Catalyst Exports to Affilliates Infringe U.S. Process Patent

In Union Carbide v. Shell Oil (Fed. Cir. October 3, 2005), the Federal Circuit Court of Appeals held that the lower, district court improperly excluded Shell’s exportation of catalysts in its damages calculation. In particular, the lower court erroneously prohibited Union Carbide from submitting evidence of Shell’s foreign sales to affilliates for the purpose of recovering additional damages under 35 U.S.C. § 271(f)(2):

(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial non-infringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

Circuit Judge Rader court began by characterizing the holding in Eolas Techs. v. Microsoft Corp., 399 F.3d 1325, 1339 (Fed. Cir. 2005) "that every component of every form of invention deserves the protection of 35 U.S.C. § 271(f); i.e., that "components" and "patented inventions" under § 271(f) are not limited to physical machines."

Eolas and this case featured similar facts. In Eolas, Microsoft exported a master computer disc with program code that caused a computer to perform various method steps. See U.S. Patent No. 5,838,906, col. 17, ll. 58-col. 18, ll. 30. Thus, both this case and Eolas feature the exportation of a component (i.e., a computer disc with program code in Eolas and a catalyst in this case) used in the performance of a patented process or method (i.e., the method steps executed by the computer in response to the computer readable program code in Eolas and the commercial production of EO in this case). In that setting, Eolas applied § 271(f) to Microsoft’s exported component. Similarly, §271(f) applies to Shell’s exportation of catalysts (i.e., a "component") used in the commercial production of EO abroad (i.e., a "patented invention").

The court then went on to compare and contrast its two interpretations of other Section 271(f):

This court has recently interpreted § 271 in two other cases. See AT&T Corp. v. Microsoft Corp., 414 F.3d 1366 (Fed. Cir. 2005); NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005).

Because AT&T concluded that § 271(f) applied to the exportation of components ultimately used abroad, its reasoning supports application of § 271 to the facts of this case. See AT&T, 414 F.3d at 1368 (applying § 271(f) to the exportation of a "master" computer readable disc that was further copied abroad, with the copies installed as software on assembled computers). This case, however, presents an even stronger basis for applying § 271(f) because Shell supplies all of its catalysts from the United States directly to foreign affiliates. Shell’s foreign affiliates do not copy these catalysts and use the copies in a foreign process, but instead use the catalysts supplied by Shell directly in their processes.

Unlike AT&T, NTP did not find that § 271(f) applied. However, NTP involved facts that differ in important respects from the facts in this case. Specifically, NTP involved the sale of wireless handheld devices and supporting software for a wireless email network. NTP, 418 F.3d at 1289-90. Research In Motion (RIM) sold wireless handheld devices in the United States. When the owners of those devices traveled abroad, those devices were used outside of the United States; otherwise, those devices were used in the United States. This court in NTP considered whether use of these domestic devices with a system partially operating abroad constituted infringement under § 271(f). Id. The NTP court answered this question in the negative:

While it is difficult to conceive of how one might supply or cause to be supplied all or a substantial portion of the steps of a patented method in the sense contemplated by the phrase "components of a patented invention" in section 271(f), it is clear that RIM’s supply of the BlackBerry handheld devices and Redirector products to its customers in the United States is not the statutory "supply" of any "component" steps for combination into NTP's patented methods.

Id. at 1322. Under the facts of NTP, this court declined to apply § 271(f) when RIM itself did not supply any component to a foreign affiliate. This court in NTP also affirmed a finding of infringement under § 271(a) for RIM’s domestic sales of devices (BlackBerries) used in the process. Id. at 1316-17. Thus, this court in NTP declined to authorize additional damages for NTP under § 271(f).

NTP is different from this case because Shell supplies catalysts from the United States directly to foreign customers. Because Shell supplies these catalysts directly to its foreign affiliates, this court does not face another situation involving the domestic sale of a component being used, in part, outside the United States. Shell’s domestic sales are separately covered by the district court’s present damages calculation. As such, Eolas, a case more factually analogous and earlier in time than NTP, governs this case.

In brief, because § 271(f) governs method/process inventions, Shell’s exportation of catalysts may result in liability under § 271(f). Accordingly, the district court abused its discretion in excluding Shell’s exportation of catalysts as part of its damages award. This court remands this case to the district court for additional findings on Shell’s potential liability under 35 U.S.C. § 271(f).