Most inventors know that the U.S. patent laws give the holder of a U.S. patent the right to prevent others from making, using, or selling the patented invention in the United States or importing that invention into the United States. What many inventors don't know is that the U.S. patent laws also provide some protections for U.S. patent holders abroad. Under 35 U.S.C. § 271(f), a person who supplies all or a substantial portion of the components of a patented invention to a party outside the United States and “actively induces” the combination of the components in a manner that would constitute patent infringement if the combination took place in the United States is liable for patent infringement under the U.S. patent laws. Similarly, a person who supplies to a party outside the United States a component that is specially made or adapted for use in a patented invention with the intention that the component be combined with other components in a manner that would constitute patent infringement if the combination took place in the United States is liable for patent infringement, as long as the component is not a staple article or commodity of commerce suitable for substantial noninfringing use.
What this means in non-legalese is that if a company here in the U.S. manufactures a component that is specifically designed for use in an invention that is the subject of an unexpired U.S. patent owned by a third party, and if that company exports the component to a company located in Britain with the expectation that the British company will use that component to create the very same invention that is patented here in the U.S., the U.S. company will be liable to the third party for patent infringement unless the U.S. company can show that the component is capable of non-infringing uses. Likewise, if a U.S. company manufactures all or a substantial portion of the components of an invention that is patented here in the U.S., and if that company sends those components to a company in Ireland, where the components are assembled into the invention that is covered by the U.S. patent, the U.S. company will be liable for patent infringement. In the latter case, the statute says that the U.S. company has to “actively induce” the Irish company to combine the components together in a manner that would infringe the U.S. patent. Although there is not a lot of case law interpreting the phrase “actively induce” under 35 U.S.C. § 271(f), that phrase has been interpreted broadly by the courts that have considered it. In T.D. Williamson, Inc. v. Dwane Odell Laymon, 723 F. Supp. 587 (N.D. Okla. 1989) and Moore U.S.A. Inc. v. The Standard Register Co., 144 F. Supp. 2d 188 (W.D.N.Y.2001), the defendants—both U.S. companies with operations abroad—argued that they could not be held liable under 271(f) because they had combined the components themselves and therefore had not “actively induced” anyone to combine them. The court rejected this argument in both cases, holding that 271(f) was not intended to be read so narrowly.
Section 271(f) was enacted in response to the U.S. Supreme Court's decision in Deepsouth Packing Co., Inc. v. Laitram Corp., 406 U.S. 518 (1972). In Deepsouth, the Court held that a company that sold all of the parts for a patented shrimp deveining machine to foreign buyers, who assembled the parts and used the machines abroad, was not liable for patent infringement under U.S. patent laws. Section 271(f) was enacted to close the “loophole” in the U.S. patent laws that allowed manufacturers to avoid liability in the U.S. by supplying components of a patented product for assembly abroad.
The current debate relating to 271(f) is whether it governs intangible, as well as tangible, property. In Eolas Technologies, Inc. v. Microsoft Corp., 274 F. Supp. 2d 972 (E.D. Ill. 2003), the issue was whether Microsoft was liable under 271(f) for sending abroad a “golden master disk” on which its Windows operating system software was stored so that the software could be installed on computers by foreign OEMs (Original Equipment Manufacturers). Patent infringement had already been established, and the question was whether the damages should include profits from foreign sales. Microsoft argued that software was not a “component” under 271(f) because the statute was intended to encompass physical products, not information. The court disagreed, holding that source code in a computer product is the legal equivalent of a piece of computer hardware and, therefore, covered by 271(f).
The issue was presented again in AT&T Corp. v. Microsoft Corp., 2004 U.S. Dist. LEXIS 3340 (S.D.N.Y. March 5, 2004). In AT&T Corp., the court held that object code contained on golden master disks shipped abroad by Microsoft constituted a “component” within the meaning of 35 U.S.C. § 271(f). The court rejected the argument that because the object code was replicated abroad, the components were not actually supplied from the U.S.
As technology advances and our global economy becomes more intertwined, courts will continue to grapple with the application of 271(f) to information technology and the broader issue of the application of existing statutory definitions to current technologies.
