Patent law - no infringement for extraterritorial completion of method patents - Cardiac Pacemakers, Inc. V. St. Jude Medical, Inc.

• Author: Feldman, Catherine Schulte

U.S. patent law generally grants the patentee the right during the patent term to exclude others from making, using, or selling the invention within the boundaries of the United States. (1) An exception to the general grant, section 271(f) of the Patent Act extends a patentee's rights extraterritorially allowing inventors to seek infringement damages against anyone who supplies "all or a substantial portion of the components of a patented invention" from the United States to a foreign country for assembly. (2) In Cardiac Pacemakers, Inc. v. St. Jude Medical Inc., (3) the Court of Appeals for the Federal Circuit considered en banc whether section 271(f) applied to method claims. (4) The Federal Circuit held that method claims were not within the scope of section 271(f) and limited infringement damages to implantable cardioverter defibrillators (ICD) used in the patented method sold within the United States. (5)

The long and complex patent litigation began when Cardiac Pacemakers, Inc. (Cardiac) filed suit against St. Jude Medical, Inc. (St. Jude) on November 26, 1996 alleging that St. Jude infringed several of Cardiac's ICD product and method patents in the United States and abroad. (6) Cardiac sought damages for the manufacture and sale of ICDs directly infringing any product patents, the sale of ICDs with programming capable of performing Cardiac's method claims, and the sale of ICDs that actually performed the method steps. (7) After a 2001 trial and subsequent appeal, Cardiac's only claim left in dispute was from U.S. Patent No. 4,407,288 ('288 patent), claiming a method of heart stimulation that detects and treats heart arrhythmias through either single or multimode operation with cardioversion. (8) The alleged infringement specific to the '288 patent concerned St. Jude selling ICDs to doctors that were programmed to a noninfringing defibrillation mode but capable of performing the patented method. (9) St. Jude provided the doctors with instructions to program the ICDs to perform the infringing cardioversion mode. (10) In the subsequent appeal, the '288 patent's claim construction was modified and remanded for a new trial of infringement in light of the claim construction and for reassessment of damages. (11)

On remand, St. Jude raised new invalidity arguments concerning the modified claim construction and filed a motion for summary judgment to limit Cardiac's damages to only those ICDs that performed the '288 method in the United States. (12) The district court denied a limitation of damages to ICDs used within the United States relying on Federal Circuit precedent that allowed section 271(f) recovery of damages for methods practiced abroad if the method used products shipped from the United States. (13) The district court ultimately precluded an award of damages when it granted summary judgment of anticipation to St. Jude because the broader claim construction made the '288 patent obvious in light of prior art and thus invalid. On appeal, a panel of the Federal Circuit reversed the anticipation summary judgment and affirmed the refusal to limit damages. Both parties filed petitions for rehearing en banc, but the Federal Circuit granted only St. Jude's petition regarding section 271(f) and the limitation of damages to territorial sales of the ICDs. (16) In the en banc decision, the Federal Circuit held that method claims were not within the scope of section 271(f) because a method's components are the actually-performed steps and not the products used to perform the steps. (17)

In Deepsouth Packing Co. v. Laitram Corp., (18) the Court refused to attach U.S. patent infringement liability to a manufacturer who shipped disassembled components of a device for reassembly overseas absent explicit legislative consent from Congress. (19) In direct response to Deepsouth Packing, Congress enacted section 271(f) to prevent companies from evading U.S. patent laws by manufacturing all that is necessary to make an infringing device and simply "supplying [the] components of a patented product" for completion of the invention abroad. (20) The legislative activity continued for over a decade before Congress finally enacted the section 271(f) loophole closing provision. (21) Initial proposals for the language of section 271(f) mirrored sections 271(b) and 271(c) that limited components to "patented machine[s], manufacture[s], or composition[s] of matter;" however, later legislative record showed consideration of methods as well. (11) In the final bill, Congress adopted the following language that holds one liable for patent infringement: "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." (23)

The initial cases concerning section 271(f) were similar to Deepsouth Packaging and involved shipping components of a physical machine. (24) Because of plaintiffs' desire to expand infringement damages to foreign acts and the development of new technology, courts have struggled to delineate the boundaries of section 271(f) when dealing with chemical compounds, instructions, and design patents. (25) More recently, courts have grappled with these issues as applied with intangible software code embodied in an invention, including Federal Circuit cases involving the exportation of disks containing software code claimed in a patent that were copied onto hard drives in foreign countries for sale. (26) In relying heavily on the all encompassing term "patented inventions," the Federal Circuit postured that components capable of being supplied cannot be limited to structural or physical parts because "patented invention" suggests that every type of invention deserves infringement protection under section 271(f). (27) Although explicitly avoiding the issue of whether intangible software is a component capable of supply, the Supreme Court overruled the Federal Circuit's holding that the supply requirement is fulfilled when an exported master disc carrying the software code is copied rather than installed on foreign computers. (28)

Two different Federal Circuit panels directly addressed whether methods, apart from software, are within the scope of section 271(f), and reached alternative conclusions based on separate interpretations of what constitutes a component of a method claim. (29) The first panel, in Standard Havens Products, Inc. v. Gencor Industries, Inc., (30) succinctly held that the foreign sale of a plant capable of performing a patented method did not invoke section 271(f). (31) Another panel, although holding on a separate issue, shed light on the Standard Havens holding by noting the difficulty of conceiving a way to supply intangible steps of a method patent in a manner that conforms to section 271(f)'s component requirement. (32) The definition of a method gives rise to the following confusion: a method, unlike a product, is not made up of tangible items but is composed of steps or acts, the combined performance of which is the invention. (33) Subsequently, a Federal Circuit panel in Union Carbide Chemicals & Plastics Technology Corp. v. Shell Oil Co. (34) disagreed that section 271(f) did not apply to methods and instead of defining "components" as the separate acts that compose the method, which are incapable of supply, the panel defined "components" as any apparatus shipped abroad for use in a patented process. (35)

In Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc., the en banc court held that section 271(f) does not apply to method patents because "patented inventions" must be read in context with the terms "components" and "supply" in order to interpret the scope of inventions Congress intended to include in section 271(f). (36) The court relied on the fundamental distinction between a product and a method, in which products consist of tangible items whereas methods are composed of the performance of steps. (37) After consulting a dictionary that defined components as elements or ingredients, the court concluded that methods consist of components, and those components are the steps used in the performance of the method but not the apparatuses used in the process. (38) The Federal Circuit stated that such interpretation was consistent with the language of section 271(c), which uses "component[s] of" in the context of patented products but uses "material or apparatus for use" in the context of method patents. (39) After clarifying what constitutes the components of a method, the court determined methods were incapable of fulfilling the supply requirement because supply means the transfer of a physical object, and it is a physical impossibility to supply the intangible action steps of a method. (40)

In support of its conclusion, the Federal Circuit noted that Congress's purpose in creating section 271(f) was to close the Deepsouth Packaging loophole that arose from the exportation of physical parts of a patented product, rather than to protect methods extraterritorially. (41) The court observed that the legislative record was almost devoid of reference to method patents and clearly indicated that section 271(f) would "prevent copiers from avoiding U.S. patents by shipping overseas the components of a product patented in this country" for reassembly abroad. (42) In challenging the majority's opinion, the dissent highlighted a portion of the record that illuminated section 271(f)'s applicability to methods. (43) The dissent further asserted that the modification of the language of section 271(f), from mirroring section 271(c) in regards to "a patented machine, manufacture, or composition of matter" to the more encompassing term "patented invention," reflects Congress's intentional broadening of the statute to include method claims. (44) The majority held that methods were not within the scope of section 271(f) and in traversing counterarguments stated the presumption against extra-territorialism...