Extraterritorial Patent Infringement: a comprehensive Consideration of Patent Policy

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Extraterritorial Patent Infringement:

A Comprehensive Consideration of Patent Policy

Cynthia M. Ho

I. Background Patent Law and Policy

    1. Patent Law and Policy

    2. Expansion and Evolution of Patent Rights

II. Evolution of Extraterritorial Patent Law and Policy

  1. Introduction to Extraterritorial Application of Domestic Laws

  2. US patent laws

        1. 271(f) – close Deepsouth “loophole”

        2. 271(g) - close “loophole” for foreign manufacturers

        3. Other Extraterritorial Oddities

          1. Control Point Theory

          2. Floating Island/ Infringement in Outer Space?

III. Evaluating Extraterritorial Infringement

    1. 271(f)- export of component(s) of patented invention

1. Waymark – is it all about intent?

2. Pelligrini – intent alone does not impose liability

3. Enhanced liability under 271(f)

a. Software as a Component – The “Golden Disc” Cases

            1. Eolas

            2. AT&T

          1. Components of Method Claims – Union Carbide

        1. Proposed Amendments

    1. 271(g) – imports of products made by a patented process

1. Bayer v. Housey [should old pharmaceutical cases be included 1st??]

2. Proposed Amendments

            1. Expanding 271(a): Resurrection of Control Point

1. Freedom Wireless [maybe skip this and go straight to Fed Circuit?]


IV. Matching Patent Policy with Current Context

              1. International/Global Context

    1. TRIPS and TRIPS Plus

    2. Learning from Comparative Patent Law and Policy

            1. 271(f) and (g) Analogs?

            2. Other views of patents

B. Comprehensive Perspective of Domestic Context

  1. Are 271(f) and (g) relevant in a post TRIPS world?

    1. Comparative Patent Law

    2. TRIPS

  2. Are 271(f) and (g) consistent with patent policy?

    1. Patent Incentive Theory

    2. Broad Scope of Patentability

C. Moving Forward [TBD]


Although we have clearly entered the Information Age, a question still remains as to how the traditional patent system fits within this new digital era. On one level, the patent system has easily expanded the scope of patentable subject matter to include computer software, internet business methods, and computerized methods of drug discovery.1 However, a patent is of little utility without enforceability and the scope of patent rights in this era is more indeterminate.2 In contrast to clear decisions of the expansive scope of patentable subject matter, there is a major question with respect to whether patents on information-age technology that may easily cross national boundaries constitutes infringement. This is an important issue in an age of globalism where inventions can more readily cross borders and companies daily do business across continents.
Liability under United States patent laws can arise for activity that occurs partially beyond the borders of the United States. Although principles of sovereignty dictate that United States laws have no reach for activity that occurs completely beyond the boundaries of the United States, there are statutory provisions that impose liability for use of patented inventions that occurs at least partially within the United States. Commonly referred to as “extraterritorial patent infringement” provisions, they were crafted long before the onset of the information age to address different issues.3 In one case, the patent act was amended to prevent those who escaped the letter of then-existing law, but were perceived to nonetheless violate the spirit of the law.4 In another case, the patent act was amended to protect the domestic pharmaceutical industry from a perceived competitive disadvantage with respect to those who could use their patented processes outside the United States without incurring liability and then sell domestically to undercut the patent owner’s products at home.5
However, as technology has developed, the extraterritorial provisions have not, leading to judicial decisions that have spawned legal uncertainty and disparate results as courts wrestle with how to apply laws crafted for a different era to contemporary technology. For example, in several cases, substantial damage awards have been imposed on Microsoft based upon its export of software for assembly in machines that were made and sold only outside the United States despite suggestions that the statutory basis upon which liability was imposed should not apply because it was intended to encompass only tangible products. On the other hand, the Federal Circuit has interpreted a different extraterritorial patent provision to preclude imposing any liability on companies that use a patented process abroad to create information critical to the drug discovery process that is imported to the United States.6 In each of these cases, a multinational company has engaged in some activity outside the United States, but in one instance, the company can completely evade patent liability, whereas in the other, there is the potential for substantial liability.
The situation has only become more complex recently with the Federal Circuit imposing liability on the maker of the popular Blackberry devices for activity occurring partially beyond the United States under a provision that expressly requires activity within the United States.7 In other words, a company was found liable for extraterritorial activity, but not under either of the extraterritorial patent provisions.8 Although statutes are presumed not to have extraterritorial effect without the clear intent of Congress – as in the explicit extraterritorial provisions previously discussed – the Federal Circuit nonetheless imposed liability with little regard for this principle. Rather, the Federal Circuit found that such liability was appropriate because the activity was “controlled” from the United States, extending a much older case with distinct facts, as well as a different statutory provision.9 Although the intricacies of this opinion could readily spawn an entire discussion unto itself,10 the focus here is on the expansion of traditional statutory provisions to cover extraterritorial activity and how such expansion fits with the pre-existing statutory framework for extraterritorial liability.
If a multinational pharmaceutical company can evade liability, why not the multinational software manufacturer, such as Microsoft, or the foreign company with some United States activity, such as the manufacturer of Blackberry devices? An easy answer is that different statutory provisions apply.11 However, there may be other important policy issues. For example, are differing results a function of judicial unease with the general breadth of patentability, or at least with how to apply laws of the bricks and mortar world to what is more akin to information?12 In addition, are the differing results a reflection of competing visions of statutory interpretation that underscore inconsistent policy perspectives?
The extraterritorial patent cases have not gone unnoticed. The software industry has argued that current law unduly hinder its operations and may place the entire domestic software industry at an international disadvantage.13 Moreover, there have been legislative proposals to address some – but not all – of the recent decisions concerning extraterritorial patent infringement.14 In addition, the Supreme Court may provide some aid in resolving this issue if it grants certiorari in the case of AT&T v. Microsoft.15 However, even if it grants the cert petition, its decision would necessarily be limited only to one of the three situations where patent liability current exists for extraterritorial activity.16 However, despite all this attention, there is no single forum where the entirety of the extraterritorial provisions are being considered with respect to whether they are sound policy, as well as whether they are providing uniform results.
This article provides the necessary comprehensive view of extraterritorial application of United States’ patent laws. As noted, the time is ripe for a policy-based consideration. Moreover, in light of the current climate favoring patent reform, it is particularly important to move beyond specific desires of industry lobbyists to ensure a broad policy framework that is best suited for all actors, as well as the patent system as a whole.
This article considers whether the provisions are appropriate in light of fundamental patent policy, as well as current realities. In particular, with respect to both traditional patent policy as well as the policy issues animating their creation, the provisions will be analyzed with respect to whether they give patent owners their just reward, or whether they allow unscrupulous infringers to evade infringement. In addition, the more general policies underlying extraterritorial application of domestic laws will also be considered, together with the current reality of a world with more extensive patent laws than when extraterritorial patent provisions were first created.
In addition to providing a comprehensive evaluation of the differing statutory provisions, this article also provides a new perspective that unifies the disparate provisions. Namely, this article focuses on one commonality through all the cases -- how should a court interpret a statute designed for a different era involving different technology? At first glance, the question may seem a routine one that exists in any statutory-based area of the law. However, in the patent field, where the nature of the area is new technology, the question of how to apply old statutes to new technology is a critical one. By its very nature, patent laws cannot anticipate every type of technology that will be created after the laws are passed. The question then arises as to whether patent statutes should be interpreted literally and where there is a question, what type of legislative intent should control. Should courts look to the specific problem that Congress aimed to address at the time of enactment – that may very well no longer exist, or should courts aim to follow the legislative “spirit.” In the area of patentable subject matter the Supreme Court, as well as the Federal Circuit, have seemed to follow the legislative spirit to embrace inventions that were clearly not contemplated when the 1952 patent act was enacted. However, the scope of granted patents is just as important as the scope of patentable subject matter in effectuating the policy of patents in promoting innovation. After all, if many patents can issue, but have limited enforceability, the wide subject matter reach is of little utility.
To tackle the issue of extraterritorial patent infringement, Part I begins with some important background on domestic patent law and policy. First, traditional policies underlying patent law are explained. In addition, a perspective on the evolving nature of patent rights through both institutional change, as well as legal interpretations is provided to help ground a perspective of where extraterritorial patent infringement should appropriately fall. The underlying policies that animated enactment of the extraterritorial patent provisions, as well as the specific intricacies of these provisions will also be explained.
Part II provides pertinent background on the genesis of extraterritorial provisions. Section A discusses Deepsouth and the resulting statutory provision. In particular, this section explains the differing perspectives of the majority and dissenting opinions in Deepsouth through two themes that they both share: punishing intentional thwarting of patent laws, together with a bipolar perspective on interpretation of patent laws.
Part III focuses on key cases that have interpreted the extraterritorial provisions, or interpreted traditional patent provisions to encompass extraterritorial activity. Each major section of this Part focuses on a different statutory provision providing patent liability for some extraterritorial act. Section A provides a new lens of interpretation for the Deepsouth decision that prompted the enactment of the first extraterritorial provision, 271(f). While this lens does not entirely reconcile the results, it does shed light on an underlying issue that may need to be resolved. These themes are then analyzed in selected Federal Circuit cases with extraterritorial applications under 271(f), (g) and (a).
Part IV moves beyond the existing cases to examine the overriding context of present extraterritorial patent law, as opposed to the general theory and history of patent law addressed in Part I. Section A begins by evaluating the current international and global context where most countries have patents and the strength of patent rights continue to increase. This section also undertakes a comparative examination of extraterritorial patent infringement to evaluate whether extraterritorial infringement. Section B then builds upon this background and also adds to the mix current proposals for domestic patent reform to assess whether liability for activity beyond the borders is desirable. In addition, this section evaluates whether current or pending proposals to patent reform are TRIPS consistent. Finally, this Part provides some concluding thoughts on current and possible proposals to ensure that patent liability is in sync with an increasingly interconnected and international world.

I. Background

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