Foreign Software Replication No Defense to U.S. Patent Infringement

AT&T Corp. v. Microsoft Corp. (July 13, 2005) the U.S. Court of Appeals for the Federal Circuit affirmed a holding that Microsoft was liable for infringement of AT&T’s United States Reissue Patent 32,580 under 35 U.S.C. § 271(f) for copies of the Windows® operating system that had been replicated abroad from a master version sent from the United States.

Under § 271(f), "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 . . . 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." During the course of AT&T’s suit against Microsoft for patent infringement, Microsoft moved in limine to exclude evidence of purported liability under 35 U.S.C. § 271(f) arising from foreign sales of Windows®. Microsoft argued that even if the Windows® software were a "component," no actual components had been "supplied" from the United States as required by § 271(f) because the copies of Windows® installed on the foreign-assembled computers had all been made abroad.

However, the court was not persuaded:

Were we to hold that Microsoft’s supply by exportation of the master versions of the Windows® software—specifically for the purpose of foreign replication—avoids infringement, we would be subverting the remedial nature of §271(f), permitting a
technical avoidance of the statute by ignoring the advances in a field of technology—and its associated industry practices—that developed after the enactment of § 271(f). It would be unsound to construe a statutory provision that was originally enacted to encourage advances in technology by closing a loophole, in a manner that allows the very advances in technology thus encouraged to subvert that intent. Section 271(f), if it is to remain effective, must therefore be interpreted in a manner that is appropriate to the nature of the technology at issue.

For this reason, we find Microsoft’s lock-and-key hypothetical, in which a single master key is sent abroad for mass replication, to be unpersuasive and irrelevant to this case. A lock-and-key assembly is a different type of technology from software, with different uses, such that its mode of mass production and consequent manner of supply abroad could very well be different from the way Microsoft conveniently hypothesizes it to be. While it is clear that a software manufacturer would want several million exact copies of a specific software program generated abroad for
distribution, it is unclear why a lock-and-key manufacturer would want several
million exact copies of a specific key made, as the point of having a lock-and-key assembly is to allow access control by a few keys. We prefer an interpretation of § 271(f) that is informed by actual industry practices, not by hypothetical scenarios that have no bearing on the technical realities of the invention at issue.

One commentator has already suggested that the decision could provide extraterritorial patent protection for software in Europe and elswhere. In fact, in his dissent Judge Rader clearly poited out that the judgment turned on the meaning of "supplies."

This court purports to construe that term according to its "ordinary,
contemporary, common meaning." The ordinary meaning of "supplies," however, does not include "copying," "replicating," or "reproducing" – in effect "manufacturing." The act of supplying is separate and distinct from copying,
reproducing, or manufacturing. Thus, this court provides extraterritorial
expansion to U.S. law by punishing under U.S. law "copying" that occurs abroad.
While copying in Düsseldorf or Tokyo may indeed constitute infringement, that
infringement must find its remedy under German or Japanese law.