CAFC Says “Patented Invention” Does Not Include Methods

In the 1972 case of Deepsouth Packing Co. v. Laitram Corp, a bare majority of the Supreme Court ruled that exporting three separate boxes of parts that could be assembled abroad into a patented deveining machine in less than an hour was not actionable under 35 U.S.C. § 271(a). In response, Congress in 1984 enacted 35 U.S.C. § 271(f) to overturn the Supreme Court’s ruling in Deepsouth Packing and close this loophole. But in closing this loophole, Congress has also created in 35 U.S.C. § 271(f) a linguistic “nightmare” that the Supreme Court, the Federal Circuit and the lower district courts have had to wrestle with many times.  The most recent interpretational foray into the language labyrinth of 35 U.S.C. § 271(f) is the case of Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc. (CAFC 8/19/2009).   But did the Federal Circuit properly define the meaning of “patented invention”?

In Cardiac Pacemakers, the Federal Circuit (en banc) had to decide whether the term “patented invention” in 35 U.S.C. § 271(f) included a patented method. All but one member of the en banc Federal Circuit ruled it did not. (The one dissenting member was Judge Newman.) In fact, the en banc majority overruled a prior 2005 Federal Circuit panel decision in Union Carbide Chemicals & Plastics Technology Corp. v. Shell Oil Co. that had held exporting a catalyst for use abroad in a patented process was actionable under 35 U.S.C. § 271(f).

Actually, 35 U.S.C. § 271(f) comprises two subparts which are directed at different types of infringing activity. The first subpart addresses “inducing infringement” activity like that of 35 U.S.C. § 271(b). By contrast, the second subpart addresses activity similar to (but not the same as) “contributory infringement” like that of 35 U.S.C. § 271(c). In fact, the only language these two subparts share in common is at the beginning and end of each.

Both subparts of 35 U.S.C. § 271(f) require that the “component” or “components” of the “patented invention” be “suppl[ied]” or “cause[d] to be suppl[ied].” In fact, the Federal Circuit held in 2001 case of Waymark Corp. v. Porta Systems Corp. that the second subpart of 35 U.S.C. § 271(f) does not require an actual combination of “components,” but only a showing that those “components” were shipped “with intent that they be combined.” Put differently, infringement liability can occur under 35 U.S.C. § 271(f) whether or not the “patented invention” is ever completed.

Most of the interpretational difficulties with 35 U.S.C. § 271(f) have involved what is (or is not) a “component(s).” Several court decisions, including initial decisions of the Federal Circuit, construed this term narrowly to refer only to “components” of a machine or similar device. But the vast majority of courts, including the Federal Circuit later, construed the term “components” much more broadly, including Union Carbide which had held that this term included chemical “components” used in a patented process.

So the Federal Circuit in Cardiac Pacemakers was initially confronted with the following question: can a patented method comprise a “component” or “components”? The en banc majority said “yes,” but not as contemplated by 35 U.S.C. § 271(f). Instead, citing In re Kollar, the en banc majority ruled that a patented method “consists of a ‘series of acts or step,’” but not “physical components” as required by 35 U.S.C. § 271(f).

In reaching this conclusion that 35 U.S.C. § 271(f) only contemplates “physical components,” not steps as “components,” the en banc majority first compared 35 U.S.C. § 271(f) with 35 U.S.C. § 271(c), the “contributory infringement” statute. In 35 U.S.C. § 271(c), “components” are used in reference to a “patented machine, manufacture, combination, or composition.” By contrast, regarding a “patented process,” 35 U.S.C. § 271(c) refers to a “material or apparatus for use in practicing” that patented process. Therefore, the en banc majority argued that Congress believed that “component” was separate and distinct from “material or apparatus,” and thus “material or apparatus” were not a “component” of a patented process.

Next, the en banc majority noted that 35 U.S.C. § 271(f) required the “component” or “components” of the “patented invention” to be supplied or caused to be supplied. That requirement “eliminated method patents” because the ordinary meaning of the term “supply” refers to providing or furnishing “supplies, provisions or equipment.” This ordinary meaning of the term “supply” implied a “transfer of a physical object”; supplying an intangible step of a method or process “is thus a physical impossibility.”

Not so fast said dissenting Judge Newman regarding the meaning of “patented invention” in 35 U.S.C. § 271(f). As Newman saw it, the term “patented invention” embraced “all statutory classes” including processes and methods. As Newman also observed, 35 U.S.C. § 271(e), which was enacted contemporaneously with (six weeks prior to) 35 U.S.C. § 271(f), also contains the term “patented invention.” As Newman also correctly observed, the Supreme Court in the 1990 case of Eli Lilly & Co. v. Medtronic, Inc. had interpreted the term “patented invention” in 35 U.S.C. § 271(e)(1) broadly to “include all inventions, not drug-related inventions alone.” So, as Newman bluntly put it, why do “[m]y colleagues reach the opposite conclusion today, without mentioning the use of the identical words ‘patented invention’ by the same Congress that enacted [35 U.S.C.] §271(e) and soon thereafter enacted [35 U.S.C.] §271(f).”

Newman also responded to the suggestion by some amici curiae that, because 35 U.S.C. § 271(g) specifically mentions the practice of a patented process, the term “patented invention” in 35 U.S.C. § 271(f) must exclude processes. But as Newman correctly observed, these two sections were directed to “distinct situations.” 35 U.S.C. § 271(g) addresses “importation.” By contrast, 35 U.S.C. § 271(f) addresses “exportation.”

Newman also turned the en banc majority’s reliance upon 35 U.S.C. § 271(c) around to support her position that the usage of “patented invention” in 35 U.S.C. § 271(f) was for a different and “distinct purpose.” More importantly, Newman pointed out that Congress had originally proposed that 35 U.S.C. § 271(f) not include processes, but was to be specific to “patented machines, manufactures, or compositions of matter.” Later, Congress replaced this specific text with the more encompassing term “patented invention.” She then referred to the published record in the legislative hearings to show “the understanding that the effect of this change is to cover processes as well as the other statutory categories.”

In my opinion, Judge Newman has the better, or at least more supportable, argument. The en banc majority’s reliance upon 35 U.S.C. § 271(c) would make more sense if it was enacted contemporaneously with 35 U.S.C. § 271(f). But that’s not the case. Instead, as Newman pointed out, 35 U.S.C. § 271(e) and 35 U.S.C. § 271(f) were enacted contemporaneously using the same term: “patented invention.” Moreover, in Eli Lilly, the Supreme Court broadly construed that same term in 35 U.S.C. § 271(e) to include “all inventions.”

If anything, the use of different language in 35 U.S.C. § 271(c), as well as 35 U.S.C. § 271(g) (“product” made by a patented process), would suggest that the term “patented invention” should be interpreted differently in 35 U.S.C. § 271(f). But the en banc majority never responds to Newman’s argument: why is the term “patented invention” which appears in these two contemporaneous sections, and which has been interpreted broadly by the Supreme Court in one of these sections to include “all inventions” (e.g., processes and methods) to be interpreted differently in 35 U.S.C. § 271(f)? And that is a significant flaw in the en banc majority’s ruling in Cardiac Pacemakers that 35 U.S.C. § 271(f) does not apply to patented processes or methods.

The en banc majority’s decision in Cardiac Pacemakers also pays unfortunate homage to the Supreme Court’s comments in the 2007 case of Microsoft v. AT&T (35 U.S.C. § 271(f) does not apply to copies of exported software made abroad and installed on foreign made computers) about “the presumption against extraterritoriality.” This comment by the Supreme Court in Microsoft is completely unnecessary (i.e., is dicta), and is frankly a misinterpretation of how 35 U.S.C. § 271(f) works. As basically held by the Federal Circuit in Waymark, and as was argued by AT&T in Microsoft, 35 U.S.C. § 271(f), correctly interpreted, “applies only to domestic conduct.” Even if 35 U.S.C. § 271(f) is considered to have an “extraterritorial effect,” that is exactly what Congress clearly intended when they answered the Supreme Court’s call in Deepsouth Packing to change the situation, which Congress did in 1984 in overruling Deepsouth Packing.

It remains to be seen whether the loser in Cardiac Pacemakers will take their cue from Newman’s dissenting opinion, and petition for certiorari to the Supreme Court. Admittedly, 35 U.S.C. § 271(f) is a messy statute to interpret, and may even be outmoded in potentially putting U.S. exporting companies at a competitive disadvantage to their foreign competitors. But the reasoning of the en banc majority in Cardiac Pacemakers for why 35 U.S.C. § 271(f) does not apply to patented methods or processes wilts under the “glare” of Newman’s dissenting opinion. And if the Supreme Court does take up Cardiac Pacemakers, they may be in the awkward position of having to reconcile the broad interpretation of “patented invention” in Eli Lilly with the restricted application of 35 U.S.C. § 271(f) in Microsoft. Perhaps prophetically (or ominously depending on how you look at it), footnote 13 of Microsoft acknowledges that whether “an intangible method or process, for instance, qualifies as a ‘patented invention’ under [35 U.S.C.] § 271(f)” is “a question as to which we express no opinion.” Stay tuned for further developments.