U.S. Supreme Court Limits the Extraterritorial Reach of U.S. Patent Law

April 30, 2007

On April 30, the Supreme Court of the United States issued a 7-1 decision in Microsoft Corp. v. AT&T Corp. that held that Microsoft is not liable under 35 U.S.C. § 271(f)–which provides that it is an act of infringement to "suppl[y] . . . from the United States" the "components of a patented invention" for combination and final assembly abroad–for exporting master versions of its allegedly infringing Windows operating system for replication overseas and installation on foreign computers. Justice Ginsburg’s majority opinion rejected the Federal Circuit’s interpretation of both the "component[] of a patented invention" and "supplie[d] . . . from the United States" requirements of Section 271(f), and narrowed the extraterritorial reach of U.S. patent law. 

The Court held that software object code that is divorced from a machine-readable medium is not a "component[] of a patented invention" within the meaning of Section 271(f) because it is not capable of being combined with other elements to form the patented invention. The Court explained that abstract software object code "is an idea without physical embodiment, and as such, it does not match § 271(f)’s categorization: ‘components’ amenable to ‘combination.’" A "copy of Windows, not Windows in the abstract," the Court concluded, "qualifies as a ‘component’ under § 271(f)." 

The Court further held that copies of the Windows operating system produced overseas using a U.S.-shipped master version are not "supplie[d] . . . from the United States" under Section 271(f). The Court explained that under the plain language of Section 271(f), "the very components supplied from the United States, and not copies thereof, trigger § 271(f) liability when combined abroad to form the patented invention at issue." Because the copies of the Windows operating system installed on the foreign computers were produced overseas, the Court concluded that they could not have been "supplie[d] . . . from the United States." The Court explained that AT&T’s remedy for the allegedly infringing foreign copying "lies in obtaining and enforcing foreign patents." 

In reaching this holding, the Court expressly rejected the Federal Circuit’s policy-based reading of the statutory language, writing that "[i]f the patent law is to be adjusted better ‘to account for the realities of software distribution,’ the alteration should be made after focused legislative consideration, and not by the Judiciary." 

Justice Alito, joined by Justices Thomas and Breyer, concurred in full in Justice Ginsburg’s majority opinion, with the exception of footnote 14, in which the Court declined to address whether Section 271(f) liability would attach if a disk shipped from the United States (rather than a foreign-made copy of a master disk) were used to install the Windows program on a foreign computer and were then removed from that computer. Justice Alito wrote that such a distribution model would not give rise to Section 271(f) liability because the software code embodied on the U.S.-shipped disk would not have been transferred to the foreign-assembled computer and thus "no physical object originating in the United States" would have been combined with the foreign-assembled computer. 

Gibson Dunn’s Theodore B. Olson, Miguel A. Estrada, Mark A. Perry, Matthew D. McGill, and Amir C. Tayrani briefed the case on behalf of Microsoft, and Mr. Olson presented oral argument in the Supreme Court.

Gibson Dunn’s Appellate and Constitutional Law Practice Group and Intellectual Property Practice Group are available to assist with any questions you may have regarding these issues. For further information, please contact the Gibson Dunn attorney with whom you work or Theodore B. Olson (202-955-8668, [email protected]), Miguel A. Estrada (202-955-8257, [email protected]), Mark A. Perry (202-887-3667, [email protected]), Matthew D. McGill (202-887-3680, [email protected]), or Amir C. Tayrani (202-887-3692, [email protected]) in the firm’s Washington, D.C. office, or any of the following attorneys:

Appellate and Constitutional Law Group:

Theodore J. Boutrous, Jr. – Los Angeles (213-229-7804, [email protected]
Daniel M. Kolkey – San Francisco (415-393-8240, [email protected])

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Wayne M. Barsky – Los Angeles (310-557-8183, [email protected]
Glenn K. Beaton – Denver (303-298-5773, [email protected]
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Denis R. Salmon – Palo Alto (650-849-5301, [email protected]

© 2007 Gibson, Dunn & Crutcher LLP

The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.