Patent Issues Arising from the US-Korea Free Trade Agreement

This week, US Congress ratified a negotiated free trade agreement with (South) Korea. The agreement includes a major section on intellectual property law.

Agreed to terms include the requirements that each nation:

  • Make patents available for any invention, whether a product or process, in all fields of technology, provided that the invention is new, involves an inventive step, and is capable of industrial application.
  • May only exclude inventions from patentability when it is necessary to protect public order or morality; or when the invention is a diagnostic, therapeutic, and surgical procedure for the treatment of humans or animals. However, the fact that a particular practice is against the law of a nation may not be used as a reason to deny patentability.
  • May only revoke a patent on grounds that would have justified a refusal to grant the patent.
  • Shall not allow third-party oppositions of pending patent applications (pre-grant).
  • Will offer at least a 12-month pre-filing grace period for disclosures authorized by or derived from the patent applicant.

The agreement must also be ratified by the Korean National Assembly. Read the US-Korean agreement here: /media/docs/2011/10/asset_upload_file273_12717.pdf. US Congress also passed similar agreements with the Latin American Nations of Panama and Columbia.

Design Registration? The agreements all additionally call for the parties to “make all reasonable efforts to ratify or accede to … the Hague Agreement Concerning the International Registration of Industrial Designs (1999) and the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (1989).” The United States is not currently a signatory to either of these agreements.

Further agreements in the air: The US passage of the Leahy-Smith America Invents Act has been taken as a signal that further harmonization efforts may also be successful. In particular, it appears that many nations would be willing to implement a new US-style grace period at least if they are limited activities subsequent to a non-commercializing public disclosure authorized by or derived from the patent applicant or inventor.

 

Declaratory Judgment: Personal Jurisdiction over Foreign Patent Holder

Autogenomics v. Oxford Gene Tech (Fed. Cir. 2009) 08-1217.pdf

The opposing viewpoints of Judges Newman and Moore continues to be seen in Federal Circuit decisions. This appeal arrived at the Federal Circuit after the Central District of California district court dismissed the case for lack of personal jurisdiction over the declaratory judgment defendant (and patent holder) Oxford Gene Technology.Writing for the majority, Judge Moore (joined by N.D. Ill. Judge Gettleman sitting by designation) affirmed the judgment. Judge Newman wrote in dissent.

Even in patent cases, a federal court’s personal jurisdiction over parties is based on state boundaries. Here, the case was filed in a federal court sitting in California. When a defendant challenges personal jurisdiction, the court must consider two general factors: (1) whether the forum state’s long-arm statute permits service of process and (2) whether assertion of personal jurisdiction would violate due process.” Most states have extended their long-arm statutes to the bounds of due process. Thus, the question collapses to a consideration of the US Constitutional as applied at the geographic state boundaries.

The Constitutional limits of due process can be met by either showing general personal jurisdiction (based on continuous and systematic contacts with the state) or specific personal jurisdiction (based on a defendant’s activities in the state that relate to the cause of action.)

Focusing on specific personal jurisdiction, this case is in some ways a repeat of the court’s 2008 Avocent holding that a patentee’s efforts at commercialization are irrelevant to the specific jurisdiction question. Rather, the minimum contacts for specific jurisdiction must relate to “only enforcement or defense efforts related to the patent.” Thus, although Oxford has licensed its patents to several California companies, those licenses do not work toward a finding of specific personal jurisdiction over the foreign company.

DJ Jurisdiction over a Non-US Company: Both the majority and dissent expressed concern that foreign patent holders may often fly under the radar in such a way that no US court would have personal jurisdiction. Of course, the patent statute deals with that potential eventuality. For a non-US patent holder, the District of Columbia Federal Court has jurisdiction “to take any action respecting the patent or rights thereunder” to the same extent “that it would have if the patentee were personally within the jurisdiction of the court.” 35 USC 293.

Section 293 makes an exception for non-US patent holders who designate a US person to receive process. The statute does not indicate that such designation serves as consent to personal jurisdiction in the person’s home location. However, cases have held that designating a US process agent under Section 293 operates as consent to personal jurisdiction. See In re Papst Licensing, 590 F. Supp. 2d 94 (D.D.C. 2008).

Section 293 reads as follows.

Every patentee not residing in the United States may file in the Patent and Trademark Office a written designation stating the name and address of a person residing within the United States on whom may be served process or notice of proceedings affecting the patent or rights thereunder. If the person designated cannot be found at the address given in the last designation, or if no person has been designated, the United States District Court for the District of Columbia shall have jurisdiction and summons shall be served by publication or otherwise as the court directs. The court shall have the same jurisdiction to take any action respecting the patent or rights thereunder that it would have if the patentee were personally within the jurisdiction of the court.

In the past year, about 11 patent infringement cases were filed in DC District Court.

No Stay of District Court Proceedings Pending Appeal of Preliminary Injunction

Fairchild Semiconductor v. Third Dimension (3D) Semiconductor 200903292047.jpg (Fed. Cir. 2009) (nonprecedential order)

Fairchild originally licensed 3D's US and Chinese patents – agreeing to a royalty for all Fairchild products "covered by" a 3D patent. However, after analyzing the patents, Fairchild decided that it need not pay any royalties and then sued for a declaratory judgment that it owed no royalties and that none of its products are covered by 3D's patents.

Restraining License Termination: In a preliminary ruling, the district court granted Fairchild's request for a preliminary injunction prohibiting 3D from terminating the license agreement. The ongoing license serves as a defense to charges of patent infringement by 3D. As the district court held, "termination of the agreement does create irreparable harm in depriving Fairchild of its primary defense to 3D patent infringement litigation.

The threat of such litigation is not speculative: 3D has already filed a complaint in the United States District Court for the Eastern District of Texas and has promised to file an infringement case in China based on the Chinese patents otherwise licensed by the Agreement. Without the Agreement as an affirmative defense to those suits, Fairchild could be forced to endure years of litigation in those other forums despite this Court eventually ruling that Fairchild did not breach the Agreement.

The preliminary injunction is now on appeal to the Federal Circuit. In a recent order, the appellate panel rejected 3D's motion to stay the district court proceedings pending outcome of the appeal. 3D argued that the appeal divested the district court with jurisdiction over the matter. That argument was regarded "without merit."

A preliminary injunction, i.e., an injunction pendente lite, is an injunction issued pending the ongoing litigation. Although a district court may not proceed with matters involved with the injunction itself, e.g., it may not amend the injunction, or make findings to support its injunction while the injunction is on appeal, the district court may proceed with the litigation and permit discovery, enter rulings on summary judgment, or hold a trial on the merits. (internal citations omitted)

Briefing in the appeal will begin in April.

Notes & Docs:

Cardiac Pacemaker v. Jude: Challenging 271(f) Liability for Components of a Method

Cardiac Pacemakers v. St. Jude Medical (On motion for en banc rehearing)

35 U.S.C. § 271 defines various types of patent infringement including direct infringement and contributory infringement. Section 271(f) details a special cause of action that captures some transnational activities. In particular, Section 271(f) creates a cause of action for supplying components of a patented invention to be assembled abroad.

In 2007, the Supreme Court ruled on a 271(f) case — finding that software per se cannot be considered a “component” under the statute. Microsoft v AT&T, 550 U.S. 437 (2007). In December 2008, the Federal Circuit decided Cardiac Pacemaker and held that the Microsoft v. AT&T did not overrule a prior precedential ruling that Section 271(f) does extend to cover components of a claimed method. “[T]he Supreme Court’s decision does not alter [the] holding” that “271(f) applies to components used in the performance of patented methods and processes.” The precedent in question is Union Carbide v. Shell. Although the Federal Circuit denied a request to rehear the Union Carbide case, Judges Lourie, Michel, and Linn, argued then that the issue was ready for en banc review. Judge Dyk also dissent from the en banc denial in Union Carbide.

In their decision, the panel (Judges Newman, Mayer, & Lourie) practically begged for en banc rehearing: “As a panel, we cannot reverse the holding of another panel of this court. We thus affirm the district court’s decisions relating to damages.” [Link] Of course, Judge Mayer signed-on to Judge Rader’s original Union Carbide opinion.

Now, the defendant (St. Jude) has asked for a rehearing en banc. If unsuccessful, we can expect a petition for a writ of certiorari. The FCBA and AIPLA joined forces in an amicus brief supporting the rehearing en banc and for a reversal of the Union Carbide analysis. Writing on behalf of Cisco, Intel, Microsoft, Oracle, and Symantec, Ed Reines also argues that the rule should be overturned. The tech companies argue in particular that the limit on exports creates major adverse economic incentives.

“A very common business arrangement is for United States companies to export instructions, materials, recipes, and other knowledge-exports to Asian and other off-shore locations where manufacturing processes takes place. An overbroad extraterritorial interpretation of § 271(f) to apply to process patents creates potential worldwide liability for companies based in the United States that export anything that can properly be considered a process step. Yet, if their competitors exist outside the United States, they are not exposed to liability for United States patent infringement for supporting foreign manufacturing processes.”

A good handful of judges have at least loosely indicated that they would support an en banc rehearing — making this a very likely candidate.

Notes:

Briefs:

Outsourcing of Patent Preparation: PTO Says Beware

In a recent notice, the PTO has indicated that it may be illegal to outsource invention information to a foreign county for the purposes preparing a US patent application.

  1. A foreign filing license from the USPTO does not authorize the exporting of subject matter abroad for the preparation of patent applications to be filed in the United States.
  2. Applicants who are considering exporting subject matter abroad for the preparation of patent applications to be filed in the United States should contact the Bureau of Industry and Security (BIS) at the Department of Commerce for the appropriate clearances.

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A First Look at Who Files Provisional Patent Applications

Patent.Law083As part of the 1995 patent law overhaul, the USPTO began allowing patent applicants to file provisional patent applications.  Over a decade later, these lower-cost provisional filings have taken hold.  According to PTO annual reports, over 132,000 provisional patent applications were filed in fiscal year 2007. In perspective, that number is over 30% of the number of the 439,000 non-provisional utility patents filed during the same period. This proportion has been slowly rising since 2002 when the provisional applications filing rate was about 27% of the non-provisional rate.[1] That year (2002), the PTO recorded just under 90,000 provisional applications and 332,000 non-provisional patent applications.

Interestingly, in my study of recently issued patents, only 21% reference a provisional application as a parent. (In the study, I look at approximately 15,000 utility patents issued in April and May 2008.) [2] 

Patent.Law085National Tool: Over half of the recently issued patents that listed an assignee indicated that the assignee was a foreign (non-U.S.) corporation or agency.[4]  Although foreign entities are not prohibited from filing provisional applications, the provisional tool was designed to benefit U.S. entities. Thus, it is not a surprise that only 5% of the patents assigned to international applicants were associated with a provisional application while 30% of the patents assigned to a U.S. applicant were associated with a provisional application.  Two countries – Israel and Canada – stood out as filing the highest proportion of provisional parent claims. Both of these countries are known for having patent attorneys with a high level of familiarity with U.S. laws.  Only 2% of the Japanese & Korean patents included provisional parent claims. [Updated June 03 with Corrected Figure]

The provisional application provides a potential extra year of patent eligibility at the end of the term.  Thus, it is also not surprising that new drug inventions – where a potential year at the end of the term is most valuable – have the highest rate of association with a provisional application.[5]  Likewise, patents on electrical and electronic applications had the lowest rate of provisional filing even after excluding the international applications.

The provisional filings appeared to have almost no impact on the pendency time of a patent application as measured by the number of days from filing the nonprovisional to issuance.  This makes sense as no examination takes place until the nonprovisional application is filed.

The following table also provides some interesting comparisons of patent strategy.[6]

Type of Technology

Number of Utility Patents in the Sample

Number of Patents Referencing Provisional Parent

Assignee

Mechanical

24

1

4%

Ford

25

13

52%

GM

Drugs & Medical

7

4

57%

Wyeth

8

7

88%

Genentech

11

1

9%

Boston Scientific Scimed

21

10

48%

Medtronic

Computers & Communications

15

12

80%

InterDigital

23

7

30%

Oracle

31

11

35%

QUALCOMM

44

25

57%

Broadcom

114

16

14%

Microsoft

Chemical

6

6

100%

Bristol-Myers Squibb

9

4

44%

Procter Gamble

10

3

30%

3M Innovative Properties

14

9

64%

EI du Pont de Nemours

17

0

0%

General Electric[7]

17

16

94%

Genentech

 


[1] This information comes from PTO annual reports for FY 2006 and 2007.

[2] These patents were downloaded on May 30. I excluded the few patents filed prior to the 1995 introduction of provisional patent applications.

[3] In a follow-on study, I will look at published patent applications claiming priority to provisional applications to get some sense of how often folks abandon provisional patent applications.

[4] 6823 were assigned to foreign entity while 6457 were assigned to a U.S. entity. Another 1922 had no listed assignee.

[5] My study included 677 patents having a primary U.S. Classification in a “drug” field and also assigned to a U.S. entity. Of those, 48% were associated with a provisional application.

[6] Note, my assignee ‘scrubber’ is not yet perfect. Thus, it is likely that some patents associated with listed assignees are not included in the table.

[7] Some companies, such as GE hold patents in several different categories – this table looks only at those patents in the particular identified category.

CAFC Denies Joint Infringement Claim and Maps Out Infringement Avoidance Schemes

BMC v. Paymentech (Fed. Cir. 2007)

BMC’s patents cover a method for processing a debit transaction without using a PIN. The payment industry is divided so that there is no single party that infringes an entire claim. However, when combined, the effort of a payee’s agent, an ATM network, and a financial institution

The usual rule is that direct infringement occurs only when a single actor performs each and every element” of an asserted claim. Likewise, inducement requires proof of underlying single-actor direct infringement.  Under a doctrine akin to agency, all actions ‘controlled’ by the single actor are considered to be performed by the single actor.  Thus, courts have long held that you cannot avoid liability by simply “having someone else carry out one or more of the steps” on your behalf. 

Here, BMC acts for an extension of the law in cases where parties are cooperating in a manner that infringes the patent – even though no single party controls the others. The CAFC, however, refused to extend the law — even while admitting that its decision paves a clear pathway for would-be infringers to avoid liability:

“This court acknowledges that the standard requiring control or direction for a finding of joint infringement may in some circumstances allow parties to enter into arms-length agreements to avoid infringement.”

The CAFC’s concern, of course is that allowing this type of joint infringement would greatly increase potential liability of many many companies. For instance, here, BMC would like to hold ATM networks liable even though their actions do not involve any novel part of BMC’s invention. Without any controlling party, BMC’s claim of infringement fails.

As part of its justification, the court cited Mark Lemley’s divided infringement article. In that article, Lemley argues that patent drafters can avoid most potential joint infringement problems by drafting claims that focus on one party at a time.

Notes:

  • The doctrine of control is certainly not as strict as typical agency doctrine.  And, in this opinion the court gives some positive language to capture bad behavior. For instance, the court noted approvingly that district courts have held parties liable for who ‘mastermind’ a scheme of contracting-out steps of a patented process.  As a strict liability claim, the CAFC is correct to avoid undue expansion of the class of potential defendants. However, the hole created by the CAFC is potentially quite large — I have proposed a new cause of action for conspiratorial infringement that would not require a single controlling entity, but would require a mens rea requirement similar to that of inducement.  
  • Related Material:
    • Fromson v. Advance Offset Plate, Inc., 720 F.2d 1565, 1568 (Fed. Cir. 1985) (finding no direct infringement by manufacturer who performed the first step of a process claim even where its customer performed the other step of the claim)
    • Cross Medical Products, 424 F.3d at 1311 (rejecting patentees’ efforts to combine the acts of surgeons with those of a medical device manufacturer to find direct infringement of an apparatus claim).
    • An expanded joint infringement notion is supported by the CAFC’s recent On Demand decision where the court noted that “[i]t is not necessary for the acts that constitute infringement to be performed by one person or entity.”
    • In PharmaStem, the CAFC did not decide the issue, but noted that the “viability and scope of [the theory of joint infringement] liability is a subject of considerable debate.”
    • Applied Interact, LLC v. Vermont Teddy Bear Co., Inc.  2005 WL 2133416 (S.D.N.Y.,2005), the district court noted that infringement by separate entities requires “some connection” between the entities.
    • Free Standing Stuffer, Inc. v. Holly Dev. Co., 187 U.S.P.Q. 323 (N.D. Ill. 1974), requires a “sufficient connection to, or control over” third party entities performing some of the elements.
    • Cordis Corp. v. Medtronic AVE, Inc., 194 F. Supp. 2d 323 (D. Del. 2002) (requiring close relationship between defendant and the doctors performing part of the patented process).
    • Shields v. Halliburton Co., 493 F.Supp. 1376 (W.D. La. 1980) (finding defendants liable for infringement based on the combined actions of two entities).
    • Wegner well thought viewpoint from 2001
    • Sriranga Veeraraghavan, Joint Infringement of Patent Claims: Advice for Patentees, 23 Santa Clara Computer & High Tech L.J. 211 (2006).

 

Microsoft v. AT&T: Transnational patent Law

Microsoft v. AT&T (Supreme Court 2007).

Section 271(f) of the Patent Act expands the territorial scope of US patent protection by creating liability for exporting one or more “components” of a patented invention so that the whole invention may be practiced abroad. The statute is divided into parts one and two dealing with inducement and contributory activity respectively.

The case at hand involves Microsoft’s infringement of AT&T’s speech coding technology patent. Microsoft has conceded that its software (once installed on a computer) infringes the patent in the US. However, Microsoft has fought against paying patent royalties for sale of the same software abroad.  Microsoft’s argument, spelled out in its brief, is two-fold: (1) Software cannot be a ‘component’ as required by the statute because software code is intangible; and (2) Software copies made abroad cannot be considered ‘supplied’ from the US as required by the statute because no physical particle that Microsoft exported actually became part of the finished product.  I have previously labeled these arguments as the tangibility requirement and the molecular conservation requirement. [Link]

Now, AT&T and its supporters has filed their briefs that explain why 271(f) should encompass foreign copies of software shipped from the US. [Petitioner and Gov’t briefs are discussed here]

AT&T’s Brief on the Merits:

Tangibility: AT&T attacks the tangibility requirement head-on, arguing that there is no such requirement.

[The software] is plainly a component of [the patented] device, just as a unique collection of intangible words is a component of any book bearing the title Moby-Dick, even though those words, too, must be combined with ink and paper before the book can be read.

Of course AT&T is correct — the statute does not spell-out any tangibility requirement, and Microsoft’s statutory argument is, at best implicit. AT&T’s arguments are supported by business practice as well. Software and hardware are developed and sold separately, and each side can easily be though of as providing components of the whole.

Molecular Conservation Requirement: AT&T takes a different view of the statutory requirement that the components be “supplied” from the US. In AT&T’s story, “supplied” means satisfying a need or furnishing.  Using a but-for analysis, AT&T makes clear that without Microsoft’s shipment of the code abroad, it would not have ended-up in the foreign computers.

Here, the Windows object code is present in the foreign made computers only because Microsoft “provided” or “furnished”—in a word, supplied—it from the United States, via golden master disk or electronic transmission.

As it stands, the AT&T brief is well written and convincing on its own — the major problem being that it leads with a petty argument for dismissal.

Philips Corporation also filed a brief in support of AT&T.  Philips makes several arguments, two of which I discuss here:

  1. In today’s market, software and hardware companies do compete head-to-head.  A finding that software export is noninfringing would be at the expense of electronics companies because hardware exports would continue to be considered infringing.  Thus, awarding the win to Microsoft here may free the software industry, but will even further damage the hardware export industry.
  2. In many ways, this case is about the size of damages. Microsoft hopes that copies made abroad will not be seen as infringing because those copies were not literally shipped from the US.  Philips points out under the rules of consequential damage calculations, Microsoft would owe damages for sales of all copies even if 271(f) only covered the initial master disk shipment.

WARF, California, and RCTech filed a joint brief in support of AT&T. These holders of strong bio-related patents see the potential that this case could narrow the scope of their protection. WARF points-out how Microsoft comes to the table with unclean hands:

When it suits its interests, even Microsoft acknowledges that the number of units it supplies is not limited by the number of golden masters it sends abroad. In Microsoft Corp. v. Comm’r of Internal Revenue, Microsoft argued that it was entitled to tax deductions . . . for all foreign sales of software replicated from Microsoft’s golden master abroad, claiming that such copies were “export property” under the statute. The Ninth Circuit . . . agreed with Microsoft that all copies created from the golden master were export property, thereby providing Microsoft with another $31 million in claimed deductions for 1990 and 1991.

BAYHDOLE25.inc is an educational NGO that supports, as you might guess, the Bayh Dole act (at its 25th anniversary).  In a brief supporting AT&T, BD25 argues for the protection of intangible assets — especially assets that are replicable and intended to be replicated.  These include software code, cell lines, patented seeds, DNA, etc. Replicable assets are important and should be protectable.

Documents:

  • On the Merits
  • In Support of Microsoft
  • In Support of AT&T
  • In Support of Neither Party
  • Reply Brief:
  • On Petition for Certiorari
  • Important recent 271(f) cases:

    • NTP v. Research in Motion, (271(f) “component” would rarely if ever apply to method claims).
    • AT&T v. Microsoft, 414 F.3d 1366 (Fed. Cir. 2005) (271(f) “component” applies to method claims and software being sold abroad);
    • Union Carbide v. Shell Oil (Fed. Cir. 2005) (271(f) “component” applies to method claims).
    • Eolas v. Microsoft, 399 F.3d 1325 (Fed. Cir. 2005) (271(f) “component” applies to method claims and software);
    • Pellegrini v. Analog Devices, 375 F.3d 1113 (Fed. Cir. 2004) (271(f) “component” does not cover export of plans/instructions of patented item to be manufactured abroad);
    • Bayer v. Housey Pharms, 340 F.3d 1367 (Fed. Cir. 2003) (271(g) “component” does not apply to importation of ‘intangible information’).

    Earlier Discussion of this case

    Text of 35 USC 271(f)

    (1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components 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.

    (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 noninfringing 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.

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    Microsoft v. AT&T: Transnational Patent Law At The Supreme Court

    Microsoft v. AT&T (Supreme Court 2006)

    Transnational patent law is a hot topic, and one the Supreme Court cannot ignore. The issue de jour involves the question of unauthorized export of patented software.  AT&T holds the speech compression patent that is infringed by Microsoft Windows. (RE 32,580). Microsoft exports the software code from Redmond to various international locations.  Once abroad, the code is then copied and installed in computers that are then sold abroad.  As the invention is claimed, the code alone does not infringe. Rather, infringement would only occur once the code is combined with the computer hardware. 

    Under traditional notions of patent law, Microsoft’s actions are not infringement because the code alone does not infringe the patent, and (for the purposes of this case) the code is not combined with the hardware within the U.S. 

    Here, however, traditional notions of territoriality have been supplanted by statute.  Under 35 U.S.C. 271(f), supply of only a portion of a component of a patented invention from the U.S. can be infringement.

    35 U.S.C. 271(f) prohibits the “suppl[y] . . . from the United States . . . [of] all or a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States,” as well as the “suppl[y] . . . from the United States [of] any component of a patented invention that is especially made or especially adapted for use in the invention.” 

    Microsoft, of course, wants to avoid infringing the U.S. patent for its activity abroad and gives two separate reasons why its activity of exporting software do not fall within the parameters of 271(f). (I) Software code is an intangible string of information not a “component” as required by the statute. (II) Because copies of the code were used to create the infringing software/hardware combination, no physical particle that Microsoft exported actually became part of the finished product.  According to Microsoft, this means that nothing in the infringing combination was actually supplied from the U.S. as required by the statute. I term these two arguments the tangibility requirement and the molecular conservation requirement.

    Microsoft and its supporters have now filed their merits briefs to the Supreme Court, and my reading of their arguments is that there is strong support for molecular conservation, but only weak support for tangibility. The Bush Administration supports this distinction in its brief filed jointly by the DOJ and PTO. 

    On tangibility, the Government argues that software can certainly be a component, and that the statute is not limited to “only tangible components” as Microsoft suggests. Although not cited by the Government, Section 271(c) provides a statutorily distinct way of limiting components.  In referring to infringement through importation, that clause identifies only components of certain types of inventions such as machines and compositions.

    On molecular conservation, the Government correctly notes that the statute requires that the exported components be the same components that are combined in the infringing manner. “Conduct that merely induces the combination of foreign-made components does not violate Section 271(f).” The statute, according to the Gov’t, leaves foreign manufacturers “free to manufacture and assemble copies of the identical components overseas” so long as none of the components actually assembled were made within the US.  Applying their argument to this case, we know that the software was copied and only those copies were combined with hardware in a would-be infringing manner.

    A group of electronics companies led by Amazon filed a colorful brief that also supports the requirement of molecular conservation.

    No matter where their unique arrangement was invented or dictated, if each molecule in the machine was supplied from outside the U.S., then no component was supplied from the U.S. In the present case, Microsoft did not supply even a single molecule of the foreign machines at issue.

    Amazon also raises the slippery slope issue.  According to the brief, if Microsoft is liable here, then the Court would open the door to infringement for export of blueprints or a CAD/CAM design scheme.  That result, the brief argues, goes against congressional intent. As an aside, Amazon cited Wikipedia but did not include it in its list of “authorities.”  Although they do not cite it, the Pellegrini case holds that plans or instructions for a patented item cannot serve as components under 271(f).

    In support of the molecular argument, a group of professors led by professors Lemley (Stanford) and Duffy (GWU), looked appropriately at the language of 271(f):

    [A]s a matter of grammar that the phrase “such components” refers back to the components that have been “supplied” from United States. Thus, the plain language of the statute requires that inducing an extraterritorial combination constitutes an act of infringement if and only if the combined components are in fact the same components that were “supplied in or from” the United States.

    For the professors, supplying exact copies does not meet the requirement. Most of the briefs come-up with some hypothetical metaphor to explain their situation — a guy memorizing some code and flying on an airplane, a hard-copy print out of some code that runs a fuel-injection system, CAD/CAM instructions, blueprints, etc.  The idea apparently is that if we allow copies of software to be considered components, then these situations necessarily also provide for infringement actions.  More accurately, however, they are just poor hypotheticals.

    Software as Patentable Subject Matter: The anti-patent activist group SFLC led by Dan Ravicher and Eben Moglen also filed a brief that may be the dark-horse of this debate.  Their brief asks the Court to take a fresh look at the patentability of software.

    Software can not be a “component[] of a patented invention” under 35 U.S.C. § 271(f) because software is not patentable subject matter under 35 U.S.C. § 101. As such, the Federal Circuit’s holding to the contrary in this case is erroneous and should be reversed.

    It would be odd for the Court to decide the 101 issue in this case after dismissing LabCorp earlier this year.  However, I expect at least one concurring opinion supporting the ideas in this brief.

    Impact on Software Industry: If Microsoft loses here, it will at least have a clear avenue to avoid future infringement. Unfortunately for US business, that avenue is to move all software development activities abroad so that components are never exported. This harmful effect was recognized and discussed in SIIA’s brief. SIIA is an industry group of software & technology companies who want to continue to design products in the US, but manufacture those products abroad. This argument is punctuated by BSA’s questionable hyperbole: “The purpose of patent protection is to encourage domestic innovation, not to drive it overseas.”

    Impact in Biotech: Although not yet a viable industry, this could have a potentially large impact on biotechnology patent issues.  Like software, DNA code (or other biologics) could be shipped from the U.S. to be copied abroad and incorporated into an organism in an infringing manner.  Even more abstract, the export may merely involve transmitting a sequence listing that would be used to reproduce the sequence abroad.  Any decision on software should consider the potential impact on these areas as well.

    Methods: What Professor Wegner has called the “Bizarre Twist” of this case involves the CAFC’s notion of export of components of method claims. In Union Carbide v. Shell, the court found that methods could indeed have components, and those included items used in the method (such as a catalyst).  Thus, in that case, the defendant could be held liable for exporting a stock catalyst if it intended to use the ingredient in a would-be infringing manner. Shell settled its case with Union Carbide, but has filed an amicus brief in this case, arguing that the Federal Circuit “seriously erred” by declaring that “every form of invention eligible for patenting falls within the protection of section 271(f).” 

    Statutory Construction Excludes Methods?: Shell compares the use of the term “component” in 271(f) its use in 271(c) — the section addressing importation.  In 271(c), Congress explicitly limited components to “component[s] of a patented machine, manufacture, combination, or composition,” but also included a provision excluding importation of materials used in a patented process.  Shell’s argument: because 271(f) does not include the provision discussing materials used in a patented process, it cannot cover processes.  Of course, the unstated counter-argument to shell is that components discussed in 271(c) are specifically limited to components of machines, while 271(f) components are not so limited — indicating that “component” in 271(f) should receive a broader interpretation.

    International Law: All of the transnational patent issues have an impact on international law issues. FICPI, a Swiss-based organization of patent folks filed its brief asking the the U.S. to keep its patents territorial and avoid stomping on the toes of others (as “young nations” are bound to do). FICPI’s implication that the Supreme Court is bound by the Paris Convention is plainly wrong.  The Paris Convention is not U.S. law. However, their point is well-taken, if 271(f) covers software, it thwarts the efforts of other countries to eliminate software patents.

    Documents:

    Important recent 271(f) cases:

    • NTP v. Research in Motion, (271(f) “component” would rarely if ever apply to method claims).
    • AT&T v. Microsoft, 414 F.3d 1366 (Fed. Cir. 2005) (271(f) “component” applies to method claims and software being sold abroad);
    • Union Carbide v. Shell Oil (Fed. Cir. 2005) (271(f) “component” applies to method claims).
    • Eolas v. Microsoft, 399 F.3d 1325 (Fed. Cir. 2005) (271(f) “component” applies to method claims and software);
    • Pellegrini v. Analog Devices, 375 F.3d 1113 (Fed. Cir. 2004) (271(f) “component” does not cover export of plans/instructions of patented item to be manufactured abroad);
    • Bayer v. Housey Pharms, 340 F.3d 1367 (Fed. Cir. 2003) (271(g) “component” does not apply to importation of ‘intangible information’).

    Notes:

    • I will be updating this page as more briefs are filed.
    • I will be talking about cross-border liability at Santa Clara University’s 25th Annual Computer & High Technology Law Journal Symposium on January 26 in San Jose. Information here.