Initial thoughts on Microsoft v. AT&T, a.k.a. Deepsouth: the sequel

April 30, 2007
Post by Blog Staff

In what could be termed a sequel to the Supreme Court's 1972 decision in Deepsouth Packing Co. v. Laitram Corp., the Court again found that if U.S. patent law is to extend its reach further into foreign acts, it must be Congress, not the courts, that extends it. The Court held that Microsoft's act of sending a "master" disk encoding Windows® abroad for installation on computers that would be sold abroad did not come under the ambit of United States patent law, specifically 35 U.S.C. § 271(f).

In Deepsouth, the defendant manufactured and sold the component parts of a shrimp deveining machine and shipped the parts abroad for assembly and use. The machine was patented in the United States, and the patent holder sued, alleging infringement. The Court held that U.S. patent law did not reach the defendant's actions, because there was no making, using, or selling of the invention in the United States. In 1984, Congress enacted 35 U.S.C. § 271(f), which legislatively overruled Deepsouth and made it an act of infringement to supply:

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.

AT&T sought to stretch the bounds of § 271(f), alleging that because Microsoft ships a "master" version of Windows® abroad for installation on computers and that when installed, Windows® practices the invention claimed in AT&T's patent, it was "supplying" a component of a patented invention from the United States, and therefore ran afoul of § 271(f). The Court disagreed in a 7-1 decision, with Justice Ginsburg writing for the majority, Justice Alito concurring and joined by Justices Thomas and Breyer, and Justice Stevens dissenting.

The majority relied primarily on two aspects of § 271(f) to support its conclusion. First, because the master disk of Windows® was not a computer-readable copy, such as a CD-ROM, it was "without physical embodiment, and as such, it does not match § 271(f)'s categorization: 'components' amenable to 'combination.'" The Court analogized a set of blueprints that may provide information on how to build a patented device: the blueprints are not a "component" of the device any more than the master disk is a "component" of Windows®. As a result, the Court found that "software, uncoupled from a medium," was not a "combinable component" of a patented invention.

Second, the Court found that the master disk could not give rise to liability for every computer eventually installed with Windows® from CD-ROMs created from that disk, because the item arguably "supplied" were not "combined." According to the Court, in order for there to be liability under § 271(f), "the very components supplied from the United States, and not copies thereof, trigger § 271(f) liability when combined abroad to form the patented invention at issue." Here, in contrast, "the copies of Windows actually installed on the foreign computers were not themselves supplied from the United States," and as a result, there could be no § 271(f) liability. Justice Alito, in concurrence, would have found no infringement because there was "no physical object originating in the United States [that] was combined with" the computers, and therefore there was no violation of § 271(f).

The Court also gave Judge Rader of the Federal Circuit kudos for his position in his dissenting opinion at the Federal Circuit, namely that "nothing in § 271(f)'s text . . . renders ease of copying a relevant, no less decisive, factor in triggering liability for infringement." In short, the Court held that AT&T's remedy for Microsoft's actions was to obtain patent protection in foreign countries where Windows® is being installed. It was not the place of the Court, just as it was not in Deepsouth, to close a "loophole" in patent law. That job, instead, is for Congress to consider.

In dissent, Justice Stevens argued that paragraph (2) of § 271(f) supports AT&T's cause, and would have affirmed. He asserts that not only does a "component" of a patented invention not need to be a physical object, but also that Windows® is a component "specially adapted for use in the invention," and as a result infringes under § 271(f)(2). He analogized a specially-designed knife for use in a patented machine: "§ 271(f)(2) would cover the export of an inventory of such knives to be warehoused until used to complete the assembly of an infringing machine." In his opinion, "an indirect transmission [of Windows®] via a master disk warehouse is likewise covered by § 271(f)."

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