med., Inc., 576 F.3d 1348, 1364 (Fed. Cir. 2009). Thus, the Federal Circuit has held that § 271(f) only protects patents over tangible items, such as claims to a “product, device, or apparatus.”  Id.  Patents covering methods or processes, by contrast, are not included, because they comprise intangible steps or acts.  Likewise, § 271(f) does not apply to “products that are the result of steps of the patented method,” nor to products used to perform the patented method, because they are not the “components” of the patent; rather, the steps or acts are. Id.

Both §§ 271(f)(1) and (f)(2) also require supplying components “in or from the United States.”  This means that the components must be “physically present in the United States and then . . . exported.”  Pellegrini v. Analog Devices, Inc., 375 F.3d 1113, 1117 (Fed. Cir. 2004).  The provision “focuses on the location of the accused components, not the accused infringer.”  Id. Accordingly, it is not a violation of § 271(f) for a manufacturer located in the United States to cause components located outside of the United States to be supplied.  Id. at 1118.  Nor is it infringement to merely “offer to supply” components from the United States.  Rotec Indus., Inc. v. Mitsubishi Corp., 215 F.3d 1246, 1257–58 (Fed. Cir. 2000).

Section 271(f) also applies only to “components of a patented invention” supplied for “combination” abroad.  A “component” is a “constituent part,” “element,” or “ingredient,” and must be supplied as a “usable, combinable part” for actual overseas assembly.  Microsoft, 550 U.S. at 449. Thus, in the Supreme Court’s first case interpreting § 271(f), it found no infringement where a master disk containing software code was supplied to an overseas manufacturer who, in turn, made copies of the disc that were combined to form the invention.  Id.  Because the master disc was not actually combined to form an infringing combination, it was not a “component of the patented invention.”  Likewise, the software itself, “detached from an activating medium,” was not a component, because it was not a “usable, combinable part.” Rather, “[a]bstract software code is an idea without physical embodiment, and as such, it does not match § 271(f)’s categorization: ‘components’ amenable to ‘combination.’”  And because the software copies created from the master disc were manufactured abroad, they were not “supplied . . . from the United States.”

B. Section 271(f)(1) Elements

Section 271(f)(1) targets the supply of “all or a substantial portion of the components of a patented invention.”  The Supreme Court recently interpreted this language in Life Technologies Corp. v. Promega Corp., 580 U.S. 140 (2017).  There, the Court held that a “substantial portion of components” is a “quantitative measure” that is “large [in] size,” rather than a qualitative measure of importance.  Id. at 146-47. That is, it refers to the “number of components” supplied.  Id. at 148.  The Court also held that, as a matter of law, one component is not a “substantial portion” under the Act.  Id. at 149-52.

The Court’s narrow ruling, however, arguably created as many questions as it answered.  For example, the Court declined to say “how close to ‘all’ of the components ‘a substantial portion must be.’”  Id.   That is, how many components must be supplied for liability under § 271(f)(1) to attach?  The phrasing of the question and Promega’s reasoning provide some clues.  First, the Court implied that a “substantial portion” is a relative concept of proportionality, defined by the percentage of components supplied out of the total components in the patented invention.  The question is thus “how close” to 100% that ratio must be.  And that phrasing, too, arguably suggests a partial answer—it must at least be “close.”  See Brief for the United States as Amicus Curiae Supporting Petitioners at 25-26, 2016 WL 4728374, Life Techs. Corp. v. Promega Corp., 580 U.S. 140 (“Section 271(f)(1) . . . is properly interpreted to reach the supply of all or something close to all of the total.”). 

Relatedly, the Court also declined to explain “how to identify the ‘components’ of a patent or whether and how that inquiry relates to the elements of a patent claim.”  Life Tech., 580 U.S. at 151 n.2.  In other words, although a “substantial portion” refers to the number of components supplied, the Court provided no guidance on how to count the number of components at issue.  The Court has said that a component is a “constituent part” or “element,” Microsoft, 550 U.S. at 449 n.11, but that, too, leaves many questions unanswered.  For example, do the components of components, or sub-components, count, since they, too, are technically parts used to make the invention?  And if so, what is the a limiting principle—do we go on down to the individual screws?  Relatedly, how, if it all, does that inquiry relate to the patent claims?  For example, does one look only to the text of the patent to determine the number of components at issue, or do the parts actually used to make the infringing device matter, also?  Consider also the doctrine of equivalents, in which an accused product may contain different kinds and quantities of parts than those stated in the claims.  Should a different rule apply to those cases?  The Court left these and other issues for the lower courts to resolve.  Unfortunately, however, no court—not even a district court—has addressed these issues since Promega was decided.

Section 271(f)(1) also requires that the defendant “actively induce” an infringing combination outside of the United States.  As mentioned, courts have struggled to define that term despite its express incorporation of the language from § 271(b).  For example, the Federal Circuit has held that an accused infringer can induce itself to form the infringing combination; unlike in paragraph (b), which applies only to the inducement of a third party. Promega Corp. v. Life Techs. Corp., 875 F.3d 651, 654 (Fed. Cir. 2017).

Finally, courts also disagree over the scienter required under § 271(f)(1).  Although many, including the Federal Circuit, have required the same mental state as under § 271(b), see Liquid Dynamics Corp. v. Vaughan Co., 449 F.3d 1209, 1222 (Fed. Cir. 2006); Twentieth Century Fox Home Ent. LLC v. Nissim Corp., 2015 WL 3465838, at *2 (S.D. Fla. June 1, 2015) (“Section 271(f) claims require a showing of specific intent to infringe”), some have required only an intent to combine, “irrespective of whether the infringer had knowledge that there would be infringement if combined domestically,” WesternGeco L.L.C. v. ION Geophysical Corp., 791 F.3d 1340, 1343-44 (Fed. Cir. 2015). Although this introduces an additional measure of uncertainty into § 271(f) case law, there is good reason to assume that the scienter requirement in paragraphs (b) and (f)(1) are the same, and that courts will generally hold as much.  Most importantly, it remains binding Federal Circuit precedent.  Liquid Dynamics, 449 F.3d at 1222.

C. Section 271(f)(2) Elements

Unlike with § 271(f)(1), courts seem to generally agree on the meaning and scope of § 271(f)(2).  Among other things, the provision is generally construed consistently with § 271(c). Thus, it is well-accepted that: (i) paragraph (f)(2) applies to the supply of even a single component of a multicomponent invention, see Life Techs., 580 U.S. at 150; (ii) the component must be “especially made” and not a staple article “suitable for noninfringing use”; (iii) the defendant must possess not only the same scienter as under paragraph (c)—including knowledge of the patent and knowledge of infringement—but also the specific intent to form an infringing combination “outside of the United States,” see Veeco Instruments Inc. v. SGL Carbon, LLC, 2017 WL 5054711, at *22 (E.D.N.Y. Nov. 2, 2017); and (iv) the component need not actually be assembled into an infringing combination abroad, so long as “the infringer shipped them with the intent that they be combined.” Waymark Corp. v. Porta Sys. Corp., 245 F.3d 1364, 1368 (Fed. Cir. 2001).  By contrast, courts generally hold that § 271(f)(1) requires final assembly abroad.  See Microsoft, 550 U.S. at 453 (“[T]he very components supplied from the United States . . . trigger § 271(f) liability when combined abroad to form the patented invention at issue.”); Jacobs Vehicle Sys., Inc. v. Pac. Diesel Brake Co., 424 F. Supp. 2d 388, 394 (D. Conn. 2006) (holding that § 271(f)(2), unlike § 271(f)(1), does not require final assembly abroad).

In its most recent case to consider § 271(f), the Supreme Court held that a plaintiff could recover lost foreign profits for infringement under § 271(f)(2). WesternGeco, 138 S. Ct. at 2136.  Despite the general presumption “that federal statutes apply only within the territorial jurisdiction of the United States,” the Court reasoned that the Patent Act authorizes damages for “infringement,” and infringement under § 271(f)(2) occurs when the defendant supplies the components at issue from the United States.  Although additional foreign activity, including final assembly, sale, and use, was necessary to establish the lost profits claimed, that activity went to the question of damages, not to the underlying injury.  Thus, the Court concluded, foreign lost profits were available.

WesternGeco raises a number of questions.  First, the Court expressly declined to address “the extent to which other doctrines, such as proximate cause, could limit or preclude damages in particular cases.”  Id. at 2139 n.3.  Second, the Court did not say to what extent, if at all, its reasoning applies to §§ 271(a)-(c)?  Courts have split on the issue.  See, e.g., Brumfield , Tr. for Ascent Tr. v. IB LLC, 586 F. Supp. 3d 827, 840 (N.D. Ill. 2022) (“While some courts have extended the reasoning in WesternGeco to § 271(a) infringement, there is still no federal precedent holding that WesternGeco overruled previous Federal Circuit precedent” precluding damages for foreign sales under § 271(a)).  Finally, to what extent does WesternGeco apply to reasonable royalties, which compensate “the use made of the invention by the infringer.” 35 U.S.C. § 284.  Are reasonable royalties also available for foreign sales, and if so, at what point does a supplier of unpatented components “use” the combined “invention”?  These are just some of the questions that remain to be decided by courts grappling with meaning of § 271(f).