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A Narrow Reading of 35 U.S.C. §271(f)

Posted Thursday, August 30, 2012 by Mike Cicero

Generally, only when an entity makes, uses, sells, offers to sell, or imports a patented invention within the United States does that entity infringe a patent and, therefore, become liable for damages. 35 U.S.C. §271(a). An exception to this general rule, provided by §271(f) of the Patent Act of 1984, occurs when an entity supplies from the United States “all or a substantial portion of the components of a patented invention” in a manner that induces the combination of the components outside the United States and where the combination would infringe if performed within the United States. 35 U.S.C. §271(f) (emphasis added).

In Microsoft Corp. v. AT&T Corp., the United States Supreme Court delivered an opinion with a very narrow reading of §271(f) which hinged on the meaning of the word “component.” 127 S. Ct. 1746 (2007). The most relevant facts of the case included that: AT&T held a patent on an apparatus for encoding and compressing recorded speech; once installed onto a computer, Microsoft’s Windows operating system infringed on AT&T’s patent; however, so long as it remained uninstalled, the Windows software did not infringe.

The question before the Court was precisely this: “Does Microsoft’s liability extend to computers made in another country when loaded with Windows software copied abroad from a master disk or electronic transmission dispatched by Microsoft from the United States?” Id. Surprisingly, the Court answered “No” because, according to the majority opinion, the master disk or electronic transmission Microsoft exported from the U.S. was “never installed on any of the foreign made computers” but rather “copies [of that disk] made abroad [were] used for installation.” Id.

The majority did express that if the actual master disk or the actual electronic transmission Microsoft exported were used to install the software onto the computers, then §271(f) would protect AT&T against that activity. However, the Seattle, Washington based software giant Microsoft was able to escape liability due the foreign computer manufacturers having created copies of the master disk and/or electronic transmission and only having used those copies to physically insert into the computers CD-ROM drive for installing Windows.

Often when knowingly applying a very narrow interpretation of a statute, the Court will indicate that it is up to the legislature to explicitly broaden and/or clarify the statutory language. The Court did so here. The Supreme Court has historically applied a presumption that United States patent laws have no extraterritorial effect and it appears that that presumption was heavily applied in this case. However, it’s unclear, and perhaps unlikely, that Congress intended for the Court to apply such a narrow interpretation of §271(f). This is especially so given that §271(f) was enacted by Congress as a direct response to another narrow decision in which the Court stated that “absent ‘a clear congressional indication of intent,’ courts had no warrant to stop the manufacture and sale of the parts of patented inventions for assembly and use abroad.” Id. (internal quotations omitted). It is doubtful that in 1984, the year that CD-ROM standards were first written, Congress reasonably could have considered the idea of creating digital copies of software from one CD-ROM to another. As such, how could Congress reasonably have provided a clear indication of intent as the Court called for as it enacted the Patent Act.

It is worth reiterating that the Court did express in their decision that the interpretation of §271(f) applied was exceptionally narrow and that “[their] decision leaves to Congress’ informed judgment any adjustment of § 271 (f) it deems necessary or proper.” Id. However, Congress appears to have declined the invitation as §271 (f) is left un-amended by the Leahy-Smith America Invents Act.

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