FALL 2020 TODAY’S GENER AL COUNSEL
Intellectual Property
Manufacturing Abroad to Avoid Infringing a Method Patent By Jason Balich and Michael Pomianek
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nfringement of a U.S. patent is fairly straightforward for a company manufacturing in the United States. If it makes, uses, offers to sell or sells any patented invention without a license, it has infringed the patent. You might be surprised, however, that there is also the potential to infringe a U.S. method of manufacturing patent by manufacturing a product abroad and then importing it into the United States. Fortunately, there are opportunities to legally avoid infringement in such situations. First, some background: Every patent has what are called “claims,” the part of the patent that defines what others are prohibited from making, using, and so forth. Some patents claim a product, and some patents claim a method of making or using a product. Method patents can provide a degree of protection for products that are so well known that they can no longer be patented as products (think bulk commodities, as opposed to a new electronic gadget). Method of manufacturing pat-
ents are commonly used in such cases. They protect a novel way of making a product, even an old product. Let’s say you make or sell a product in the United States and want to take advantage of the technology protected by a method of manufacturing patent, without a license and without infringing. Let’s walk though some common scenarios to see how manufacturing abroad can be used to avoid infringing that U.S. method of manufacturing patent. Scenario 1: The patent claims a method of making an intermediate, a component of, or something for use in completing your final product, but not a method of making the final product itself. If you were to make the intermediate or component using the patented method in the United States, or outside the U.S. but then you were to import it to the United States, you would infringe the patent. However, there are two exceptions where you could legally make the intermediate or component outside the United States, use it to make the final product
outside the United States, and then import the final product into the United States without infringing. One exception occurs when the intermediate or component produced by the patented method “becomes a trivial and nonessential component of another product.” This includes situations where the patented method covers the manufacturing of minor components or ingredients, and then those components or ingredients are used in the final product. If all the manufacturing is performed outside the United States, then importing the final product itself will not infringe the United States patent covering the manufacturing of the components or ingredients used to make the final product. The second exception occurs when the product produced by the patented method “is materially changed by subsequent processes.” There have been several court cases that have analyzed what constitutes a “material change.” While the analysis that the courts apply is fact-specific, and aspects of these cases may not be entirely reconcilable, generally some change to the basic utility of the material will be held to constitute a material change. Under this exception one could, without liability for infringement, import a final product into the United States that is not itself patent protected, even if a method of manufacturing an intermediate of such product is patented in the United States, as long as the intermediate is materially changed in forming the final product. One potential pitfall for the unwary is that these exceptions do not apply to violations of the Tariff Act of 1930, which are litigated before the International Trade Commission (ITC). Thankfully, there are some prerequisites for patent owners to file a complaint with the ITC, one of them being that the patent owner must have already established a “domestic industry.” U.S. patent owners that operate outside
