written by

Brent P. Lorimer
Equity Shareholder at Workman Nydegger

posted on 29 March 2010 | 0 Comments

The Buck Stops In the U.S. - Federal Circuit Reverses Precedent and Limits Liability for Some Kinds of Infringing Acts Occurring Outside the U.S.

In Cardiac Pacemakers, Inc. v. St. Jude Medical, 576 F.3d 1348 (Fed. Cir. 2009), the Federal Circuit held that liability does not extend to U.S. manufacturers of components made in the U.S. that are shipped abroad and then used in a process that would otherwise infringe a method claim of a U.S. patent. This en banc opinion reversed prior Federal Circuit precedent thereby harmonizing the Federal Circuit’s cases with the Supreme Court’s recent ruling in Microsoft Corp. v. AT&T Corp., 127 S.Ct. 1746 (2007).

At issue in Cardiac Pacemakers was section 271(f) of the patent statute, which provides that “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, . . .  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.” (Emphasis added). This statutory language had previously been interpreted by the Federal Circuit as covering components used to practice a method of using the components, even if the method was practiced outside of the U.S., thus creating liability for such extraterritorial acts.

The technology at issue in Cardiac Pacemakers was implantable cardioverter defibrillators (“ICDs”), small implantable devices that detect and correct abnormal heart rhythms. ICDs work by administering electrical shocks to the heart, where those shocks are calibrated to restore normal rhythms and functionality to the heart. The plaintiff, Cardiac, owned a U.S. patent claiming a method of heart stimulation using an ICD. The claim in question was relatively simple, requiring the ICD to determine the existence of a particular heart condition, selecting a mode of operation of the ICD that corresponded to the determined condition, and executing the mode of operation to treat the heart condition, where the mode used includes cardioversion. St. Jude made ICDs that were used to perform the claimed method in the U.S. and abroad.

The issue in Cardiac Pacemakers was whether the sale of the St. Jude ICDs and subsequent use of those ICDs to perform the claimed method in foreign countries gave rise to infringement liability under § 271(f) by virtue of using the St. Jude ICDs outside the U.S. Cardiac argued that the sale in the U.S. by St. Jude of its ICDs constituted the sale of components of a patented invention (i.e., the ICD used in the claimed method of Cardiac’s U.S. patent), thereby actively inducing the practice of the patented method outside the U.S. This argument was based in large part on a 2006 decision of the Federal Circuit in Union Carbide Chemicals & Plastics Technology Corp. v. Shell Oil Co.,425 F.3d 1366 (Fed. Cir. 2006), where the Federal Circuit held that § 271(f) applies to claims covering a method of using such components. In Union Carbide the Court held that the exportation of a catalyst that was used abroad in a process that satisfied the limitations of a U.S. method claim constituted infringement under §271(f). However, the Federal Circuit rejected Cardiac’s argument and reversed Union Carbide in doing so.

In the interim between the Federal Circuit’s Union Carbide decision and the Cardiac Pacemakers decision, the U.S. Supreme Court decided Microsoft v. AT&T Corp., 550 U.S. 437 (2007). In the Microsoft case the Supreme Court held that the supplying by Microsoft of master disks from the U.S. which were then used in foreign countries to make other disks used for installing software on computers in those foreign countries, where those computers were not supplied from the U.S., did not constitute infringement under § 271(f). Specifically, the Supreme Court held that under those circumstances, Microsoft had not supplied components from the United States. The Federal Circuit, speaking through Judge Lourie, understood the Microsoft decision to be “a clear message that the territorial limits of patents should not be lightly breached.” 576 F.2d at 1362.

Using the Microsoft opinion as a springboard, the Federal Circuit held that supplying the ICDs in the U.S. where those ICDs were subsequently used to practice Cardiac’s method claim abroad was not within the scope of § 271(f). The Federal Circuit went even further, holding that the only “components” of a method claim are the steps of the claim, and that tangible goods used to perform the steps of the claim are not “components” of the claimed method. Building on this logic, the Court then determined that since the steps (“components”) of a method claim cannot be “supplied in or from the United States” in the sense of transferring a physical object, § 271(f) does not apply to method claims. The result was that the Court found Cardiac was not entitled to damages for ICDs exported to foreign countries.

The decision in Cardiac Pacemakers is significant for several reasons for manufacturers in the medical device industry who rely on U.S. patent claims covering methods of using their medical devices to protect their intellectual property.

First, the decision lessens the value of U.S. patents covering methods of using a medical device in a patented method, since liability for such use will no longer attach to acts outside the U.S. This is significant, because sometimes claims to a method of using a medical device are the most practical way to protect things like diagnostic kits or assays. Moreover, since many foreign countries severely limit the availability of such method claims, meaning that obtaining foreign patents covering such methods is much more difficult in many cases, the decision also removes an otherwise important form of protecting such technology that may otherwise not be obtainable through foreign patents.

Second, the decision underscores the importance of striving to insure that patent claims that cover the medical device itself are obtained both in the U.S. and in foreign countries, since this may be the only way to protect against using such devices outside the U.S. That is because patent claims granted in a foreign patent that covers the medical device itself will still be infringed if the device is made, used or sold in that country.

Third, for competitors who are prevented from selling devices for use in patented methods in the U.S. by existing U.S. method patents, Cardiac Pacemakers represents at least the opportunity to now move into new foreign markets, provided that foreign patents have not issued covering the device.