A Loophole Opens for Exporters of Devices Used to Perform Patented Methods

By jlynch. By Robert Hess

August 2009 IP Update

The Court of Appeals for the Federal Circuit has narrowed the  protection available for holders of patents with method claims. In Cardiac Pacemakers Inc. v. St. Jude Medical Inc., the court ruled that a method claim may not be successfully asserted against those who export devices for the purpose of practicing the claimed method, even if the device would infringe the method claim if used within the United States.

Cardiac Pacemakers invented and patented an implantable defibrillator/pacemaker cardioverter. Circuitry in the device can determine a heart condition of the patient from among multiple types of heart conditions (e.g., irregular pace or defibrillation), select a mode of operation based on the condition determined, and execute a therapeutic mode to treat the heart condition. St. Jude Medical manufactured and exported such a device.

If the device had been used in the United States, St. Jude would likely be liable for patent infringement because a user would be performing the patented method. The Federal Circuit has now ruled that exporting the device from the United States was not an act of infringement.

A valid patent has long empowered inventors to exclude “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States.” See 35 U.S.C. § 271(a). In recent times, the law has been amended to decisively foreclose clever manufacturers from doing an end-run around a patent simply by manufacturing a patented invention abroad and importing it into this country.

But is it possible to avoid a U.S. patent on a product by manufacturing the parts of a device in the United States and then shipping them abroad for assembly?  This practice was blessed in a 1972 Supreme Court decision, Deepsouth Packing  Co. v. Laitram Corp. Adopting a very literal view of “makes . . . within the United States,” the justices held that the parts of a patented shrimp deveining machine could be manufactured here for assembly abroad without liability for infringement.

Congress closed this loophole in 1984 by enacting 35 U.S.C. §271(f), which forbids supplying all or a substantial portion of the components of a patented invention so as to actively induce the combination of such components outside of the United States.  By the same token, supplying even one component of an invention that is especially made for use in the patented invention and is not a staple article of commerce suitable for substantial noninfringing use also became an act of infringement.

But when the patent covers a method rather than a product, different issues arise. For example, the widely publicized case of NTP, Inc. v Research in Motion, which threatened to shut down service to the widely used Blackberry® smartphone, addressed the issue of whether a company could sell a product in the U.S. that caused users to perform all the steps of a method claim when the steps of the method were not all performed in the United States.

In NTP, the Federal Circuit absolved Research in Motion of infringement of NTP’s patent because one step of NTP’s claimed method was performed on a Canadian relay server. Thus, when the claimed invention is a process, rather than a tangible object, one may avoid liability for patent infringement when not all of the claimed steps are practiced within the United States.

A further evasion is conceivable when a company exports a product that is designed to practice a method patented in the U.S. In 2006, in Union Carbide v. Shell Oil, a Federal Circuit panel held that section 271(f) covered method patents and thereby closed that loophole. In that case, export of a catalyst  to perform, overseas, a chemical process patented in the United States was found to be an act of infringement under section 271(f).

However, Cardiac Pacemakers now overturns Union Carbide and holds that method claims are not actionable under section 271(f). In the 11-1 decision, the majority reasoned that the text of the statute and the legislative history indicated that Congress intended to prevent the export of physical objects that could be assembled into an infringing device, not of products that embody an infringing method.

Section 271(f) states that one commits an act of infringement if one “supplies” one or more “components” of a patented invention to an offshore assembler.  The court explained that the individual steps of a method claim are the “components,” not the device intended to perform those steps. Thus, by exporting a device, one is not supplying a component, thereby triggering section 271(f).

Further, the majority relied on a dictionary to narrowly interpret the word “supplies,” asserting that there is no way to supply the intangible steps of a method. In addition, the legislative history suggests that section 271 was added in response to the Deepsouth decision, which related only to tangible hardware. The majority was also concerned about extending U.S. patent laws in a way that affected foreign activities.

Judge Pauline Newman vigorously dissented. In her view, the term “invention” in section 271(f) indicated Congressional intent to protect the full range of patentable subject matter, including method patents. Such is the term’s meaning everywhere else in the patent statutes. Moreover, pointing to legislative history, she noted that in 10-plus years of hearings and debate, the language of the statute was broadened from “machine, manufacture, or composition of matter” to, simply, “invention.”  Moreover, the modern meaning of “supply” is broad enough to cover information and other abstract items.

According to Judge Newman, the majority’s ruling defeats the purpose of the statute, which seeks to prevent evasion of United States patents and safeguard incentives for innovation. She shrugged off concerns over national sovereignty because the infringement that would occur under her interpretation would be the result of purely domestic activities.

Given the decade-long Congressional debate required to initially pass section 271(f) and the current deadlock over proposed patent reform, it is unlikely that Congress will clarify its intention any time soon. Perhaps the Supreme Court will weigh in on the subject.

For now, a patentee in the position of Cardiac Pacemakers would be wise to claim not only the method, but also to claim the device more concretely, for example, as a device with a sensor that triggers an electrical actuator and has multiple modes.

Claims to the exported software stored within the device may also be beneficial to the patentee. More generally, there is great benefit in claiming inventions in multiple ways due to the continuously shifting interpretation of the patent laws by the courts.