Opposition Brief — Microsoft Corp. v. AT & T CORP.

/ MAR 2 3 2006

No. 05-1056 OFFICE OF THE CLEP

In the

Supreme Court of the Anited States

—

MICROSOFT CORPORATION,

V.

Petitioner,

AT&T CORP.,

Respondent.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Federal Circuit

BRIEF IN OPPOSITION

LauRA A. KASTER

AT&T Corp.

One AT&T Way

BepMINSTER, NJ 07921

(908) 532-1839

MICHAEL TRAYNOR

CooL_ey Gopwarp LLP

101 CALIFORNIA STREET, 5TH FL.

SAN Francisco, CA 94111

(415) 693-2000

Counsel for Respondent

*Counsel of Record (will be

admitted on March 27, 2006)

STEPHEN C. NeEAL*

CooL_ey Gopwarp LLP

Five PALO ALTO SQUARE

3000 Et Camino REAL

Paco ALto, CA 94306

(650) 843-5000

JONATHAN G. GRAVES

NATHAN K. CUMMINGS

CooLey Gopwarp LLP

ONE FREEDOM SQUARE

Reston Town CENTER

11951 FREEDOM Drive

Reston, VA 20190

(703) 456-8000

Becker Gallagher Legal Publishing, Inc. 800.890.5001

COUNTERSTATEMENT OF

THE QUESTIONS PRESENTED

After AT&T presented its case-in-chief to the jury,

Microsoft stipulated that AT&T’s pioneering ‘580 patent is

valid and that Microsoft infringed in the United States, in part

by supplying master copies of its U.S.-developed Windows

operating system software to domestic computer

manufacturers for assembly into the patented speech-coding

apparatus. Microsoft also stipulated that it sends identical

master copies of Windows to foreign computer manufacturers

with the intent that those manufacturers replicate the software

and assemble the identical speech-coding apparatus that

Microsoft stipulated infringes AT&T’s patent in the United

States. The district court entered judgment for AT&T based

on 35 U.S.C. § 271(a), (b), and (f) (including (f)(1) and

(f}(2)). The Federal Circuit affirmed. Although section

271(1)(2) also is a ground for the judgment, Petitioner elected

to exclude section 271(f)(2) from its questions presented. The

section 271(f)(1) questions presented are:

1. Whether software may be a “component” of a patented

invention under section 271(f)(1). See AT&T Corp. v.

Microsoft Corp., 414 F.3d 1366, 1369 (Fed. Cir. 2005) (Pet.

App. 4a).

2. Whether software replicated abroad from a master version

exported from the United States—with the intent that it be

replicated—may be deemed “supplied” from the United States

for tie purposes of section 271(f)(1). See id.

PARTIES TO THE PROCEEDINGS

AND RULE 29.6 STATEMENT

There are no parties to the proceedings other than those

listed in the caption.

Respondent AT&T Corp.’s parent company is AT&T,

Inc., which holds 100% of the stock of AT&T Corp.

TABLE OF CONTENTS

Counterstatement of the Questions Presented ......... i

Parties to the Proceedings and Rule 29.6 Statement ... ii

eT I a 5-0.0 5 60e ob wwe 6 ew Oa5 Ee iil

FR Re eres re a ern pee V

Summary of Reasons to Deny the Petition ......... I

IE EEE Shae ond 6 oO eee N eaerk kes 2

A. The Invention of the ‘580 Patent ........... 2

fs}. Microsoft’s Distribution of Infringing Software . 3

hi, PD i's 5 ow nih © 008s 0 oes 609 4

Reasons for Denying the Petition ............... 7

I. The Court Already Concluded This Term That the

Questions Presented Do Not Merit Review ...... 7

Il. There is No Inter- or Intracircuit Split on the

CO re a ener array are 8

Ill. The Federal Circuit’s Decision Was Correct ...... ‘10

iV

A. The Federal Circuit’s Decision Is in Harmony

with Long Standing Patent Jurisprudence That

Software Can Be a Component of a Patented

Invention or an Infringing Device ..........

B. The Federal Circuit Properly Read and Applied

the Statute to the Stipulated Facts ..........

1. The Federal Circuit Properly Construed

“Components” to Include Software

SI A 5.04 04s 0 06.9 Rew ckiewes

2. The Federal Circuit Properly Construed

“Supplied” to Include the Supply of Software

ES ct OR 5a oS aes bee hee ne

3. The Federal Circuit’s Decision Does Not

Expand the Extraterritorial Reach of U.S.

IAS ee Ir ae ae Ps Pe ey

4. Congress Recently Rejected Proposals to Limit

Section 271(f) as Petitioner Requests ......

IV. The Judgment Below Is Also Based on Section

271(f)(2), an Alternate Ground That Petitioner

Elected to Exclude from Its Questions Presented

a , i em Om oF we | Ow a os lO Oe Om A oe me Fe fs OS ee oe we a OS lOO lO

as. @ 28 64 2 2. 2? Be @& a C.F 2 es 2a. 6&6 &.o e's 6 tS ee ee SS

V

TABLE OF AUTHORITIES

Cases

In re Alappat,

33 F.3d 1526 (Fed. Cir. 1994) ...... 11, 12, 13, 16

AT&T Corp. v. Microsoft Corp., No. 01CV4872,

2004 WL 406640 (S.D.N.Y. Mar. 5, 2004),

aff'd, 414 F.3d 1366 (Fed. Cir.),

reh’g and reh’g en banc denied

Pe Ce chi ek eee ee eewes 8-9, 21, 22

Bayer AG v. Housey Pharmaceuticals, Inc.,

340 F.3d 1367 (Fed. Cir. 2003) ............ 9, 10

Bennett v. Spear,

i eee ree ee Pees 19

In re Bernhart,

417 F.2d 1395 (C.C.P.A. 1969) ..... 11, 12, 13, 16

Blum v. Bacon,

Se We ee CE. cw 20.0 eo 8k CK Eee 24

Burr v. Duryee,

Sy St ED 6 5s 6 bce 0.64 teen 12, 13

C.L. Maddox, Inc. v. Benham Group, Inc.,

OD Fae see Gee Rae. TOE vc cce reece euwoses 17

In re Comstock,

481 F.2d 905 (C.C.P.A. 1973) +... 2.2... 12, 13

vi

Deepsouth Packing Co. v. Laitram Corp.,

S56 U.S. SIS CITA) 2. wwe ccccs 6, 15, 20, 26, 27

Diamond v. Chakrabarty,

I a Oe a tae 15

Diamond v. Diehr,

. LB By 7), |) 11, 12, 14, 15, 16

Eolas Technologies, Inc. v. Microsoft Corp., No. 99 C 0626,

2004 WL 170334 (N.D. Ill. Jan 15, 2004) ....... 9

Eolas Technologies, Inc. v. Microsoft Corp.,

274 F. Supp. 2d 972 (N.D. Ill. 2004),

aff'd, 399 F.3d 1325 (Fed. Cir.),

reh’g and reh’g en banc denied, cert. denied,

ee a aie a's b's a6 ba v'e 9

Eolas Technologies, Inc. v. Microsoft Corp.,

399 F.3d 1325 (Fed. Cir. 2005),

reh'g and reh’g en banc denied, cert. denied,

i Cc <ecocevacsdccane passim

Haggar Co. v. Helvering,

Do ialh Wee 06 644 60 6086448 6

In re Hayes Microcomputer Products, Inc.

Patent Litigation,

i & fee Es A Ree i}

Herman & Maclean v. Huddleston,

ee eee eee 8, 22

Imagexpo, L.L.C. v. Microsoft Corp., No. O2CV751,

2003 WL 23147556 (E.D. Va. Aug. 19, 2003) .... 9

vii

Information Communications Corp. v. Unisys Corp..,

181 F.36 G29 (Sth Civ. 1999) 2... wee ee wees 17

Izumi Seimitsu Kogyo Kabushiki Kaisha v.

U.S. Phillips Corp.,

a ee i 5's < 0's tc beeen biked see 25

In re Knowlton,

bm Fie oon 2. ee 12, 13

In re Lowry,

32 F.3d 1579 (Fed. Cir. 1994) ........... 12, 16

Micro Chemical, Inc. v. Lextron Inc.,

317 F.3d 1387 (Fed. Cir. 2003) .............. 17

Microsoft Corp. v. Commissioner,

311 F.3d 1178 (9th Cir. 2002)............ 19, 26

Microsoft Corp. v. Eolas Technologies, Inc.,

Case No. 05-288 (Oct. 31, 2005) ............. 7

Miles v. Apex Marine Corp..,

GP Ss SU bo ccc cee ae cdetustetnen 13

Mills v. Rogers,

GES Dae G8 CHD 0 Oe heck cceseescvceeds 24

Netword, LLC v. Centraal Corp..,

242 F.3d 1347 (Fed. Cir. 2001) ............-. 14

Vill

NTP, Inc. v. Research In Motion, Ltd.,

261 F. Supp. 2d 423 (E.D. Va. 2002),

aff'd on different grounds,

418 F.3d 1282 (Fed. Cir. 2005),

reh’g and reh’g en banc denied, cert. denied,

rn an Seen: é os vate 4-6 bo Bees 8 Be 9

Paper Converting Machine Co. v. Magna-Graphics Corp.,

eee oe Ge as Sins kt pee enn ee 21

Pellegrini v. Analog Devices, Inc.,

375 F.3d 1113 (Fed. Cir.),

cert. denied, 543 U.S. 1003 (2004) ......... 9, 16

In re Prater,

oe gh fle ee | ere 11, 13

Response of Carolina, Inc. v. Leasco Response, Inc.,

ee ee ee es Sa as cc cw cacestae 14

Rotec Industries, Inc. v. Mitsubishi Corp.,

215 F.3d 1246 (Fed. Cir. 2000)............ 9, 10

Southwest Software, Inc. v. Harlequin Inc.,

226 F.3d 1280 (Fed. Cir. 2000)........... 12, 16

State Street Bank & Trust Co. v. Signature Financial

Group, Inc.,

149 F.3d 1368 (Fed. Cis. 1996) .............. 13

Tcherepnin v. Knight, 389 U.S. 332 (1967)... ...... 7

Union Carbide Chemicals & Plastic Technology Corp.

v. Shell Oil Co.,

434 F.3d 1357 (Fed. Cir. 2006)............ 9, 10

iX

United States v. Dubilier Condenser Corp. ,

PE 5. s:ste abe tees CAG wo heces 15

Waymark Corp. v. Porta Systems Corp..,

245 F.3d 1364 (Fed. Cir. 2001).............. 21

Williams v. Taylor,

SED 5 06k 05 4 5k X08 Be 6

Yee v. Escondido,

EP SO EEEEED ce nacidedevcevasuvner.e 24

Constitutional Provision

FR Gf & t) Bape yi ere Te ee 26

Statutes

Ge ED ic eketeeeeucs eueente 19

SD oD odkadnd ds bbe ede hheee ene 4

SP EE Se S6 Cee Cosa beh adacoeweex 4

Pe cto babes bowls Pek e wen “passim

f+ tS. A rrenenrn ae passim

35 U.S.C. § 271(f(2) ...... eee teens passim

I NE ke ee as 10

Rules

eg 0 ee rw re ye ay 24

EE We sin cekis Habe eeeeeeeens ©) 23

Other Authorities

American Bar Association Section of Intellectual Property

Law, A Section White Paper: Agenda for 21st Century Patent

Reform

ey SED ine dk Wwe ood Ke 20, 22, 26

American Heritage Dictionary 302

CEE "sas kb vce eeaeienesaks 14,17

American Jobs Creation Act of 2004,

Pub. L. No. 108-357, 118 Stat. 1418 (2004) .. 19, 26

Manual of Patent Examining Procedure

PR 64-405 OEE 50 b cE ewe Rees 12, 14

Microsoft Computer Dictionary (Sth ed. 2002) ... 14, 16

Patent Law Amendments Act of 1984, H.R. 6286,

130 Cong. Rec. 28069 (Oct. 1, 1984) ..... 7, 15, 26

Patent Quality and Improvement: Hearing Before the

Subcomm. on Courts, the Internet and Intellectual Property of

the H. Comm. on the Judiciary, |

CEE cdg win e-o es bees dale tse 22

xl

Patent Reform Act of 2005, H.R. 2795,

rer errr Ts oe 22

S. Rep. No. 98-663 (1984) ..... ere L Lo 15, 18, 26

Staff of H. Comm. on the Judiciary, 109th Cong.,

Patent Act of 2005 § 10 (Comm. Print 2005) ..... 22

BRIEF IN OPPOSITION

+

SUMMARY OF REASONS TO DENY THE PETITION

The Court recently denied Microsoft's certiorari petition

in a case presenting the identical issue of liability for patent

infringement under 35 U.S.C. § 271(f) based on conduct in

the U.S. In this case, Microsoft stipulated that it infringed

AT&T’s valid patent in the U.S. based on Microsoft’s supply

of software to domestic computer manufacturers for

replication and loading into infringing devices. Microsoft's

liability under section 271(f)(1) is based on identical conduct:

Microsoft’s supply of the same software to foreign computer

manufacturers with the intent that it be replicated and loaded

into the same devices that Microsoft admits infringe when

assermbled in the United States. Developments since the

denial of certiorari in the Eolas case make Microsoft's

Petition in this case even weaker because recent legislative

activity suggests Congress has ratified the result in both cases

by rejecting the attempts of Microsoft and others to amend the

statute. Microsoft’s Petition should also be denied because

there is no conflict among the Circuits or within the decisions

of the Federal Circuit. Furthermore, the Federal Circuit

reached the correct result. The court’s construction does not

expand the extraterritorial reach of U.S. patent laws, but

instead appropriately focuses on the activities of Microsoft as

a domestic supplier. Finally, the judgment below rests on an

alternative ground that Petitioner elected to exclude from its

questions presented. The Court should therefore deny

Microsoft's Petition because the case does not qualify for or

otherwise merit review in this Court.

2

.

STATEMENT OF THE CASE

A. The Invention of the ‘580 Patent.

In 1981, Bishnu Atal and Joel Remde, two scientists at

Bell Telephone Laboratories, invented a pioneering advance

in digital speech compression, which is disclosed and claimed

in U.S. Patent Re 32,580. Their breakthrough greatly

enhanced the sound quality of synthesized speech while

maintaining high data compression. Ct. App. JA 711.

From the outset, the implementation of the invention has

required a machine, such as a computer programmed by

software, to perform the patented speech coding and decoding

operations. Ct. App. JA 493-94. Dr. Atal included as

appendices to the ‘580 patent excerpts of the implementing

software program he wrote. ‘580 patent appendices A-D (Ct.

App. JA 104-108). The patent expressly teaches the use of

this software to carry out the speech-coding operations

essential to the invention. See ‘580 patent col.5, In.68-col.6,

In.9; col.8, 11.37-40 (Ct. App. JA 102-103).

Although at the time of the invention it could be

implemented only by using very large supercomputers,

dramatic improvements in microprocessors in the 1990s

enabled widespread implementation of the invention via

software running on personal computers and microprocessor

chips. During that period, the invention was adopted by

international telecommunications organizations for important

industry standards, and was widely licensed by AT&T to

numerous third parties and used in numerous products. Ct.

App. JA 708, 1033-43. The ‘580 patent is recognized as a

seminal technology cmployed today in mobile telephones,

3

personal computers, videoconferencing services and products

that operate over the Internet, all using software programs to

achieve significant compression and high-quality reproduction

of speech. It is not merely “one of the thousands of

unexploited patents comprising the modern ‘patent thicket’”

as Petitioner contends. Pet. at 20. To the contrary, the ‘580

patent is a technological breakthrough that has been widely

praised; Dr. Atal has received numerous prestigious awards

attributed to the invention. Ct. App. JA 509-10.

fs. Microsoft’s Distribution of Infringing Software.

I: is undisputed that Microsoft conceives of, writes,

compiles, tests, debugs, and creates a master version of its

flagship Windows operating system software in Redmond,

Washington. Pet. App. 45a. The Windows software is

asseinbled and becomes operational in its final form in the

United States. Microsoft supplies the Windows software to

foreign and domestic computer manufacturers on so-called

“golden master” disks or via electronic transmissions. The

computer manufacturers then use these master versions to

install the Windows software into the computer products that

they manufacture. Pet. App. 45a-46a. As a result, the same

software code—the same “zeros and ones” created in the U.S.

by Microsoft programmers—is assembled on _ foreign

computers in the very same manner as it is on domestic

computers.

Although others in the industry licensed AT&T’s patented

technology on reasonable and non-discriminatory terms,

Microsoft refused to obtain a license. Ct. App. JA 1044-

1052. Without authorization, Microsoft incorporated into

Windows certain speech-coding software (known as “codecs” )

that use the invention of the ‘580 patent. After licensing

4

discussions broke down, AT&T filed suit against Microsoft

for infringing the ‘580 patent. See id.

C. Proceedings Below.

At trial, after AT&T presented its case-in-chief to the

jury, Microsoft stipulated to infringement under 35 U.S.C.

§ 271(a) (direct infringement within the United States) and

271(b) (active inducement of infringement), and to the validity

and enforceability of the ‘580 patent. Pet. App. 42a.

Microsoft’s stipulated infringement and inducement in the

U.S. was based in part on its supply of Windows software

(including the infringing codecs) on golden master disks and

via electronic transmissions to U.S. computer manufacturers,

who then installed the same Windows software onto

computers to create fully assembled, infringing systems.

AT&T also claimed that Microsoft infringed under section

271(f), which includes both (f)(1) and (f)(2). See Pet. App.

24a, 25a-27a. Microsoft’s liability under those sections was

premised on the same conduct Microsoft admitted infringed

under sections 271(a) and (b). Microsoft supplies its

Windows’ software products to foreign computer

manufacturers on golden master disks and through electronic

transmissions, with the intent that those manufacturers install

the Windows software onto computers to create fully

assembled systems. Microsoft moved for partial summary

judgment of non-infringement under section 271(f).

The district court denied Microsoft’s motion. Relying on

established patent jurisprudence and the text and legislative

history of section 271(f), the court rejected Microsoft’s

argument that its software is intangible and therefore cannot

be a “component” under section 271(f). Pet. App. 29a-35a.

The district court also rejected Microsoft’s contention that a

5

foreign-replicated copy of the infringing software does not

constitute a component supplied from the United States, based

on Microsoft’s stipulation that it supplies the software with the

intent that an exact copy of the U.S.-manufactured software

be incorporated into foreign-assembled computers. Pet. App.

3S5a-37a. Microsoft’s counsel also admitted to the district

court that sending a separate Windows CD abroad for every

computer to be assembled would infringe under section

271(f). Pet. App. 36a n.7. Accordingly, the district court

held, based on the stipulated facts, that Microsoft infringed

the ‘580 patent under section 271(f), including both (f)(1) and

(f)(2). Pet. App. 20a-38a, 42a-43a.

The United States Court of Appeals for the Federal Circuit

affirmed the district court’s judgment under section 271(f).

Relying on Eolas Technologies, Inc. v. Microsoft Corp. , 399

F.3d 1325 (Fed. Cir. 2005), reh’g and reh’g en banc denied,

cert. denied, 126 S. Ct. 568 (2005), the panel unanimously

agreed that software may be a “component” of a patented

invention under section 271(f). Pet. App. 4a & lla. It also

ruled, by a 2-1 majority, that software replicated abroad from

a master version of the software developed in and exported

from the United States—with the intent that the software be

replicated—may be deemed “supplied” from the United States

for the purposes of section 271(f).'

' Although the opinion states that the “supplied from the United

States” issue was one of first impression, it had been previously

‘briefed and argued to the Federal Circuit in Eolas and, based on

facts identical to those here (supply of Windows software to foreign

computer manufacturers for assembly abroad), the court affirmed

the judgment under section 271(f). Eolas, 399 F.3d at 1339

(“Exact duplicates of the software code on the golden master disk

are incorporated as an operating element of the ultimate device.”);

see also id. at 1340-41; Microsoft Eolas Appeal Br. at 28, 62-63;

6

Because Congress did not define the word “supplied” in

section 271(f), the court looked to the ordinary, contemporary

and common meaning of the term. Pet. App. 6a (quoting

Williams v. Taylor, 529 U.S. 420, 431 (2000)). Given the

nature of the technology, the court concluded that copying is

part and parcel of software distribution. It emphasized that

Microsoft has taken advantage of the replicable nature of

software to distribute its software efficiently. Rather than

supply a separate disk for each copy of the software

supplied—thus incurring extra material, shipping and storage

costs—Microsoft supplies a single master disk that is intended _

to be replicated easily. In light of the undisputed and

Stipulated facts and the admissions of Microsoft’s counsel, the

court reasoned that Microsoft’s competing interpretation is

incorrect because it would permit liability only when the party

acts in an unrealistic manner (namely, supplying the software

in a more expensive, labor intensive way). Pet. App. 7a

(citing Haggar Co. v. Helvering, 308 U.S. 389, 394 (1940)).

The court also examined the legislative history and

concluded that its interpretation comports with Congress’s

purpose in enacting section 271(f). Pet. App. 8a. Congress

enacted section 271(f) in response to Deepsouth Packing Co.

v. Laitram Corp., 406 U.S. 518 (1972), which exposed a

loophole in section 271 that allowed potential infringers to

avoid liability by manufacturing the components of patented

products in the United States and then shipping them abroad

for assembl Congress concluded that, without this

“housekeeping-oriented” measure, “the patent system would

Eolas Opp. Appeal Br. at 12, 58, 60-61. Microsoft previously

admitted to this Court that the decision in Eolas necessarily decided

this issue. Microsoft Eolas Cert. Pet. at 8-9 n.2 (Case No. 05-

288).

7

not be responsive to the challenges of a changing world and

the public would not benefit from the release of creative

genius.” Pet. App. 9a (quoting Patent Law Amendments Act

of 1984, H.R. 6286, 130 Cong. Rec. 28069 (Oct. 1, 1984)).

The court concluded that section 271(f) is a remedial measure

that should be construed broadly to effectuate its purposes.

Id. (citing Tcherepnin v. Knight, 389 U.S. 332, 336 (1967)).

The court also reasoned that Microsoft’s interpretation

would subvert the remedial purpose of the statute by allowing

advances in technology to be used to maintain a loophole that

the statute was intended to close. Pet. App. 9a-10a. The

court concluded that sending a single copy of a software

component abroad with the intent that it be replicated creates

liability under section 271(f) for those copies. The panel

thereafter denied without comment Microsoft’s petition for

rehearing, and the full court denied without comment

Microsoft’s petition for rehearing en banc. Pet. App. 39a-

40a.

¢

REASONS FOR DENYING THE PETITION

I. The Court Already Concluded This Term That the

Questions Presented Do Not Merit Review.

The Court recently denied a certiorari petition in which

Microsoft presented the identical issue it raises here.

Microsoft Corp. v. Eolas Techns., Inc., Case No. 05-288

(Oct. 31, 2005). In its petition in Eolas, Microsoft stated that

“AT&T v. Microsoft involves the identical issue presented

here. ... In both [Eolas] and AT&T, the Federal Circuit

determined that a foreign-made and sold computer that has

been programmed with the Windows software code includes

8

a ‘component’ that was ‘supplied’ from the United States and

‘combined’ with other components to produce the final

product within the meaning of § 271(f).” Microsoft Eolas

Cert. Pet. at 8-9 n.2; see also id. at i (question presented).

Because the operative facts and legal conclusions relating to

section 271(f) are identical in both decisions, this case

presents no better a vehicle for review than did Eolas.’

Indeed, given Congress’s recent refusal to limit section 271(f)

as Microsoft urges (see infra p. 21), the justifications for

granting Microsoft’s present Petition are even weaker now

than when Microsoft presented them in Eolas. See Herman

& MacLean v. Huddleston, 459 U.S. 375, 385-86 (1983)

(decision by Congress to leave a provision intact suggests that

it has ratified the interpretation). The Court’s recent decision

in Eolas not to review this issue was correct.

II. There is No Inter- or Intracircuit Split on the

Questions Presented.

The questions presented are purely issues of patent law.

Petitioner does not and cannot allege any intercircuit conflicts,

because the Federal Circuit has exclusive jurisdiction over the

interpretation and application of the patent laws. Moreover,

there was never any intercourt conflict about these questions;

every court that has considered the issues has reached the

same conclusion that the Federal Circuit reached here and in

Eolas. See AT&T Corp. v. Microsoft Corp., No. 01CV4872,

* Microsoft’s attempts to distinguish its petition in Eolas are

unavailing. Pet. at 29-30. Microsoft does not explain why the

Federal Circuit’s remand for further proceedings on issues of

anticipation, inequitable conduct and prior art defenses rendered

Eolas ill-suited to address the scope of infringement and damages

under section 271(f). /d. at 29. In fact, Microsoft argued to the

contrary in Eolas. Microsoft Eolas Cert. Reply Br. at 2-3.

9

2004 WL 406640 (S.D.N.Y. Mar. 5, 2004), aff'd, 414 F.3d

1366 (Fed. Cir.), reh'g and reh’g en banc denied (Fed. Cir.

2005); Eolas Techs. Inc. v. Microsoft Corp. , 274 F. Supp. 2d

972 (N.D. Ill. 2004), aff'd, 399 F.3d 1325 (Fed. Cir.), reh’g

and reh'g en banc denied, cert. denied, 126 S. Ct. 568

(2005); Eolas Techs. Inc. v. Microsoft Corp., No. 99 C 0626,

2004 WL 170334 (N.D. Ill. Jan 15, 2004); Imagexpo, L.L.C.

v. Microsoft Corp., No. 02CV751, 2003 WL 23147556 (E.D.

Va. Aug. 19, 2003); NTP, Inc. v. Research In Motion, Litd..,

261 F. Supp. 2d 423, 431 (E.D. Va. 2002), aff'd on different

grounds, 418 F.3d 1282 (Fed. Cir. 2005), reh'g and reh’g en

banc denied, cert. denied, 126 S. Ct. 1174 (2006). The

courts have been clear, consistent, and predictable in their

application of section 271(f) to software, and there is no need

for the Court to exercise its discretionary jurisdiction.

Nor can certiorari be justified on the basis that the

decisions below conflict with prior Federal Circuit precedent,

because no such conflict exists. Petitioner's effort to

manufacture such a conflict rests primarily on Pellegrini v.

Analog Devices, Inc., 375 F.3d 1113 (Fed. Cir.), cert.

denied, 543 U.S. 1003 (2004). Microsoft raised this

argument below, and both the Eolas and AT&T panels

correctly distinguished Pellegrini. Pet. App. 7a-8a; Eolas,

399 F.3d at 1340-41. The nature of the shipping

“instructions” (to people) at issue in Pellegrini is

fundamentally different from software instructions (for

computers) that cause the computers to act as special purpose

and infringing machines. See Pellegrini, 375 F.3d at 1118

(holding that instructions to people and corporate oversight

are not “components” under section 271(f)).

Petitioner's citations to Bayer, Rotec and the dissent in

Unicn Carbide (Pet. at 11, 15, 17 & 19 n.3) also fail to

identify any conflicts among Federal Circuit decisions. In

10

Bayer AG v. Housey Pharmacewticals, Inc., 340 F.3d 1367,

1368-69 (Fed. Cir. 2003), the court held that importing

information about the properties of a substance does not

infringe section 271(g). Nevertheless, information about a

substance’s properties is fundamentally different from the

computer software at issue here and in Eolas the causes

computers to function in a specific manner. In Rotec

Industries, Inc. v. Mitsubishi Corp. , 215 F.3d 1246, 1257-58

(Fed. Cir. 2000), the patentee admitted that none of the

construction equipment components were manufactured in the

United States, and the court rejected patentee’s argument that

an “offer to supply” foreign components infringes under

section 271(f). Here, by contrast, it is undisputed that

Microsoft wrote, compiled, tested, debugged, and created the

Windows software in, and exported that software from, the

United States. Finally, in Union Carbide Chemicals & Plastic

Technology Corp. v. Shell Oil Co., 434 F.3d 1357, 1358

(Fed. Cir. 2006), the court denied a petition to rehear en banc

whether section 271(f) applies to process inventions.

Petitioner’s attempt to depict Judge Lourie’s dissent as

rethinking the opinion he authored below (Pet. at 11, 15) is

misleading. Judge Lourie explicitly noted that the inventions

in Eolas and AT&T were apparatus inventions, whereas the

inventions in Union Carbide were methods and processes.

434 F.3d at 1358. Microsoft has simply failed to show the

decision below to be in conflict with any other cases applying

or interpreting the patent statute.

Ill. The Federal Circuit’s Decision Was Correct.

This Court should deny Microsoft's Petition because the

Federal Circuit correctly applied section 271(f) and binding

patent-law precedent to the facts of this case.

1]

A. The Federal Circuit’s Decision Is in Harmony with

Long Standing Patent Jurisprudence That Software

Can Be a Component of a Patented Invention or an

Infringing Device.

Microsoft's Petition is devoid of citations to any judicial

authority holding that software is intangible and cannot be a

component of a patented invention. In fact, Microsoft’s

position conflicts with thirty years of patent jurisprudence,

business practices in the software industry, and Microsoft's

own patent portfolio. In contrast, the Federal Circuit's

decisions here and in Eolas are entirely consistent with

precedent, Patent Office procedures and policy, and industry

practices.

Long standing patent jurisprudence holds that software

may be a component of a patented invention. This Court held

in Diamond v. Diehr, 450 U.S. 175, 187 (1981), that a patent

claim may be drawn to statutory subject matter even if it uses

a computer program. See also In re Alappat, 33 F.3d 1526,

1545 (Fed. Cir. 1994) (holding that “a computer operating

pursuant to software may represent patentable subject

matter”). In fact, a general-purpose computer is nothing

more than a “storeroom of parts and/or electrical

components” until the computer is programmed; but once the

software is introduced, the “commoditized” parts become a

spec'al-purpose computer that may be patented. /n re Prater,

415 F.2d 1393, 1403 n.29 (C.C.P.A. 1969). When such a

machine is programmed, it is physically different from the

machine without the program; if the software programs the

machine in a new and nonobvious way, then the programmed

machine is patentable. /n re Bernhart, 417 F.2d 1395, 1500

(C.C.P.A. 1969); see also In re Hayes Microcomputer

Proas., Inc. Patent Litig., 982 F.2d 1527 (Fed. Cir. 1992)

(affirming judgment of infringement by devices programmed

12

to practice the invention). Software may also be the structure

corresponding to means-plus-function limitations in a patent

claim. See In re Knowlton, 481 F.2d 1357, 1368 (C.C.P.A.

1973); In re Comstock, 481 F.2d 905, 908-09 (C.C.P.A.

1973).

The procedures of the Patent Office are in complete

accord with this case law. The Manual of Patent Examining

Procedure (MPEP) notes that computer programs are often

recited as part of a patent claim. If the computer program

being claimed is part of an otherwise patentable machine, the

claim is patentable. MPEP § 2106 at 2100-13 (8th ed. 2003).

Several of the cases cited above explicitly rejected the

notion that software is intangible and unpatentable. See, e.g.,

In re Alappat, 33 F.3d at 1545 (rejecting the contention that

software running on a computer transforms the computer

from a machine into a mathematical algorithm) (citing Diehr,

450 U.S. at 187); In re Lowry, 32 F.3d.1579, 1583 (Fed. Cir.

1994) (rejecting the contention that software data structures

are intangible information, and instead holding they are “the

essence of electronic structure”); /n re Bernhart, 417 F.2d

1395 (reversing a rejection of apparatus claims based, in part,

on the rationale that a computer is structurally the same with

or without its software). See also Southwest Software, Inc. v.

Harlequin Inc. , 226 F.3d 1280, 1283, 1288 (Fed. Cir. 2000)

(noting that the software accused of infringing under section

271(f) was a “device”).

This Court long ago recognized that, under patent law, a

machine is “a concrete thing, consisting of parts, or of certain

devices and combination of devices.” Burr v. Duryee, 68

U.S. 531, 570 (1863). The Court stressed that a particular

machine is defined by its mode of operation, or “that peculiar

combination of devices which distinguish it from other

13

machines.” /d. The cases cited above demonstrate that

computer software may be a device—indeed, perhaps the only

device—that distinguishes a patented invention from a

general-purpose computer. See, e.g., In re Alappat, 33 F.3d

at 1545; In re Bernhart, 417 F.2d at 1399 (stating that the

claims recite, and can be infringed only by, a computer

programmed to carry out the recited routine), /n re Knowlton,

481 F.2d at 1368; In re Comstock, 481 F.2d at 908-09; In re

Prater, 415 F.2d at 1403 n.29; see also State Street Bank &

Trust Co. v. Signature Fin. Group, Inc. , 149 F.3d 1368, 1375

(Fed Cir. 1998). It logically follows that the distinguishing

device—the software—must be a component of that patented

invention. See Burr, 68 U.S. at 570.

B. The Federal Circuit Properly Read and Applied the

Statute to the Stipulated Facts.

1. The Federal Circuit Properly Construed

“Components” to Include Software

Components.

a. The Federal Circuit’s decisions in Eolas and AT&T

properly construe section 271(f). As shown above, the courts

consistently held that software programs can be a component

of patented inventions long before Congress enacted section

271(f). As a matter of law, Congress is presumed to have

known of this judicial authority when it included the language

“component of a patented invention” in section 271(f). See

Miles v. Apex Marine Corp., 498 U.S. 19, 32 (1990) (“We

assume that Congress is aware of existing law when it passes

legisiation.”). In light of this authority, it would have been

strange if software were not covered by section 271(f).

Moreover, because Congress did not specifically define

the word “component,” the Federal Circuit appropriately

14

gave the term its ordinary, contemporary and common

meaning. Diehr, 450 U.S. at 182. Nothing in the ordinary

meaning of “component” limits the term to exclude software.

See, e.g., American Heritage Dictionary 302 (2d coll. ed.

1991) (defining “component” as “part of a mechanical or

electrical complex”); Microsoft Computer Dictionary 116 (Sth

ed. 2002) (defining “component” as a “discrete part of a

larger system or structure” and an “individual modular

software routine that has been compiled and dynamically

linked, and is ready to use with other components or

programs”). And with respect to software in particular, it is

ordinary usage of the courts, the Patent Office and the

industry to refer to software as a “component” of a computer

system. See, e.g., Netword, LLC v. Centraal Corp., 242

F.3d 1347, 1351 (Fed. Cir. 2001) (patent claim describes

“computers” and their “software components”); Response of

Carolina, Inc. v. Leasco Response, Inc., 537 F.2d 1307,

1326 (Sth Cir. 1976) (“The final component of the computer

system is the application software.”); MPEP § 2106.01 at

2100-24 (discussing elements “at least partially comprised of

a computer software component”); id. § 2106.02 at 2100-25

(discussing “systems which include a computer as well as

other hardware and/or software components”).

Ironically, even Microsoft’s directions for using the

golden master disks refer to software as “components” to be

installed during computer assembly. Ct. App. JA 1677,

1681, 1712. Indeed, Petitioner itself has obtained numerous

patents that include software as a “component” of the

invention. See, e.g., U.S. Patent No. 6,738,773 col.5 11.43-

47 (filed May 1, 2000) (Ct. App. JA 1838); U.S. Patent No.

6,727,917 col.3 Il.7-14 (filed May 4, 2000) (Ct. App. JA

1851); U.S. Patent No. 6,725,262 col.5 11.23-28 (filed Apr.

27, 2000) (Ct. App. JA 1863).

15

This Court has “more than once cautioned that courts

should not read into the patent laws limitations and conditions

which the legislature has not expressed.” Diehr, 450 U.S. at

182 (quoting Diamond v. Chakrabarty, 447 U.S. 303, 308

(1980) and United States v. Dubilier Condenser Corp. , 289

U.S. 178, 199 (1933)). There is simply nothing in the

language of section 271(f) that can support excluding software

from the definition of “component.” In fact, there is nothing

in the statute that suggests Congress intended to exclude any

type of component whatsoever. To the contrary, subsection

(f)(2) explicitly states that “any” component is covered by the

statute. The use of the comprehensive term “any” reflects

Congress’s intent not to place any restrictions on the types of

components subject to the statute. See Chakrabarty, 447 U.S.

at 308 (“In choosing such expansive terms as ‘manufacture’

and ‘composition of matter,’ modified by the comprehensive

‘any.’ Congress plainly contemplated that the patent laws

would be given wide scope.”).

Nor is there anything in the legislative history suggesting

that software—or any other part of a special purpose

machine—would be excluded from the definition of

“component” or from the purview of the statute. To the

contrary, the legislative history demonstrates Congress’s

intent to protect all patent owners by completely closing the

“loophole” in section 271 recognized by Deepsouth. S. Rep.

No. 98-663, at 2-3 (1984); 130 Cong. Rec. H28,069 (daily

ed. Oct. 1, 1984). Congress emphasized that section 271(f)

was needed to make the patent system “responsive to the

challenges of a changing world.” 130 Cong. Rec. H28,069.

b. Petitioner argues otherwise by mistakenly treating

software as nothing more than “intangible information” or

“design information.” Pet. at 13-22. This is not a novel

argument; it is one the courts have repeatedly rejected. See,

16

e.g., Southwest Software, 226 F.3d at 1283, 1288; In re

Alappat, 33 F.3d at 1545 (citing Diehr, 450 U.S. at 187); In

re Lowry, 32 F.3d at 1583; In re Bernhart, 417 F.2d 1395.

Moreover, the software’ industry—including

Microsoft—clearly understands that software is not

“information.” Information is “[t}he meaning of data as it is

intended to be interpreted by people. Data consists of facts,

which become information when they are seen in context and

convey meaning to people. Computers process data without

any understanding of what the data represents.” Microsoft

Computer Dictionary 271. Software, on the other hand, is

“computer programs; instructions that make hardware work.”

Id. at 489 (emphasis added).

By contrast, instructions to people about how to

manufacture a product (Pet. at 17-18, citing Pellegrini); the

design information about a car (Pet. at 15); a mask for

fabricating semiconductor circuits (Pet. at 21); and a tire’s

tread design (id.) are very different. The appropriate limiting

principle in the statute is that the “component” is part “of

[the] patented invention” being assembled. Petitioner’s

“examples” are not functional parts incorporated in devices

being manufactured and are, therefore, irrelevant.

Petitioner's argument also cannot be reconciled with its

admission to the district court that Microsoft would be liable

under section 271(f) if it exported a separate disk containing

the Windows software for each computer to be assembled

overseas, rather than supplying a limited number of golden

master versions. Pet. App. 36a n.7. Through that admission,

Microsoft necessarily acknowledged both that software can be

a component of a patented invention supplied from the United

States under section 271(f), and that software is still a

component when it is transferred from a disk to a computer

hard drive to assemble the special purpose machine.

17

2. The Federal Circuit Properly Construed

“Supplied” to Include the Supply of Software

Abroad.

a. The Federal Circuit also properly construed the term

“supplied” consistent with its ordinary, contemporary and

common meaning. The ordinary meaning of “supply” is

“[{t}o make available for use; provide;” “[t}o furnish or equip

with.” American Heritage Dictionary 1222 (2d coll. ed.

1991). When it comes to the ordinary meaning of

“supplying” software, this includes providing or furnishing

the software for installation on a computer. See, e.g., Micro

Chem. Inc. v. Lextron Inc. , 317 F.3d 1387, 1389 (Fed. Cir.

2003) (stating that defendant “supplics ... software” as part of

computerized medical record systems); /nfo. Comm. Corp. v.

Unisys Corp., 181 F.3d 629, 631 (Sth Cir. 1999) (explaining

that as joint-creators of public-safety computer systems,

plaintiff “created and supplied the software applications,”

while defendant supplied the computer hardware); C.L.

Maddox, Inc. v. Benham Group, Inc. , 88 F.3d 592, 597 (8th

Cir. 1996) (referring to an undependable computer system

that had numerous deficiencies in the software “supplied by”

a defendant). Even Petitioner's own patents use “supply”

with-this same meaning. U.S. Patent No. 5,548,759 col.3

11.31-41 (filed Jan. 11, 1996) (explaining that a manufacturer

“supplies software” on a disk for installing the application

program on the computer); U.S. Patent No. 6,000,832 col.14

11.45.49 (filed Sep. 24, 1997) (claiming as part of a method

claim the step of “supplying” software code to the customer).

Although the replication of the accused Windows software

occurs Overseas, the courts have correctly recognized that the

software is nevertheless supplied from the United States. The

Windows software was designed, written, debugged, tested

and manufactured entirely within the United States.

18

Microsoft stipulated that it exports those software components

from the United States to foreign computer manufacturers

with the intent that the manufacturers install an exact copy of

the software onto foreign-assembled computers. Pet. App.

45a-45b. The very same zeros and ones cieated in the U.S.

by Microsoft programmers are installed on the foreign

computers. It is these zeros and ones that cause the foreign-

assembled machines to practice AT&T’s patented speech

compression technology, just as with computers assembled in

the U.S. In other words, the software that makes the

computers “new and useful” was created domestically; it was

not of foreign origin.’ This is exactly the type of domestic

activity Congress intended to cover when it enacted section

271(f).

b. Petitioner’s reading of “supplied” would write the

clause “in a manner that would infringe the patent if such

combination occurred within the United States” out of the

statute. That clause implements Congress’s intent to treat the

exportation of components the same as domestic “making”

and “selling” of infringing devices. See, e.g., S. Rep. No.

98-663, at 3 (1984) (“The bill simply amends the patent law

so that when components are supplied for assembly abroad to

circumvent a patent, the situation will be treated the same as

when the invention is ‘made’ or ‘sold’ in the United States.”)

(emphasis added). Microsoft stipulated that it infringed the

‘580 patent in the United States, in part by supplying golden

* Judge Rader dissented below from the majority’s construction of

“supplied.” In his view, copying is separate from supplying. But

his dissent cannot be reconciled with the opinion he authored in

Eolas, where the panel unanimously affirmed a judgment under

section 271(f) on stipulated facts identical to those here (exporting

golden masters of Windows software with the intent that it be

replicated abroad).

19

masters to domestic computer manufacturers with the intent

that they use the disks to assemble infringing computers. See,

e.g., Ct. App. JA 1671-72. But Petitioner argues that the

very same assembly by foreign computer manufacturers

should not be covered by section 271(f). In both instances

Microsoft’s conduct and intent are the same; the only

difference is the location of the assembly. Petitioner is

therefore asking this Court to treat golden masters sent to

foreizn OEMs differently from domestic golden masters, even

though Microsoft intended that all golden masters be used to

assermble AT&T’s patented speech processor. Such a reading

of the statute would violate the “cardinal principle of statutory

construction” that each word should be given meaning.

Bennett v. Spear, 520 U.S. 154, 173 (1997).

c. Microsoft’s arguments about the meaning of

“components” and “supplied” are undermined by its own

prior successful arguments in at least two other contexts.

First, in Microsoft Corp. v. Commissioner, 311 F.3d 1178

(9th Cir. 2002), Microsoft argued that it was entitled to tax

deductions under 26 U.S.C. § 927(a)(2)(B) for all foreign

sales of software replicated abroad from Microsoft’s golden

masters, claiming that such copies were “export property”

under the statute. The Ninth Circuit, while recognizing that

purely “intangible intellectual property” was not “export

property,” agreed with Microsoft that all copies created from

the software embodied on the exported golden master were

export property, thereby allowing Microsoft over $31 million

in deductions for 1990 and 1991. /d. at 1182, 1185, 1189.

Second, in the American Jobs Creation Act of 2004, Pub. L.

No. 108-357, 118 Stat. 1418 (2004), software is classified as

a manufactured good. The bill was originally intended to

protect more traditional manufacturing companies, but as a

result of Microsoft’s lobbying efforts, the definition of

manufactured goods was expanded to include computer

20

software. A.B.A. Sec. Intellectual Property L., A Section

White Paper: Agenda for 21st Century Patent Reform 52-55

(Sept. 16, 2005) (explaining the ABA Intellectual Property

Law Section’s opposition to the proposed repeal or

amendment of section 271(f)) (hereinafter “ABA White

Paper”). If computer software is deemed a manufactured

good and export property and afforded the protections of a

manufactured good and export property in other areas of the

law, then it should not be considered an intangible item

manufactured abroad for purposes of the patent law. See id.

Such an interpretation would subvert the protections of U.S.

patents.

The Federal Circuit’s construction of section 271(f) is in

complete harmony with long standing patent case law and the

language and intent of Congress in enacting the statute.

Microsoft’s strained interpretations of “component” and

“supplied,” on the other hand, would create special treatment

for software—another Deepsouth “loophole”—that would

discriminate against owners of software-related inventions.

Certiorari cannot be justified on this basis.

3. The Federal Circuit’s Decision Does Not

Expand the Extraterritorial Reach of U.S.

Patent Laws.

Microsoft erroneously contends that the Federal Circuit’s

decision expands the extraterritorial reach of U.S. patent laws

and subjects foreign manufacturers to the requirements of

U.S. law. See Pet. at 22-29. To the contrary, the Federal

Circuit appropriately focused on Microsoft's activities in the

United States. The court affirmed the judgment of

infringement under section 271(f) based on Microsoft's supply

from the United States of the accused software, and

Microsoft's intent that it be copied and combined with

21

computer hardware abroad. See Pet. App. 6a (“sending a

single copy abroad with the intent that it be replicated invokes

§ 271(f) liability for those foreign-made copies”); see also

Eolas, 399 F.3d at 1339. This is consistent with the statutory

language (“Whoever without authority supplies or causes to

be supplied in or from the United States . . . in such a manner

as to actively induce the combination”) and prior precedent.

See, e.g., 35 U.S.C. § 271(f(1); Waymark Corp. v. Porta

Sys. Corp., 245 F.3d 1364, 1367-68 (Fed. Cir. 2001) (actual

assembly of the infringing product is irrelevant to

section 271(f) infringement; statute requires only intent by the

supp!ier that the exported component(s) be combined) (Rader,

J.). The statute was specifically intended to reach the

activities of domestic suppliers, and it was properly applied

below.

Petitioner’s extraterritoriality argument is a red-herring.

Years before the Federal Circuit decided Eolas or AT&T, the

court defined the limits of section 271(f) in order to avoid

“the appearance of ‘giving extraterritorial effect to United

States patent protection.’” Waymark, 245 F.3d at 1368

(quoting Paper Converting Mach. Co. v. Magna-Graphics

Corp., 745 F.2d 11, 17 (Fed. Cir. 1984)). Relying on the

language and legislative history of the statute, the Waymark

court held that liability does not require proof of an actual

combination of the components abroad, but only a showing

that the infringer shipped them from the United States with

the intent that they be combined. /d. Thus, section 271(f)

liability is not “predicated [on] acts wholly done in a foreign

country” or on “efforts to practice a patent invention outside

the territorial jurisdiction of the United States” (Pet. at 14),

but on the domestic actor exporting the components abroad.

See id. In both Eolas and this case, that domestic actor was

Microsoft. It was Microsoft—not the foreign computer

manufacturers—that wrote, compiled, tested, debugged, and

22

created the infringing software, and exported that software

with the intent that it be installed on computers abroad in a

manner that Microsoft admits infringes when done in the

United States. The Federal Circuit appropriately applied the

statute to those activities.

4. Congress Recently Rejected Proposals to Limit

Section 271(f) as Petitioner Requests.

Recent legislative activity also suggests that the Federal

Circuit properly construed and captured Congress’s intent in

section 271(f). Leading up to the introduction of the Patent

Reform Act of 2005, H.R. 2795, 109th Cong. (2005),

Congress considered proposals either to repeal section 271(f)

or to amend it to limit its application only to “tangible”

components that are “physically” combined with other

“tangible” components. See Staff of H. Comm. on the

Judiciary, 109th Cong., Patent Act of 2005 § 10 (Comm.

Print 2005); Patent Quality and Improvement: Hearing Before

the Subcomm. on Courts, the Internet and Intellectual

Property of the H. Comm. on the Judiciary, 109th Cong. 23

(2005) (prepared statement of Richard J. Lutton, Jr., on

behalf of the Business Software Alliance in support of

repealing section 271(f)); see also id. at 143-44; ABA White

Paper at 52-55. In considering those proposals, the lower

courts’ decisions in AT&T and Eolas were explicitly

discussed. See, e.g., Patent Quality and Improvement

Hearing at 14, 23; ABA White Paper at 53. The proposals to

repeal or limit section 271(f) were nevertheless rejected. See

H.R. 2795. Congress’s decision to leave the provision intact

suggests that Congress has ratified the Federal Circuit’s

interpretation. See Herman, 459 U.S. at 385-86.

The Federal Circuit correctly construed section 271(f)

consistent with its plain meaning, the legislative history and

23

binding patent-law precedent. The exercise of the Court’s

discretionary jurisdiction is accordingly unnecessary.

IV. The Judgment Below Is Also Based on Section

271(f)(2), an Alternate Ground That Petitioner

Elected to Exclude from Its Questions Presented.

The judgment below was also based on section 271(f)(2),

which Microsoft has not asked this Court to review.

Microsoft’s Petition should therefore also be denied because

Microsoft presents an incomplete case for review. See Sup.

Ct. R. 15.2 (requiring Respondent to raise objections to the

questions presented).

AT&T alleged that Microsoft infringed under section

271(), i.e., including both (f)(1) and (f)(2). See Pet. App.

24a, 2S5a-27a.* The district court entered judgment against

* Tithe 35 U.S.C. § 271(f) provides in its entirety:

§ 271. Infringement of patent.

(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.

(*) 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

24

Microsoft, and the Federal Circuit affirmed the judgment,

again under both 271(f){1) and (f)(2). See Pet. App. Sa, 11a,

26a-27a, 38a, 42-43a, & 45a-47a. But in its Petition to this

Court, Microsoft has presented questions only under section

271(f)(1), and has cited only section 271(f)(1) as the statutory

provision involved. Supreme Court Rule 14.1(a) requires the

petition to contain the “questions presented for review,” in

order to provide the respondent with sufficient notice and to

assist the Court in “selecting the cases in which certiorari will

be granted.” Yee v. Escondido, 503 U.S. 519, 535-36

(1992). Although Microsoft included both (f)(1) and (f)(2) as

part of the question presented and statutory provision involved

in its petition in Eolas, Microsoft elected here to exclude

(f)(2). Because Petitioner presents only questions under

section 271(f)(1), and does not seek review of section

271(f)(2), section 271(f)(2) is an alternative ground for

upholding the judgment below. See, e.g., Mills v. Rogers,

457 U.S. 291, 305 (1982) (“review of one basis for a decision

supported by another basis not subject to examination would

represent ‘an expression of abstract opinion’”); see also Blum

v. Bacon, 457 U.S. 132, 137 n.5 (1982).

Nor can Petitioner claim that a question under section

271(f)(2) is “subsidiary” to and “fairly included” within its

questions presented under section 271(f)(1). See Sup. Ct. R.

14.1(a). It only cites (f)(2) twice, once as a “see also”

supporting cite (Pet. at 15) and once as providing a

confirming use of the term “component” (Pet. at 17). In

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.

25

addition, although sections (f)(1) and (f)(2) both contain the

term “component” and the clause “supplies or causes to be

supplied,” the two sections otherwise have materially

different texts, and differ in their operation and effect. For

example, section (f)(1) is directed to active inducement not

implicated in section (f)(2); similarly, the components in (f)(2)

are limited to those that are “especially made or especially

adapted for use in the invention and not a staple article or

comraodity of commerce,” a restriction not found in (f)(1).

Because no 271(f)(2) issue is set out or fairly included in the

Petition, there is a “heavy presumption against” the Court’s

consideration of any issue under that section. See /zumi

Seimitsu Kogyo Kabushiki Kaisha v. U.S. Phillips Corp. , 510

U.S. 27, 32 (1993). By denying certiorari, the Court will

avoic the dilemma of deciding whether to follow the

presumption and thereby hear only a partial case, or to

override the presumption and thus reach out to hear questions

that have not been presented.

V. Petitioner Misstates the Impact of the Decision Below.

Microsoft tries to paint a doomsday picture for American

software companies if the lower courts’ interpretation of

section 271(f) stands. Petitioner claims that section 271(f)

will expose them to “crippling” liability and destroy their

“right” to “compete with an American patent holder in

foreign markets.” Pet. at 11. Microsoft alleges that as a

resul: these companies will move their research and

development facilities outside of the United States. Pet. at 11-

12. This is nothing more than alarmism posing as advocacy.

The only way section 271(f) has any impact whatsoever on a

defendam in the U.S. software industry—or any other

industry for that matter—is if that defendant has

misappropriated another’s patented technology. Stripped of

its rhetoric, the premise of Petitioner’s policy argument is

26

therefore that American software companies can compete

abroad only if they are permitted to expropriate and export

another’s patented innovations. This attitude not only is self-

defeating, it is wrong. Congress’s Constitutional authority is

to protect the rights of U.S. inventors, not U.S. infringers.

See U.S. Const. art. 1, § 8.

Petitioner’s repeated invocation of the “right of American

companies to compete with an American patent holder in

foreign markets” also rings hollow. See, e.g., Pet. at 1]

(quoting Deepsouth, 406 U.S. at 531). There can be no

question that, in closing the “loophole” recognized by

Deepsouth, Congress explicitly concluded that the right to

compete with an American patent holder in foreign markets

does not include the right to export components of the patent

holder’s invention for assembly abroad. 130 Cong. Rec.

H28,069; S. Rep. No. 98-663, at 2-3. Furthermore,

Petitioner's warnings about software manufacturing fleeing

overseas are overblown. Pet. at 12. It is clear from the

Microsoft v. Commissioner case and the American Jobs

Creation Act of 2004 that Microsoft receives significant

financial benefits for keeping its manufacturing in the United

States. 311 F.3d at 1182; ABA White Paper at 55.

The range of inventions containing software or operating

under software control is astounding: automobiles,

telephones, televisions, refrigerators, washers, digital

watches, and even new “smart goods” such as light switches,

electrical outlets and shower faucets now rely on software for

some portion of their operation. The variety of new

computer-related products available to consumers is also

impressive, including cell phones, handheld computers, digital

video recorders, digital cameras and camcorders, vehicle

navigation, and so forth. It is irrational to contend that

Congress would have designed section 271(f) to exclude such

27

technology from the scope of the statute. To the contrary, the

statute and legislative history make clear that Congress

intended to reverse Deepsouth for all inventors, both as a

matter of basic fairness and to stimulate all areas of the

economy. Petitioner’s strained interpretation of section 271(f)

would undermine and harm American businesses, and should

be rejected.

+

CONCLUSION

For the foregoing reasons, the Petition for writ of

certiorari should be denied.

LAURA A. KASTER

AT&T Corp.

One AT&T Way

Bedminster, NJ 07921

(908) 532-1839

MICHAEL TRAYNOR

COOLEY GODWARD LLP

101 California Street

5" Floor

San Francisco, CA 94111

(415) 693-2000

28

Respectfully submitted,

STEPHEN C. NEAL*

COOLEY GODWARD LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA 94306

(650) 843-5000

JONATHAN G. GRAVES

NATHAN K. CUMMINGS

COOLEY GODWARD LLP

One Freedom Square

Reston Town Center

11951 Freedom Drive

Reston, YA 20190

(703) 456-8000

Counsel for Respondent

March 23, 2006

* Counsel of Record (Will be

admitted on March 27, 2006)