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Wednesday, 21 February 2007

US Supreme Court hears AT&T v Microsoft

According to widespread reports, the US Supreme Court is to hear today Microsoft's arguments in their long-running patent dispute with AT&T. The dispute (for background see Patently-O's excellent summary here) centres around section 271(f) of the US patent law, which reads:
"(1) 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, 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, shall be liable as an infringer.

(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined 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.
AT&T argue that their patented invention relating to computer speech algorithms is infringed by software included within Microsoft's Windows operating system. The key point is that AT&T claim damages not only for infringement within the US, but also for infringement wherever Windows is sold outside the US, since Microsoft have supplied "components" abroad (master copies of the operating system) to others, who have then incorporated these components into a product (i.e. a computer with Windows installed on it).

Microsoft argue that the law should not be extended in this way, as it was not intended to cover software. Any patent infringement case should be brought according to the local law of the country where the infringement actually takes place.

The IPKat awaits the outcome of this argument with interest, and would not like to bet on which way it is likely to go. There are arguments about whether applying s.271(f) effectively extends US jurisdiction beyond the boundaries of the US, but on the other hand the wording of the law appears to be reasonably clear. There is no equivalent UK (or, to this Kat's knowledge, other European) provision to s.271(f), the nearest provision in the UK being section 60(2) of the Patents Act. This UK provision (as interpreted according to Menashe v William Hill) only applies where the extraterritorial act results in putting "the invention into effect in the United Kingdom". The same argument could not therefore apply over here. Would it be fair if a US court were to rule on damages for acts that might properly fall under the jurisdiction of a UK court?

Postscript (22 February): Patently-O now has extracts from a transcript of the oral arguments, which make for interesting, though not necessarily very illuminating, reading.


Jeremy said...

I'm thinking that there must be many situations in which the same act turns out to infringe national patents both in the country in which that act is performed and elsewhere. Presumably, where this is so, damages will be available in each jurisdiction but only in respect of loss inflicted upon the patent monopoly in that jurisdiction. But this wouldn't work for some types of loss, such as diminution of value of a corporate subsidiary (see Court of Appeal in Gerber v Lectra, 1995). This looks like a promising topic for further serious research.

David said...

It seems to me that this is not even about whether a patent would be infringed in other jurisdictions. Section 271(f) is not concerned with whether the patent is actually infringed abroad, but whether the combination would infringe if it were to be made in the US. There is no suggestion therefore of exerting extraterritorial jurisdiction as such.

If the Supreme Court rule in AT&T's favour, they will effectively be granting damages for (possibly imaginary) infringements outside the US, as there is no consideration as to whether the invention is even patented abroad.

Anonymous said...

One suggestion is that software patents with so-called "program claims" could perhaps trigger this kind of action in Europe.

Consider if Company B, regardless of Company A's patent, creates software on a golden disk, which it sells in the UK to Company C. Company C then sells this software in the rest of the world.

Company B is presumably liable for the full consideration it has received from Company C.

But now suppose Company B and Company C are units of a larger structure, so the payment is only an internal transfer.

Can Company A still sue Company B, and get damages for the whole (worldwide) value of the Golden Disk ? Or does Company A have to sue the consolidated structure A+B ? And then can it get anything at all ?

- J. Heald

Aarathi said...

My rather sketchy memory of UK law on this relates to whether the article made is brought into the UK. So if X owns a patent in UK and Y manufactures the patented product outside the UK, X can only sue Y in the UK if the patented product is brought into the UK. If not... it'd be a long stretch for UK courts I would think.

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