An en banc ruling by the U.S. Court of Appeals in the Federal Circuit held recently that a statute used by patent holders to assert patents to products originating in the U.S. and assembled in other countries does not apply to method patents. The court ruled that patents for methods or processes are not subject to patent infringement liability if the products are assembled and sold overseas. The case is captioned Cardiac Pacemakers Inc. v. St. Jude Medical Inc. The full opinion can be found here.
The Issue before the court was whether a 1970s federal law against encouraging patent infringement abroad applies to method patents. The court ruled that it does not, which pleased U.S. business interests.
The court reasoned that Congress’s intent in passing the legislation was to close a loophole that allowed companies to circumvent U.S. patent laws by assembling the majority of a product in the U.S. and finishing the remaining portion abroad.
The court explained:
Congress’s focus on patented products is apparent from an examination of the legislative history. See, e.g., S. Rep. No. 98-663 at 6 (1984) (stating that the legislation was geared towards “prevent[ing] copiers from avoiding U.S. patents by shipping overseas the components of a product patented in this country so that assembly of the components will be completed abroad.” (emphasis added)); 130 Cong. Rec. H10,525 (daily ed. Oct. 1 1984) (same).”
This recent decision is yet another illustration of the Supreme Court’s willingness to limit the extraterritorial reach of U.S. patent laws. In a similar case several years ago, the Supreme Court held in Microsoft Corp. v. AT&T Corp, that Microsoft was not liable under U.S. patent law for sending master discs encoded with encrypted Windows data to non-U.S. companies, which would subsequently sell the products to foreign customers, even though the final product infringed on an AT&T speech software patent. Notably, the United States as amici curiae argued for a territorial limitation of U.S. patent law and asserted that AT&T’s remedy was “in obtaining and enforcing foreign patents, and not in attempting to extend U.S. patent law to overseas activities."
Trend to Watch: Look for Courts to Further Limit the Extraterritorial Reach of U.S. Patent Laws