Cardiac Pacemakers v. St. Jude: Section 271(f) Does Not Apply to Method Claims

Following the lead of the U.S. Supreme Court in its 2007 Microsoft Corp. v. AT&T Corp. decision, the Federal Circuit ruled that 35 U.S.C. Section 217(f) is not applicable to method claims. In Cardiac Pacemakers, the Court expressly overruled its own previous controversial decision in Union Carbide, finding that Section 217(f) requires the transfer of tangible physical objects. Cardiac Pacemakers Inc. v. St. Jude Medical Inc., ___ F.3d ___, 2009 WL 2516346, No.’s 2007-1296 and 2007-1347 (Fed. Cir., Aug. 19, 2009) Since method patents have no tangible components, the statute cannot apply. Moreover, the court found that the presumption against extraterritorial application of U.S. law weighed against the application of the statute to method and process claims.

Background

Cardiac owned patents covering implantable cardioverter defibrillators (ICDs) that included method claims for detecting and correcting potentially fatal abnormal heart rhythms . St. Jude sold ICDs that allegedly could be used to infringe on Cardiac’s method claim. Some of St. Jude’s ICDs were shipped abroad. Cardiac sued St. Jude for infringement in federal court.

Relying on Union Carbide Chemicals & Plastics Tech. Corp. v. Shell Oil Co., 425 F.3d 1366 (Fed. Cir. 2005), the District Court found that 35 U.S.C. Section 271(f) applied to method claims, and that St. Jude’s shipment of ICDs abroad could result in a violation of that section. A Federal Circuit panel affirmed the District Court decision on the same basis.

The Federal Circuit granted St. Jude’s request for a rehearing en banc, resulting in the Federal Circuit reversing the lower court decision and expressly overruling Union Carbide.

Section 271(f) is not applicable to method claims

35 U.S.C. Section 271(f) provides a cause of action for patent infringement when the “components” of a patented invention are “supplied” by or from a U.S. entity for assembly abroad. Congress enacted the provision to close a loophole in the patent laws exposed by the Supreme Court’s opinion in DeepSouth Packing Co. Inc. v. Laitram Corp., 406 U.S. 518 (1972). In DeepSouth, a U.S. manufacturer who shipped unassembled parts of a patented shrimp deveining machine abroad for assembly and use was found not liable for patent infringement because “it is not infringement to make or use a patented product outside of the U.S.” 406 U.S. at 527, 531.

Congress responded with Section 271(f), which prohibits any U.S. entity from supplying unassembled components of a patented production abroad in a way that actually induces assembly of those components in a way that would infringe the U.S. patent if the combination and use occurred in the U.S.

In the 2005 Union Carbide decision, the Federal Circuit interpreted Section 271(f) as encompassing method claims. In that case, Shell was found liable for exporting a catalyst to be used abroad for the purpose of practicing Union Carbide’s patented method. 425 F.3d at 1380. This is the precedent followed by the both the District Court and Federal Circuit panel in Cardiac Pacemakers.
But in 2007, the U.S. Supreme Court decided Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007). In that case, the Supreme Court found that section 217(f) does not cover foreign duplicated software. That case held that “master disks” were not a “component” for purposes of section 217(f) when abroad to be copied and then installed to form a system that would allegedly infringe on AT&T’s method patent.  550 U.S. at 452. The Supreme Court thus defined the concept of “supplying components” in terms of tangible objects.

Following the lead of Microsoft, the en banc Federal Circuit honed in on two key words of Section 217(f): “components” and “supplied.” The Court determined that a method or process claim is just a series of steps, which by definition are not physical “components” that can be exported: “[M]ethod patents do have ‘components,’ viz., the steps that comprise the method, and thus they meet that definitional requirement of Section 271(f), but the steps are not the physical components used in the performance of the method.” 2009 WL 2516346, *13.

As Cardiac’s method claim lacked any physical components, Section 217(f) cannot apply, determined the Court, because the term “supplied,” as used in the statute, implies the physical transfer of a tangible object. 2009 WL 2516346, *14. An intangible step in a method or process cannot be “supplied” and therefore Section 271(f) cannot apply to method claims.

The en banc court supplemented its decision by pointing to the legislative history of Section 217(f), noting that it is “almost completely devoid of any reference to the protection of method patents.” Id. Moreover, the court noted that extending Section 271(f) to method claims is barred by the presumption against extraterritoriality. The court cited Microsoft for the position that this presumption applies even to statutes with an international reach, such as Section 271(f), because the scope of such laws should be no broader than specifically set forth in the statute. 2009 WL 2516346, *15.

Judge Newman filed the sole dissent to the en banc decision regarding Section 271(f)’s scope, arguing that the statute was intended to cover “all of the statutory classes of patentable invention,” including process patents.  Judge Newman pointed out that under the majority opinion , the infringement for process patents – but not machine patents – could be avoided simply by completing the steps offshore. 2009 WL 2516346, *17.

CONCLUSION

Though perhaps dramatic in its limitation of Section 217(f) to apparatus patents, Cardiac Pacemakers does seem to have a relatively limited scope, since it will apply only to method claims that lack an accompanying apparatus claim. Most method claims have accompanying apparatus claims.

The types of claims where Cardiac Pacemakers may prove limiting are those involving methods such as biotechnology and software code claims. Still, in those cases, one has to wonder if Judge Newman’s dissent won’t prove prophetic, and someone will be found not liable for infringement simply because they completed the patented process outside of the United States.

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Yuri Mikulka

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