Monday, June 27, 2016

Can You Induce Yourself to Infringe?

The Supreme Court granted certiorari in Life Tech v. Promega Corp. today to resolve an interesting conundrum of statutory interpretation having to do with foreign infringement. I won't provide all the details here - as Jason Rantanen and Dennis Crouch have ably done so. [Note: it turns out that the issue on which the court granted cert. is the one I find less interesting. Thus, I've edited this!]

The question is deceptively simple: when a manufacturer creates an infringing product in a foreign country, here a "kit," is it infringement of the patent for the manufacturer to buy or make a key component of that kit and then export it from the U.S. to the foreign manufacturing facility?

You'd think there would be a clear answer to this question, but there isn't. The statute, 35 U.S.C. § 271(f)(1), states:
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.
I had always assumed that the exported product is a substantial portion. The jury found it was, and if it turns out it wasn't, then that's just not that interesting a question. But I guess not - as this is the question that the court granted cert on. Indeed, on this issue only, as discussed further below.

The only thing that's interesting about the substantial portion question is that the exported product is a commodity, and thus 35 U.S.C. § 271(f)(2) - which enforces liability for exporting specially made products used for contributory infringement - doesn't apply. In other words, this is an interesting case because inducement liability is the only type of liability available, and inducement liability is really hard to prove, especially with a commodity.

But inducement is much easier here, theoretically, because the exporter is the same company as the foreign manufacturer. In other words, you can assume that the intent of the export was to combine the product into the infringing combination. And, yet, the court did not grant cert on that issue.

Instead, it will have to answer the question in a roundabout way - whether self-inducement is possible, but not when the component is a commodity. I suppose the Court could say, well, it's not the commodity that matters, but that it was too small a component. But isn't that a jury question? It seems to me that the only way the Court can reasonable make a distinction is either to make some new threshhold for what "substantial" is, or say that a commodity can never qualify. I don't like either of those options much, though - as I note below - the commodity angle has more legs given that the same commodity could be purchased from a third party without liability.

When this type of combination is done by a single manufacturer in the U.S., we call it direct infringement under § 271(a). The concept of inducement simply never comes up, and thus all the precedent to date discusses inducing another and spends no time on the importance of each component (indeed, § 271(b) says you can induce without selling anything!). So, to say that Life Tech is liable under § 271(f)(1) is to say that it has induced itself to infringe by exporting the commodity component that it could have bought from someone else who would not have induced it.

I don't think this was such a clear cut case on the self-inducing point, and I think that granting cert. on only the substantial component issue muddles the question. I offer two opposing viewpoints.

On the one hand, of course one can induce oneself for this statute. Foreign infringement liability was written in order to stop parties from avoiding the reach of a U.S. patent by shipping parts overseas to be assembled there. Viewed from this angle, it is not only rational but mandated that a company be held liable for shipping components overseas for the purpose of combining them into an infringing product. From this perspective, the policy goals of the statute dictate liability - even if the component shipped is a commodity.

On the other hand, the key component is a commodity, supplied by any number of companies. If Life Tech had only ordered the commodity from one of the other companies for shipment from the U.S., rather than supplying it from it's U.S. arm, it surely would not be liable. Viewed from this perspective, the extraterritorial reach of the statute makes little sense -- is a little silly even -- if it turns on a detail as minute as whether a company bought a commodity and shipped it overseas to itself or whether it bought a commodity and had the seller ship it overseas to itself.

My gut says follow the statute and find liability, even if avoiding liability is ridiculously easy. There are lots of statutes like that, and there's no reason why this shouldn't be one of them. In that sense, the Court's denial of cert. on the self-inducement issue makes sense, but I don't know what to make of the issue on which it did grant review.

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