Microsoft v. ATT and Footnote 14
01 05 07 - 21:20 The Microsoft v. ATT case concerns a narrow issue about patent law, but the clear implication of the Court's reasoning could lead one to conclude that many so-called "software patents" will become the target of litigation as innovators with good lawyers recognize that a majority of the Court are ready to slam a wrecking ball into software patents purportedly protecting - - in the Court's view - - "abstract software."There are numerous indications in Microsoft v. ATT that a sea change in patent law is afoot, but one indication of noteworthy recognition is Footnote 14.
First, the facts: AT&T holds a patent on a computer used to digitally encode and compress recorded speech. Microsoft’s Windows operating system has the potential to infringe that patent because Windows incorporates software code that, when installed, enables a computer to process speech in the manner claimed by the patent. Microsoft sells Windows to foreign manufacturers who install the software onto the computers they sell. Microsoft sends each manufacturer a master version of Windows, either on a disk or via encrypted electronic transmission, which the manufacturer uses to generate copies.
Those copies, not the master version sent by Microsoft, are installed on the foreign manufacturer’s computers. The foreign-made computers are then sold to users abroad. AT&T filed an infringement suit charging Microsoft with liability for the foreign installations of Windows. By sending Windows to foreign manufacturers, AT&T contended, Microsoft “supplie[d] . . . from the United States,” for “combination” abroad, “components” of AT&T’s patented speech-processing computer, and, accordingly, was liable under the Patent Act.
And, the holding: the Supreme Court held: Because Microsoft does not export from the United States the copies of Windows installed on the foreign-made computers in question, Microsoft does not “suppl[y] . . . from the United States” “components” of those computers, and therefore is not liable under the U.S. Patent Act.
Footnote 14: three justices, (Alito's concurrence), in the 7-1 majority explicitly indentified that they concurred with Justice Ginsburg's opinion except for footnote 14. Why did Justice Alito, Breyer, and Thomas explicitly disagree with footnote 14? Justice Ginsburg asserted in footnote 14 that the majority had not reached an issue raised by Microsoft concerning whether software on a CD-ROM installed on a computer would effectively be a component of the computer, notwithstanding that the CD-ROM is removed upon installation.
Justice Alito says no -- relying on the conclusion that section 271(f) of the Patent Act does not reach software that is not a physical part of a machine (computer).
Justice Ginsburg was, perhaps, more cautious in reserving the implications of footnote 14 for another day, but I doubt that the remaining 4 justices in the majority would disagree with Alito's conclusion. Of course, the determination of what constitutes a potential patented invention's components is not dramatically distinct from considerations of patent subject matter. Hence, the Court's conclusion that "abstract software" is not a component of a patented invention logically applies to the question whether a software patent constitutes abstract software masquerading as patent subject matter. This should spur some interesting discussions among folks paying license fees for dubious software patents. The Court seems to be hinting at a doctrinal move toward pushing back on the proliferation of software patents.
More generally. there are troubling problems with the Court's reasoning (or, more precisely, its textual analysis), and the line drawing the Court makes between at what stage software ranks as a component and what stage it doesn't is ephemeral. I will not identify all of he problems I see in this post, but may do so later. Certainly, it seems sound to say that a component of a patent invention cannot be an abstract idea, but is firmware more like software on a CD-ROM (usually not a component) or software on a hard drive? If Microsoft had exported hard drives abroad and the hard drive was "combined" with other parts of a computer, the Court, presumably, would have found Microsoft liable. What about the BIOS on a chip? Although I agree with the Court's outcome, I am less convinced of a principled basis for the Court's line drawing. The hypos I have proposed go beyond the facts in the case, but the Court's reasoning should still seem applicable, if it's valid. I am not so sure.
As a matter of policy, the Court's conclusion s remarkably sound; namely, that U.S. patent law generally should not reach extraterritorially except under Congress' narrowly circumscribed exception for exports of a patented invention's "components" for the purpose of combining those components in another country. Exporting abstract software - - whatever that may be held to mean in a given context - - does not come within the exception.
Rod Dixon, J.D., LL.M.
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