U.S. Patents but International Problems: U.S. Supreme Court's Life Technologies and Lexmark Decisions Expected to Have Global Impact on Patent Rights and Technology Industry
During its 2017 term, the Supreme Court decided two patent cases that
are expected to have important repercussions on global supply chains and
businesses, including manufacturing, sales, and the licensing of technology
The first decision, Life Technologies
Corp. v. Promega Corp., 14-1538 (Feb. 22, 2017), held that the exportation
of a single component that is intended to be combined with other components
abroad cannot be subject to patent liability under 35 U.S.C. § 271(f)(1)
of the Patent Act.
The second decision, Impression
Products, Inc. v. Lexmark International,
Inc., 15-1189 (May 30, 2017), held that patent owners cannot enforce
post-sale restrictions on downstream sales of lawfully purchased goods through
patent infringement lawsuits, whether those goods are sold domestically or
Both decisions have implications for companies that source, manufacture,
distribute, or sell patented products internationally, as well as patent owners
or licensors that enforce or monetize patents against competitors or licensees.
Taken together, these decisions remind companies of significant traps for the
Life Technologies v. Promega Corp.
In Life Technologies, the
Supreme Court held that exporting only a single component of a multicomponent
product for manufacture abroad is insufficient to actively induce infringement under
35 U.S.C. § 271(f)(1). That provision states that “[w]hoever 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 such manner as to actively induce
the combination of such components outside of the United States” can be liable as
an infringer (emphases added).
In the underlying case, Life Technologies sublicensed U.S. Reissue
Patent No. RE 37,984, which claims a genetic testing kit, from Promega, the
exclusive licensee, for use only in certain fields. The kit is used to take
small samples of genetic material and synthesize multiple copies of a
particular nucleotide sequence. The kit contains five patented components. Only
one component (an enzyme) is manufactured in the United States. That component is
shipped to a United Kingdom facility and then combined with the other four
components that are manufactured there.
When Life Technologies began selling the kits outside the licensed
fields of use, Promega filed suit, alleging that Life Technologies was actively
inducing patent infringement under § 271(f)(1). Although the jury returned a
verdict favoring Promega, the district court granted Life Technologies’ motion
for judgment as a matter of law, holding that § 271(f)(1) does not
encompass the supply of only a single component. The Federal Circuit reversed,
finding that a single “important” component could satisfy the statute’s
“substantial portion” requirement.
The Supreme Court reversed the Federal Circuit’s decision. The Court
determined that the “substantial portion” requirement refers to a quantitative,
rather than a qualitative, measurement. In support, the Court relied upon the
context of the statute, including the neighboring terms “all” or “portion.”
Because the statute consistently refers to “components” in the plural, the
Court then concluded that, as a matter of law, a single component could never
satisfy the “substantial portion” requirement. In a decision that will impact
how companies manage their sourcing and supply chains, the Court thus sought to
develop a more administrable, bright-line rule that a single component cannot
constitute “a substantial portion of the components of an invention” under §
The Court, however, declined to address how close to “all” of the
components “a substantial portion” must be. Moreover, while the supply of a single
component from the United States for a multicomponent product assembled abroad
does not infringe under § 271(f)(1), infringement may still be found for
supplying a single component from the United States under another provision, §
271(f)(2), if the component “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.” Thus, in cases involving infringement
allegations under § 271(f), both the quantitative number of components supplied
from the United States and the qualitative purpose of those components will
still have to be considered.
Impression Products, Inc. v. Lexmark International, Inc.
While Life Technologies deals
with the exportation of components to manufacture abroad, Lexmark addresses post-sale restrictions that
can be imposed on distribution channels and downstream customers,
in the U.S. or abroad.
In Lexmark, the Supreme Court
addressed whether a patentee should be able to control the resale of a patented
article that has entered the stream of commerce following an authorized sale by
the patentee. Reversing 25 years of Federal Circuit precedent, the Supreme Court
first held that “once a patentee decides to sell — whether on its own or
through a licensee — that sale exhausts its patent rights, regardless of any
post-sale restrictions the patentee purports to impose.” The Court further held
that it makes no difference for purposes of patent exhaustion whether the
authorized sale of the article is first made in the United States or abroad. Both
of these issues have important implications for sale and distribution of
products, domestically and internationally.
U.S. patent law allows a patent holder to exclude others from making,
using, offering for sale, selling in the U.S., or importing patented inventions
into the U.S., without authority from the patent owner. Under the doctrine of
patent exhaustion, however, a patentee’s right to exclude is exhausted after it
sells (or authorizes the sale of) a patented product. Prior to Lexmark, a patentee could impose and
enforce post-sale restrictions that can be enforced under patent law, if the
restriction is otherwise lawful and within the scope of the patent grant (e.g.,
restrictions on reuse; geographical locations for sales; field of use; pricing).
See Mallinckrodt, Inc. v. Medipart, Inc.,
976 F.2d 700 (Fed. Cir. 1992).
The Supreme Court’s Lexmark decision
reversed this precedent, holding that all patent rights are exhausted upon an
“authorized” sale, even where the article is sold subject to an express contractual
restriction. Emphasizing the common law’s “refusal to permit restraints on the
alienation of chattels,” the Court opined that “patent exhaustion reflects the
principle that, when an item passes into commerce, it should not be shaded by a
legal cloud on title as it moves through the marketplace.”
In the underlying case, patentee Lexmark sought to prevent its printer
cartridges from being refilled and resold by third parties in the U.S.,
directly or after importation. Toward that end, Lexmark imposed a post-sale
restriction: in exchange for a price discount, purchasers were required to use
each cartridge only once or return it to Lexmark for refilling.
Under the Court’s holding, Lexmark is free to attempt to enforce
contractual provisions it may have against purchasers who breach the post-sale
restriction under contract law, but it may not bring a patent infringement suit
under patent law against a purchaser who fails to return an empty cartridge or
against a subsequent reseller of refurbished cartridges.
In view of Lexmark, licensors would
be well-advised to review all current license agreements to see which post-sale
restrictions can still be enforceable. Patent owners will need to be more
creative with their licensing terms if they want to enforce post-sale
restrictions under contract law. Companies also may wish to explore new
business models to address the risk of patent exhaustion. These are of course
subject to antitrust or other relevant laws, including other aspects of patent
Both the Life Technologies and
Lexmark decisions are reminders that companies
should aim to obtain strategic patent protection, including in key
jurisdictions and markets where a product may be manufactured, imported, or
sold, by itself, or by its competitors or licensees, while balancing costs and
benefits. Companies should also ask foundational questions about the scope of
their patent claims, how well their patents are helping them advance their business
strategies, and what legal recourse is available to enforce their intellectual
property rights in the U.S. and in key markets around the world.