United States: Intellectual Property At The Supreme Court 2017

Last Updated: August 1 2017
Article by John C. Donch and Danielle C. Froschhauser

In 2017, the Supreme Court will issue opinions on a wide range of important issues in intellectual property law. Below are two pending cases to keep on your radar, as well as three cases that the Court has already decided earlier this year.

TC Heartland LLC v. Kraft Food Brands Group LLC

In TC Heartland, the Supreme Court will examine whether the Federal Circuit's stance on patent venue is correct. The Federal Circuit has interpreted patent venue broadly, holding that venue is proper in any federal court that has personal jurisdiction over the accused infringer.

Proper venue for patent cases is codified in 28 U.S.C. § 1400(b). § 1400(b) limits venue to judicial districts "where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." The Federal Circuit has maintained that this narrow provision is supplemented by 28 U.S.C. § 1391(c), which states that venue includes "any judicial district in which such defendant is subject to the court's personal jurisdiction."

The issue in TC Heartland is whether §1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by § 1391(c).

If § 1400(b) is found to be the sole provision governing patent venue, plaintiffs would no longer have their choice of venue. This would likely have a large impact on the Eastern District of Texas, where most patent suits are filed, but where few defendants are based. It has also been speculated that this would cause an increase in patent cases in the District of Delaware, where a relatively large number of companies are incorporated.

Therefore, if the Court reverses the Federal Circuit, plaintiffs will be limited to venues where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business. Such a result could significantly limit a patent owner's venue options if faced with infringement of its patent.

Impression Products Inc. v. Lexmark International Inc.

The Supreme Court will also be hearing a case concerning the Federal Circuit's established views on patent exhaustion. Under the doctrine of patent exhaustion, a patentee's rights to restrict sale of a product are "exhausted" with a first authorized sale.

The Federal Circuit maintains that foreign sales of a patented product do not exhaust the patentee's exclusionary right on importation of the patented product absent an express or implied license. The Federal Circuit has also taken the position that post-sale restrictions on patented items are permissible, so long as those restrictions were communicated to the buyer at the time of the sale.

If the Court reverses the Federal Circuit's holdings, a wide range of industries will be affected. For example, drug companies often sell their United States-patented products at lower prices abroad, relying on the rule that these drugs may not be imported into the United States. A reversal would effectively prevent drug companies from selling their patented products at lower prices abroad.

Further, a wide range of industries place post-sale restrictions on their patented products. For example, Lexmark gives customers an option to purchase their patented toner cartridges at full price, without restrictions, or at a discounted price wherein the toner cartridges may be used only once and then must be returned to Lexmark. Similarly, medical device companies often limit their patented products (e.g., nebulizers, syringes, etc.) to a single use. If the Court reverses, these companies would no longer be able to place such post-sale restrictions on their patented products. Post-sale restrictions help companies control the way their patented products are used, thereby helping them ensure the integrity of their goods.

If the Court affirms the Federal Circuit's rules on patent exhaustion, patent owners will continue to reap the benefits from selling their patented products abroad at lower prices and placing post-sale restrictions on their patented product. However, if the Court reverses, patented products sold abroad could be imported in the United States, which would prevent patent holders from charging a premium price in the United States. In addition, patent holders would be unable to control the quality of their patented product through post-sale restrictions.

Life Technologies Corp et al. v. Promega Corp. et al.

Promega Corporation owns the Tautz patent, which claims a genetic testing toolkit comprised of five components. One of the components, an enzyme known as the Taq polymerase, was manufactured by Life Technologies in the United States and then shipped to the United Kingdom. The enzyme was then combined with the other four components in the United Kingdom. Promega sued Life Technologies for infringement under 35 U.S.C. § 271(f)(1).

  • 271(f)(1) prohibits the supply from the United States of "all or a substantial portion of the components of a patented invention" for combination abroad. The issue in this case was whether shipping a single component of a patented invention to be combined with others overseas can constitute infringement.

On February 22, 2017, the Court held that the supply of a single component of a multicomponent invention for manufacture abroad does not give rise to liability under §271(f)(1). The Court found that the phrase "substantial portion" refers to a quantitative measurement, not a qualitative one. Under a quantitative approach, a single component cannot constitute a "substantial portion" triggering § 271(f)(1) liability.

The Court noted that the history of § 271(f)(1) supported this conclusion. Congress enacted § 271(f) in response to Deepsouth Packing Co. v. Laitram Corp. to ensure that patent rights reach components that are manufactured in the United States but assembled overseas. A supplier may be liable under § 271(f)(1) for supplying from the United States all or a substantial portion of the components of the invention or under § 271(f)(2) for supplying a single component if it is specially adapted for use in the invention and not a staple article or commodity. However, when the product is made abroad and all components but a single commodity article are supplied from the United States, as was the case here, the activity is beyond the scope of the Patent Act.

This decision is unfavorable for patent owners, as it eliminates the possibility of suing under § 271(f)(1) if only one component of the invention is supplied from the United States. However, the patent owner may still sue under §271(f)(2) if the single component is specially adapted for use in the invention.

SCA Hygiene Products AB et al. v. First Quality Baby Products LLC

On March 21, 2017, the Supreme Court held that laches is no longer a defense in patent infringement cases. Laches is an equitable defense, barring suits after unreasonable delays.

In the 2014 copyright decision, Petrella v. Metro-Goldwyn-Mayer, the Court held that the defense of laches could not be used to bar damage claims under the Copyright Act. The Patent Act, like the Copyright Act, sets out a specific time period during which a plaintiff can sue for damages for patent infringement (six years). The Court stated that "[b]y the logic of Petrella, we infer that this provision represents a judgment by Congress that a patentee may recover damages for any infringement committed within six years of the filing of the claim."

Under the Patent Act, each infringing act is seen as a new act of infringement. Therefore, the six-year time limit restarts each time an infringing act is committed. Now that laches is no longer a defense, plaintiffs may effectively sit on their patent rights, with only the six-year time period from the last infringing act restricting them.

In many cases, plaintiffs in patent lawsuits sue as soon as possible, in hopes of getting an injunction to keep competing products off the market. However in some cases, especially where the plaintiff is a non-practicing entity, the plaintiff may wish to delay filing as long as possible in order to maximize damages.

Therefore, the Court's decision is welcome news to non-practicing entities asserting patents.

Star Athletica LLC v. Varsity Brands Inc.

On March 22, 2017, the Supreme Court ruled that decorative elements of a cheerleading uniform may be protected by copyright law. Varsity Brands Inc. ("Varsity"), the country's largest cheerleading supplier, have more than 200 copyright registrations for two-dimensional designs, consisting of various lines, chevrons, and colorful shapes that appear on the cheerleading uniforms they design and produce. Varsity sued Star Athletica, a company that also makes cheerleading uniforms, for copyright infringement.

In general, apparel is outside the scope of the Copyright Act, which bars protection for "useful items." However, if a decorative element is "conceptually separable" from the underlying garment, it may be protectable under copyright law.

In Star Athletica, the Court laid out a two part test for determining whether a feature incorporated into the design of a useful article is eligible for copyright protection: The feature (1) must "be perceived as a two- or three-dimensional work of art separate from the useful article," and (2) must qualify as protectable expression when "imagined separately from the useful article into which it is incorporated."

The Court found that the test was satisfied in this case. However, it was careful to limit its ruling: "To be clear, the only feature of the cheerleading uniform eligible for copyright in this case is the two-dimensional work of art . . . . [Varsity has] no right to prohibit any person from manufacturing a cheerleading uniform of identical shape, cut, and dimensions to the ones on which the decorations in this case appear."

This case is a win for producers of clothing, who have long pushed for greater protections for their designs. Meanwhile, consumer groups have expressed concerns about the impact that this will have on the clothing industry. Justice Breyer, writing for the dissent, stated that "a decision by this court to grant protection to the design of a garment would grant the designer protection that Congress refused to provide. It would risk increased prices and unforeseeable disruption in the clothing industry, which in the United States alone encompasses nearly $370 billion in annual spending and 1.8 million jobs."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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