AT&T v. Microsoft Corporation (Fed. Cir. 2005).
AT&T’s patent covers certain speech codecs that are included in Microsoft’s Windows product. As shown above, Microsoft generates its source code in the U.S. That source code is copied and shipped abroad to Foreign computer manufacturers who, pursuant to their license agreement with Microsoft, generate 2nd generation copies of the software that are then installed and sold.
The district court found that Microsoft could be liable for foreign sales under Section 271(f) for shipping components of a patented invention.
On appeal, Microsoft argued that (i) software code cannot be a “component” under 271(f) and (ii) the 2nd generation copies are not “supplied” from the U.S. Rather, Microsoft argued that those 2nd generation copies are manufactured abroad.
Component: The majority panel made quick-work of the “component” argument, finding that the issue was fully determined by Eolas.
Supplied: Using a simple statutory analysis, the majority determined that “supplying” of software necessarily implies making a copy. “Copying, therefore, is part and parcel of software distribution.”
Rule: Thus, “sending a single copy abroad with the intent that it be replicated invokes § 271(f) liability for those foreign-made copies.” Therefore, the district court properly held Microsoft liable for the foreign activity.
In a well reasoned dissent, Judge Rader, decried the majority’s “extraterritorial expansion” — arguing that the court “should accord proper respect to the clear language of the statute and to foreign patent regimes by limiting the application of § 271(f) to components literally ‘shipped from the United States.’” as is required under Pellegrini.