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.
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);
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’).