Amicus Curiae Brief — Microsoft Corp. v. AT & T CORP.

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No. 05-1056 _

5n The

Supreme Court of the Anited States

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. MICROSOFT CORPORATION,

Petitioner,

V.

AT&T CORPORATION,

Respondent.

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On Writ Of Certiorari

To The United States Court Of Appeals

For The Federal Circuit

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BRIEF OF THE BUSINESS

SOFTWARE ALLIANCE AS AMICUS

CURIAE SUPPORTING PETITIONER

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ViET D. DINH

Counsel of Record

LIZETTE D. BENED!

BANCROFT ASSOCIATES PLLC

601 13th Street, N.W.

Suite 930 South

Washington, D.C. 20005

(202) 234-0090

Counsel for the Business

Software Alliance

COCKLE LAW BRIEF PRINTING CO (800) 725 6964

OR CALL COLLECT 402 342 2831

i

QUESTIONS PRESENTED

(1) Whether digital software code — an intangible

sequence of “1’s” and “0’s” — may be considered a “compo-

nent[] of a patented invention” within the meaning of 35

U.S.C. § 271(f)(1);

— and, if so, —

(2) Whether copies of such a “component| |” made in

a foreign country are “supplie[d] ... from the United

States.”

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TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ...........:c:cccsccscscessscssscscessses i

TABLE OF AUTHORITIES...........cccccccssscssssssesesesseseseees iii

INTEREST OF THE BUSINESS SOFTWARE ALLI-

(RAE PPLE MED Stee MON POND INN 1

ERAS Et it Ae OR aI 1

SUMMARY OF ARGUMENT. ..........c:ccccscecescssesesecseseseees 5

PNT Ear eee ee Pe 7

I. The Decision Below Threatens Domestic

Innovation by United States Software Compa-

nies and Upends the Purpose of Patent Law..... 7

A. The Decision Below Threatens Domestic

Innovation by United States Software

SE dntcricteinncnctetsinepiiaiinhnntennaieinicamtnanndase 8

B. The Purpose of Patent Protection Is To

Encourage Domestic Innovation, Not To

RII iteinhicnncinsitimsinsiniianicnndneandiamaien 11

II. The “Software Is Special” Jurisprudence

Created by the Federal Circuit Offends the

Text and Purpose of 35 U.S.C. § 271(f).............. 18

A. Software Should Not Be Singled Out for

ey I sisiericinscnintncmnatnnteesucveninainden 19

B. To Copy Is Not To Supply ....................cccceees 22

C. The Software Object Code at Issue Is Not

a “Component” Under Section 271(f).......... 27

Ee scrinproniasrutiontsinsdaninneoninniiticintennennitneintanseniestibie 29

ill

TABLE OF AUTHORITIES

Page

CASES

AT&T Corp. v. Microsoft Corp., 414 F.3d 1366 (Fed.

Sk EI csinesictatsheiabiitesettvierieriiiicheesibtneniounternincatniiinheiininniuali passim

AT&T Corp. v. Microsoft Corp., No. 01 Civ. 4872, 2004

US. Dist. LEXIS 3340 (S.D.N.Y. Mar. 5, 2004).......... 3, 4,9

Atascadero State Hosp. v. Scanlon, 473 U.S. 234

CT icinisctipscerbsipiieniahtinhainbeiatianahiaiisegnidianesinnipinenanieaedmnicmttts 13

Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 437

Tie cininsnccaveesieelcaptaliladiiinstadiniianiiadiiagnaianmciibdianinttendatnaadaiet 26

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

ey RG See etscclencnirveiicinachiddiininanentiiniaiennisceibabilaebiiiiden 7,27

Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489

es Fe Ce vessndrniesideninticiniatihinecnietaniniicmnacdbeninneiias 2,11

Brown v. Duchesne, 60 U.S. (19 How.) 183

iil cccccinteussiatincntininiinnissbubidieatineinnataieasenabndibiiin 11, 13, 21, 24

Chevron U.S.A. Inc. v. Echazabal, 536 U.S. 73

rai ciisstescssiacstinitunctsntinntiitinidelamapebiahdindidibibiasdisiadadentaaineiiit 15

Crooks v. Harrelson, 282 U.S. 55 (1930)............ccccceceeeeeees 26

Deepsouth Packing Co. v. Laitram Corp., 406 U.S.

UII adeitsindiicesiidcnisdnatdeinbetainsiatiainid 14, 18, 20, 24, 25, 26

Diamond v. Chakrabarty, 447 U.S. 303

ri cdiindchietpagibinbeadiiiiiaivnetiideitimnedmamanans 20, 21, 23, 24, 25

Dowagiac Mfg. Co. v. Minnesota Moline Plow Co.,

Se ae I I ccistiiitseititiciintiitbtanpaicmeeaninsenentbenses 13

E.E.O.C. v. Arabian Am. Oil Co. (Aramco), 499 U.S.

SPITE ccsiciscirtniesiiniiiaieciatiaienabisininsteatintildinppianiinpiamias 12, 13, 16

ENPAT, Inc. v. Microsoft Corp., 6 F. Supp. 2d 537

ES Ws REID cctciscceseccsesscissteeriniieriicinneDiahbaaiatiiniiiinintintinniasuansisaiai 21

iv

TABLE OF AUTHORITIES — Continued

Page

Eldred v. Ashcroft, 537 U.S. 186 (2003)............cseseeeeeseeseeees 2

Eolas Techs. Inc. v. Microsoft Corp., 399 F.3d 1325

a SI Ge csaentncinisisitesisieclsianiitchiapiacnitandnitineisisiiiasiiaias 20, 21

F. Hoffman-La Roche Ltd. v. Empagran S.A., 542

eee Se cintisnespeaccensecsogstibnianidiiiiienipiosieves 12, 16,17

Fantasy Sports Props., Inc. v. Sportslines.com, Inc..,

287 F.3d 1106 (Fed. Cir. 2002) .......ccccrcscorcesssccovscesseceooees 4

Fla. Prepaid Postsecondary Educ. Expense Bd. v.

College Sav. Bank, 527 U.S. 627 (1999)........cccccccceeeeeeees 2

Foley Bros. v. Filardo, 336 U.S. 281 (1949) ..........:cccceseees 12

Gottschalk v. Benson, 409 U.S. 63 (1972) ............ccseeeeeneees 25

Graham v. John Deere Co., 383 U.S. 1 (1966).............. 2,13

Gregory v. Ashcroft, 501 U.S. 452 (1991) ..........ceeseeeeeeeeeees 13

Haggar Co. v. Helvering, 308 U.S. 389 (1940)...........:000+ 18

Hartford Fire Ins. Co. v. California, 509 U.S. 764

Sree icstcncicniciianesciatilesseniiaiininpiiiaiiaditiniidmnaiitacnanninimieiiiats 16

Helvering v. Hammel, 311 U.S. 504 (1941)... eee 26

Koons Buick Pontiac GMC, Inc. v. Nigh, 543 U.S. 50

eer hicindsiieptetinrnsinceininbinintiaesideabiappecbialaiiadiiiaigiietinentaniaieniineneniin 27

Lauritzen v. Larsen, 345 U.S. 571 (19538) ................000. e000 16

McCulloch v. Sociedad Nacional de Marineros de

Honduras, 372 U.S. 10 (19G638).....c..cccccccocccccccecssccccees 13, 16

Mercoid Corp. v. Mid-Continent Inv. Co., 320 U.S.

Sa ET cesses sineincenntekainecinnctieahbicineeltasbneeemelatiaaeabiailaginnii 11

Motion Picture Patents Co. v. Univ. Film Mfg. Co.,

as Se CD etsinsvacnicnciattintciniacienseniinnanintineensentins 2

TABLE OF AUTHORITIES — Continued

Page

Murray v. Charming Betsy, 6 U.S. (2 Cranch) 64

Sire ei nciodcioneinctchisoediarituinidaiaacanieaiimastadidivtetennainasichaipciemainanaubciiniitiailiis 16

Nixon v. Missouri Mun. League, 541 U.S. 125 (2004)...... 14

Parker v. Flook, 437 U.S. 584 (1978) .........cccccseeeeeeeeeees 23, 24

Pellegrini v. Analog Devices, Inc., 375 F.3d 1113

GR, Get cris cxsthcnioconssecienininenieiteteaheleusiniamasheaiain 24

Pennock v. Dialogue, 2 Pet. 1 (1829).............ccccsssceceeeeeeeeeees 2

Perrin v. United States, 444 U.S. 37 (1979)...........cccceeeeees 23

Romero v. Int'l Terminal Operating Co., 358 U.S.

Ne CED cnteirerictprereniivviincinartonsieimiiiantiaiiaaiiidiaal 16

Smith v. United States, 507 U.S. 197 (1993) ........... eee 15

United States v. Corey, 232 F.3d 1166 (9th Cir.

IEEE veoveusemnepinnsectpeinilieeinindinabepaignseiiuaipiiitiaiiiedininiadbaainign 17

United States v. Line Material Co., 333 U.S. 287

Cire ia ee ccrecsathertapunedaninntinsutinapengriiadinininiivntebibatinmehiteniiaads 19

WMS Gaming Inc. v. Int’l Game Tech., 184 F.3d

a 4

Walters v. Metro. Educ. Enters., Inc., 519 U.S. 202

FEI e Tencrcistrcacienesisinaticiiapincncamieiiatiialiciiiaieiniitimiiteaens 7, 23

Williams v. Taylor, 529 U.S. 420 (2000)...............ccceeeeee 7,23

U.S. CONSTITUTION & STATUTES

os Be Se eee Ae 2,11

BY ls Oe eiensrsiinsetinntinnitninteninnininitagteneinianladione 4

Fp Bs Bee catiintinsintinniertviiantiicdsiiinmiiiaain passim

OR WEE OID ois icvcsisscssvtnunidineasiindiaveininieatoamectinile 20, 27

vi

TABLE OF AUTHORITIES - Continued

CONGRESSIONAL MATERIALS

Encryption: Security in a High-Tech Era, Hearing

Before the Subcomm. on Int Economic Policy

and Trade, House Committee on Int’) Relations,

106th Cong. (testimony of Edward J. Black,

President and CEO, Computer & Communica-

tions Industry Association (May 18, 1999)).............

The Global Threat of Software Counterfeiting,

Hearing Before the Subcomm. on Courts, the

Internet, and Intellectual Property, 108th Cong.

(testimony of Richard C. LaMagna, Senior Man-

ager, Worldwiae Anti-Piracy Investigations Law

and Corporate Affairs, Microsoft Corporation

kT a aor

H.R. 2795, 109th Cong. § 5 (2005) .......cccssesessssveseenseees

S. 3818, 109th Cong. § 5 (2006) ......cccccscessesssessseesseessees

Section by Section Analysis: Patent Law Amend-

ments of 1984, 130 CONG. REC. 28069 (Oct. 1,

1984), available at 1984 U.S.C.C.A.N. 5827, 1984

EE ee

Staff of House Committee on the Judiciary, 109th

Cong., Patent Act of 2005 (Comm. Print 2005) .......

MISCELLANEOUS

Nicholas Oros, Infringement Twice Removed:

Inducement of Patent Infringement for Overseas

Manufacture of Infringing Products Imported by

Another, 10 COMPUTER L. Rev. & TECH. J. 163,

BO GPO cenvcccscecccsccesesessenvesscevectsoccecesovscosocsnconsesossess

Page

vil

TABLE OF AUTHORITIES — Continued

Bradford Smith & Susan Mann, Innovation and

Iniellectual Property Protection in the Software

Industry, 71 U. CHI. L. REV. 241 (2004).............csseeeeeeees 3

Karen Wong, Digital Imaging: E-Business Ecosys-

tem Drives the Industry Forward, ASIA COMPUTER

WEEKLY, Oct. 20, 2000..........-sssecsseseersssrersescessetersessnsneses 9

1

INTEREST OF THE

BUSINESS SOFTWARE ALLIANCE’

The Business Software Alliance (BSA) promotes global

policies that foster innovation, growth and a comnetitive

marketplace for commercial software and related tech-

nologies. BSA’s membership in the commercial software

industry relies on the strength and predictability of United

States patent law both to promote innovation by ensuring

the enforceability of patents and also to foster United

States industry by delineating the proper scope of United

States patent law. Foreign sales on average represent 50

percent of total revenues for BSA member companies. BSA

therefore has a strong interest in the proper application of

patent laws, especially where, as here, the lower court has

broadened their reach to encompass purely foreign actions.

The members of the Business Software Alliance

include Adobe Systems, Inc., Apple Computer, Inc., Auto-

desk, Inc., Avid Technology, Inc.,-Bentley Systems, Inc.,

Borland Software Corporation, Cadence Design Systems,

Inc., Cisco Systems, Inc., CNC Software/Mastercam, Inc.,

Dell, Inc., Entrust, Inc., Hewlett-Packard Company, IBM

Corporation, Intel Corporation, Macromedia, Inc., McAfee,

Inc., Microsoft Corporation, Parametric Technology Corpo-

ration, RSA, The Security Division of EMC, SAP AG,

SolidWorks Corporation, Sybase, Inc., Symantec Corpora-

tion, and UGS Corporation.

STATEMENT

Amicus adopts the statement of the case presented in

the Brief for Petitioner. For the Court’s convenience,

’ Petitioner and Respondent have filed letters with the Court

consenting to all amicus briefs. Consistent with Rule 37.6, this brief is

not authored in whoie or in part by counsel for any party. No person,

other than amicus or their counsel, has made a monetary contribution

to the preparation or submission of this brief. Petitioner is a member of

the Business Software Alliance.

2

amicus highlights below a background on the law of

patents and the development of computer software to

provide the historical context to the present dispute.

Prior to the adoption of the Constitution, individual

states had adopted different patent laws.’ James Madison,

seeing the shortcomings of potentially overlapping patent

regimes, noted that states “cannot separately make effec-

tual provision” for patents without uniform or supreme

rules. Fla. Prepaid Postsecondary Educ. Expense Bd. v.

College Sav. Bank, 527 U.S. 627, 650 (1999) (citing THE

FEDERALIST 267 (H. Lodge ed. 1908)). The Patent Clause’

reflects the balance between encouraging innovation in the

new nation and avoiding monopolies that stifle competition.

Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S.

141, 146 (1989). Acting on this Constitutional authority,

Congress wrote the Patent Laws of 1790 and 1793 “to

promote the progress of science and useful arts.” Motion

Picture Patents Co. v. Univ. Film Mfg. Co., 243 U.S. 502,

510-11 (1917) (citing Pennock v. Dialogue, 2 Pet. 1 (1829)).

The history of software development is the paradigm of

such progress of science. The full implications of the decision

below are made plain by a brief description of how the patent

law has evolved with respect to computer programs. The first

computer was built in 1936, and the first commercial

* Thomas Jefferson wrote that “Nobody wishes more than I do that

ingenuity should receive a liberal encouragement.” Graham v. John

Deere Co., 383 U.S. 1, 8 (1966) (citing LETTER TO OLIVER EVANS (May

1807), V THE WriTINGS OF THOMAS JEFFERSON 75-76 (H.A. Washington

ed., Townsend MacConn 1887)). Although wary of monopolies, the

Framers nevertheless sought to encourage innovation by granting

limited exclusive use to, in the words of James Madison, “the authors of

Books, and of useful inventions.” Eldred v. Ashcroft, 537 U.S. 186, 246

(2003) (citing Monopolies. Perpetuities. Corporations. Ecclesiastical

Endowments, in J. MADISON, WRITINGS 756 (J. Rakove ed. 1999)).

* “The Congress shall have Power ... to promote the progress of

Science and useful Arts, by securing for limited Times to Authors and

Inventors the exclusive Right to their respective Writings and Discover-

ies.” U.S. Const. art. 1, § 8.

3

computer in 1950. However, computers were not widely

accessible until the development of the single-chip micro-

processor. The microprocessor allowed for compact computers

to be assembled relatively inexpensively. The Altair 8800,

introduced in 1975, marked the transition from mainframe

to personal computer, but was priced for a limited market.

Then came the IBM personal computer, released in 1981,

which democratized computing power and augured the

information revolution. IBM Corp., The Birth of the IBM PC,

http://www-03.ibm.com/ibm/history/exhibits/pc25/pc25_birth.

html (last visited Dec. 13, 2006).

Computers, however, are simply processing machines

and need instructions on what and how to process in order to

be of functional use. Software provides those instructions.

The earliest machines were hampered by software limita-

tions; programmers could not develop software separate from

the machine but instead had to penetrate the master proc-

essing unit itself. Before the personal computer, machines

ran on several different combinations of microprocessors, and

software could not be written for use on machines with all

the different combinations. The personal computer led to the

development of the Altair BASIC programming algorithms,

the first product developed by Microsoft and the first widely

distributed software. The booming market for personal

computers led to the development of universally compatible

software to make them run. See generally Bradford Smith &

Susan Mann, /nnovation and Intellectual Property Protection

in the Software Industry, 71 U. Cui. L. REv. 241 (2004).

Software makes computers functional by providing

instructions to computers to perform specific operations.

Software developers create “source code” (computer lan-

guage that is intelligible to humans) that is then converted

into “object code™ (a series of binary “1's” and “0’s”) by

compilers. AT&T Corp. v. Microsoft Corp., No. 01 Civ.

* Object code consists of machine code — code directly executed by a

computer’s CPU - together with other information.

4

4872, 2004 U.S. Dist. LEXIS 3340, at *3 n.5 (S.D.N.Y. Mar.

5, 2004). The machine readable object code directs the

computer to open or close circuits in specific sequences,

creating electrical paths which result in the specified

operation. See Fantasy Sports Props., Inc. v. Sport-

slines.com, Inc., 287 F.3d 1108, 1118 (Fed. Cir. 2002); see

also 17 U.S.C. § 101 (defining a “computer program” as a

“set of statements or instructions to be used directly or

indirectly in a computer in order to bring about a certain

result”); WMS Gaming Inc. v. Int'l Game Tech., 184 F.3d

1339, 1348 n.3 (Fed. Cir. 1999). It is this “machine-

readable object code” for the Windows operating system

that is on Microsoft’s golden master disks (Pet. App. 45a

4 4). Foreign “replicators,” licensed by Microsoft, make

copies of the object code and “ship those foreign manufac-

tured copies” to manufacturers, who install the copies on

computers (Pet. App. 45a 7{ 5, 6).

AT&T filed a patent infringement lawsuit alleging

that certain of Microsoft’s products infringed on AT&T's

patent. The district court denied Microsoft’s motion for

partial summary judgment to exclude sales of goods

incorporating foreign-replicated copies of infringing

software. AT&T, 2004 U.S. Dist. LEXIS 3340. On review,

the Court of Appeals for the Federal Circuit upheld the

denial of the motion because (1) software may be consid-

ered a component of a patentable invention under Section

271(f), and (2) foreign-made copies of the software “may be

deemed supplied” or have “essentially been supplied from

the United States.” AT&T Corp. v. Microsoft Corp., 414

F.3d 1366, 1369-70 (Fed. Cir. 2005). Judge Rader dis-

sented, saying that “copying and supplying are different

acts, and one act of ‘supplying’ cannot give rise to liability

for multiple acts of copying.” Jd. at 1373 (Rader, J., dissent-

ing). Judge Rader further concluded that the “extraterrito-

rial expansion of U.S. patent law contravenes the precedent

of this court and the Supreme Court that expressly con-

fines the rights conferred by Title 35 to the United States

and its Territories.” Jd. (Rader, J., dissenting).

5

SUMMARY OF ARGUMENT

To appreciate the competitive, economic and legal

import of the decision below, one need only to recognize

that this dispute is not between a domestic inventor and a

foreign infringer. Rather, it is between two inventors based

in the United States. One inventor, the Petitioner, had

shipped a copy of its invention overseas. The other inven-

tor, the Respondent, could apply for and prosecute a

foreign patent for its innovation. There is no United States

liability for foreign actions, whether the invention is used

or not.

The holding that the shipment of one golden master

disk could lead to multiple acts of infringement, based on

the software’s replication abroad, subjects software com-

panies to indefinite and unpredictable worldwide liability,

irrespective of the companies’ ability to contro] the over-

seas copying. This decision (1) necessarily changes the way

United States software companies will do business, pro-

ducing results contrary to the intent of United States

patent laws, and (2) offends the plain meaning of the

statute at issue and circumvents the prerogatives and

duties of the Congress.

If allowed to stand, this unjustified and baseless

extraterritorial application of United States patent laws —

premised on a fundamental misreading of the law and a

misunderstanding of the software technology at issue —

will corrupt the Constitutional purpose of the patent law

to promote the welfare through innovation within our

national boundaries. The indefinite liability established by

the lower court’s opinion for inventive acts done in the

United States, with no corresponding liability for foreign

inventions, is likely to put at risk America’s inventive

genius for software innovation. At a minimum, the deci-

sion negatively impacts United States software companies’

competitiveness with their foreign counterparts, who face

no corresponding infringement liability. The risk of liabil-

ity now faced by American companies, a risk not faced by

their foreign competitors, will undoubtedly diminish any

6

competitive advantage currently enjoyed by those develop-

ers in the United States.

Protecting against this result is precisely the rationale

behind the strong presumption against extraterritorial

application of patent law, a longstanding legal principle. It

is well settled that all legislation is presumed to apply

only within the territorial jurisdiction of the United States

unless the statute expressly provides otherwise, and this

presumption is considerably amplified in the context of

patent law where Congress is not only concerned with

national conditions and international comity, but also with

spurring domestic innovation.

The Federal Circuit’s crafting of a “software is special”

rule has no basis in the law of patents or the logic of

business. The language utilized by the court below makes

clear that the facts before it did not fit into the statute as

written, and thus it had to opine such that the golden

master disk was “deemed supplied” or the resulting copies

had “essentially been supplied.” AT&T, 414 F.3d at 1369-

70 (emphasis added). With such judicial license the court

ignored the long standing clear statement rule, the pre-

sumption against extraterritoriality and an implicit

decision by Congress to close one particular “loophole” in

the law, but to go no further. Moreover, the Federal Cir-

cuit’s opinion all but ignored that there is no need for the

extraterritorial application that it has given to the statute,

for foreign patent law already provides a remedy and

inventors may protect their innovations outside of the

United States by applying for and enforcing patents in

foreign jurisdictions. ~

In so doing, the lower court exceeded its proper role

and rewrote Section 271(f) to apply in ways that Congress

did not intend — to create a “software is special” rule, thus

treating it differently from other patented material, and

by making “copying” outside the territory of the United

States equivalent to “supplying” from the United States.

Where Congress has not directed that “supplying” is

7

to bear any other import than that accompanying its

contemporary, common meaning, it is not the role of the

judiciary to read other words or word meanings into the

statute. See Williams v. Taylor, 529 U.S. 420, 431 (2000)

(citing Walters v. Metro. Educ. Enters., Inc., 519 U.S. 202,

207 (1997)).

Further, the lower court’s finding of a “component”

ignored the text and history of Section 271(f), which

require that any “component” under its ambit be produced,

or at least physically present, in the United States. Noth-

ing in the facts before this Court indicates that anything

that became a part of the final allegedly infringing product

was ever present in the United States, other than the

information contained on the golden master disk. But the

Federal Circuit recognized that the term “component,” as

used in Section 271(g), a provision of law passed after

Section 271(f), must refer only to “tangible objects and not

intangibles such as information” Bayer AG v. Housey

Pharms., Inc., 340 F.3d 1367, 1372 (Fed. Cir. 2003).

Under a properly construed Section 271(f), to copy is

not to supply, ethereal knowledge is not a component, and

unlimited worldwide liability should not attach for a single

act of shipping a golden master disk.

ARGUMENT

I. The Decision Below Threatens Domestic

Innovation by United States Software Compa-

nies and Upends the Purpose of Patent Law.

The lower court’s creation by judicial decree of liability

that Congress did not intend will have a profound impact

both on the companies now faced with potentially limitless

exposure and on the United States economy as a whole.

The Federal Circuit’s decision, if allowed to stand,

threatens the competitive viability of an industry that

receives on average 50 percent of its revenues from

foreign sales. This decision jeopardizes the ability of

8

United States based companies to compete with their

foreign counterparts — competitors who are not subject to

the reach of the Federal Circuit.

The lower court’s opinion, while claiming faithfulness

to the “object and policy” of the whole law, all but ignored

the object and policy of the Patent Clause and of patent

laws. The court strained the statutory text of Section

271(f) to apply the statute extraterritorially, to a set of

circumstances for which it is not intended and contrary to

general canons of statutory interpretation. In so doing, the

Federal Circuit has pronounced a drastic change in the

status quo — one which has significant adverse effects on

an industry which, like many others, is highly responsive

to legal rules.

A. The Decision Below Threatens Domestic

Innovation by United States Software

Companies.

The United States government describes the modern

United States economy, in the 1990s and beyond, as one

defined by the computer software industry: “If steel and

shoes were no longer American manufacturing mainstays,

computers and the software that make them run were.”

United States Department of State, Outline of the U.S.

Economy, available at http://usinfo.state.gov/products/pubs/

oecon/chap3.htm. In 2005, the software industry contrib-

uted $194 billion and the computer industry $85 billion to

the nation’s gross domestic product. U.S. Department of

Commerce, Bureau of Economic Analysis, Gross Domestic

Product and Related Measures: Level Change From

Preceding Feriod, available at http://bea.gov/bea/newsrel/

gdpnewsrelease.com. The software industry’s contribution

to the GDP reflected an increase from 2.1 percent of GDP

in 2002 to 7.4 percent in 2005. U.S. Department of Com-

merce, Bureau of Economic Analysis, GDP by Industry,

available at http:/Awww.bea.gov/bea/dn2/home/annual_industry.

htm.

9

A major part of these software and computer industry

contributions derives from foreign exports. According to

publicly filed annual reports for 2005, foreign sales typi-

cally represented 40 to 60 percent of total revenues for

BSA member companies, with a high of 85 percent. And

while the United States trade deficit reached record highs

in 2000, the software industry generated a trade surplus of

$20 billion that year. The Global Threat of Software Counter-

feiting, Hearing Before the Subcomm. on Courts, the Inter-

net, and Intellectual Property, 108th Cong. (testimony of

Richard C. LaMagna, Senior Manager, Worldwide Anti-

Piracy Investigations Law and Corporate Affairs, Microsoft

Corporation (March 13, 2003)), available at http//Awww.microsoft.

com/presspass/exec/lamagna/03-13-03lamagnatestimony.mspx.

In the year 2000 alone the computer industry generated

$800 billion in revenue worldwide, and this was projected

to increase ten-fold in the next decade. Karen Wong,

Digital Imaging: E-Business Ecosystem Drives the Industry

Forward, ASIA COMPUTER WEEKLY, Oct. 20, 2000.

The risk of indefinite foreign liability imposed on

United States companies for a single act of shipping the

golden master disk — a risk that foreign software develop-

ers do not bear — may well offset any technological or

product advantages United States companies enjoy over

their foreign competitors. As the district court acknowl-

edged, the interpretation given below to Section-271(f) has

“profound ramifications” for the software and computer

industry. AT&T, 2004 U.S. Dist. LEXIS 3340, at *2. Far

from promoting the “object and policy” of patent law, the

Federal Circuit’s decision creates unforeseeable risk and

unbounded liability for software and computer companies.

Software and computer companies based in the United

States rely on the strength of United States law both to

protect innovation through the enforceability of patents,

and also to promote innovation through the manufacturing

and selling of their products without the improper asser-

tion of patent rights. Until the Federal Circuit’s expansive

reading of Section 271(f), these two tenets coexisted

harmoniously.

10

The Federal Circuit’s decision drastically alters the

status quo and jeopardizes future software advancements

in the United States. At the very least, the decision creates

a competitive disadvantage for United States software

companies vis-a-vis their foreign counterparts. Absent a

foreign patent, foreign competitors can make and use an

invention patented in the United States without any

infringement liability, and the United States product

would be burdened with a royalty while foreign competi-

tors are not. With 40 to 60 percent of their revenues

derived from foreign exports, the costs to United States

software companies attributable to the competitive dis-

equilibrium created by the decision below is certainly

substantial, if not catastrophic.

At the extreme, the decision below threatens to

recalibrate the decisions of American companies on where

they do their research and innovation by attaching sub-

stantial and unpredictable risk of liability to research done

at home in the United States, while excluding from all

such risks innovation done outside of United States

territory. This is perversion of the very purpose of the

patent law. By opening up the sluice gates to indefinite

foreign liability for a single act of shipping a golden master

disk from the United States, the decision below risks

having companies decide that golden master disks will! not

be developed in and shipped from the United States.

Legal rules impact corporate decisions, incentives to

innovate and American competitiveness. As but one

example, consider the United States restrictions on the

export of encryption software products of greater than 40-

bit length during the 1990s. These restrictions that were

far more stringent than those in foreign jurisdictions like

the European Union, Canada, Ireland, and Finland, created

a regulatory disadvantage that rendered United States

companies unable to compete with foreign software compa-

nies. While the intent of the restrictions was to increase

homeland security, they actually had the potential] to create

the exact opposite result. By driving expertise in encryption

11

development overseas, United States encryption technolo-

gies would be compromised.

The most effective means of dealing with strong

encryption is to utilize access to the best and

brightest cryptographers and security experts in

the world. Many such people now reside in Amer-

ica, but as we enable the competitiveness of our

foreign rivals in the market for strong encryp-

tion, this expertise will gravitate elsewhere.

Encryption: Security in a High-Tech Era, Hearing Before

the Subcomm. on Int] Econ. Policy and Trade, House

Comm. on Int] Relations, 106th Cong. (testimony of

Edward J. Black, President and CEO, Computer & Com-

munications Industry Association (May 18, 1999)).

The substantial impact on industry and the economy

is but one reason why a new legal rule as dramatic as that

adopted by the court below should be effected not by

judicial] fiat but by the institution best suited to weigh the

ramifications of a potential change — Congress.

B. The Purpose of Patent Protection Is To En-

courage Domestic Innovation, Not To Drive

it Overseas.

From their inception, patent rights have represented a

“privilege which is conditioned by a public purpose.” Mer-

coid Corp. v. Mid-Continent Inv. Co., 320 U.S. 661, 666

(1944). Thomas Jefferson opined that the patent law is

about “drawing a line between the things which are worth

to the public the embarrassment of an exclusive patent and

those which are not.” Bonito Boats, Inc. v. Thunder Craft

Boats, Inc., 489 U.S. 141, 148 (1989) (citing 13 WRITINGS OF

THOMAS JEFFERSON 335 (Memorial ed. 1904)). Early cases

expounded on this notion that the objective of the patent

laws was to develop the “genius and industry of the coun-

try.” Brown v. Duchesne, 60 U.S. (19 How.) 183, 187 (1856).

The lower court’s decision perverts the purpose of

Article I, Section 8, to promote our nation’s economic

12

welfare through innovation. It establishes an irresponsible

rule that punishes software inventors for expending their

energies at home in pursuit of novel technologies by

subjecting those same inventors to heretofore unantici-

pated and henceforth unforeseeable worldwide liability.

The corruption of the Constitutional purpose is exacer-

bated by the lower court’s ruling that innovation done

outside our national borders is free of such limitless risk

and liability. The decision upsets the industry standard so

significantly that it poses the very real risk that compa-

nies will no longer be willing or able to develop products

within the United States. Such relocation of software

development to other countries directly contradicts the

historical and constitutional purpose of the patent law

regime.

Protecting against this result is precisely the rationale

behind the presumption against extraterritorial applica-

tion of United States laws. It is a general canon of con-

struction that congressional enactments are meant to

apply only in the United States unless a contrary intent is

evident. See, e.g., Foley Bros. v. Filardo, 336 U.S. 281, 285

(1949) (“[Ljegislation of Congress, unless a contrary intent

appears, is meant to apply only within the territorial

jurisdiction of the United States .. . based on the assump-

tion that Congress is primarily concerned with domestic

conditions.” (internal citation omitted)).

Concern for jurisdictional comity informs the pre-

sumption against extraterritoriality. This Court “ordinar-

ily construes ambiguous statutes to avoid unreasonable

interference with the sovereign authority of other nations

... this rule of construction reflects principles of custom-

ary international law.” F. Hoffman-La Roche Ltd. v. Empa-

gran SA., 542 U.S. 155, 164 (2004) (internal citations

omitted). Further, the extraterritorial application of

United States laws poses the risk that United States law

may conflict with foreign laws and thereby subject pri-

mary actors to conflicting legal obligations. See E.E£.0.C. v.

Arabian Am. Oil Co. (Aramco), 499 U.S. 244, 248 (1991).

13

This presumption against extraterritorial application

of the law is exponentially stronger in the patent context,

where Congress is presumed to be concerned not only with

domestic conditions and international comity, but addi-

tionally with spurring domestic innovation. The domestic

scope of patent laws is evident from the earliest cases.

“The power thus granted is domestic in its character, and

necessarily confined within the limits of the United States

... and the use of [the patentee’s rights) outside of the

jurisdiction of the United States is not an infringement of

his rights.” Brown, 60 U.S. at 195. See also Dowagiac Mfg.

Co. v. Minn. Moline Plow Co., 235 U.S. 641, 650 (1915).

Even more recently, this Court has stated that “the Con-

gress in the exercise of the patent power may not over-

reach the restraints imposed by the stated constitutional

purpose.” Graham v. John Deere Co., 383 U.S. 1, 6 (1966).

Thus, the presumption against extraterritorial application

of United States statutes is particularly robust in the

context of patent law.

To rebut this presumption, a statute must contain a

“clear statement,” explicitly specifying that it is intended to

operate extraterritorially. “In this delicate field of interna-

tional relations there must be present the affirmative

intention of the Congress clearly expressed.” McCulloch v.

Sociedad Nacional de Marineros de Honduras, 372 U.S.

10, 21-22 (1963). See also Aramco, 499 U.S. at 248 (“It is a

longstanding principle of American law that legislation of

Congress, unless a contrary intent appears, is meant to

apply only within the territorial jurisdiction of the United

States.”) (internal citations omitted). In other contexts,

this Court has adopted rules regarding what constitutes a

“clear statement” from Congress about its intentions. See,

e.g., Gregory v. Ashcroft, 501 U.S. 452, 467 (1991) (“We will

not read the ADEA to cover state judges unless Congress

has made it clear that judges are included ... it must be

plain to anyone reading the Act that it covers judges.”

(internal citation omitted) (emphasis in original)); Atasca-

dero State Hosp. v. Scanlon, 473 U.S. 234, 242 (1985)

(“Congress may abrogate the States’ constitutionally

14

secured immunity from suit in federal court only by

making its intention unmistakably clear in the language of

the statute.”); Nixon v. Missouri Mun. League, 541 U.S.

125 (2004). Absent such a clear statement, no United

States law should be read to apply extraterritorially.

Congress enacted Section 271(f) in response to Deep-

south Packing Co. v. Laitram Corp., 406 U.S. 518 (1972).

The Court in Deepsouth held that assembling components

of a patented product overseas was not an infringement

because “our patent system makes no claim to extraterri-

torial effect; ‘these acts of Congress do not, and were not

intended to, operate beyond the limits of the United

States.’” Jd. at 531 (internal citation omitted). The draft-

ers of Section 271(f) explained that the proposed Section

271(f) “will prevent copiers from avoiding U.S. patents by

supplying components of a patented product in this coun-

try so that the assembly of the components may be com-

pleted abroad. This proposal responds to the United States

Supreme Court decision in Deepsouth Packing Co. v.

Laitram Corp., 406 U.S. 518 (1972), concerning the need

for a legislative solution to close a loophole in patent law.”

Section by Section Analysis: Patent Law Amendments of

1984, 130 ConG. Rec. H. 10525 (Oct. 1, 1984), available at

1984 U.S.C.C.A.N. 5827, 5828, 1984 WL 37541 (Leg.

Hist.).

Congress thus aimed to close the loophole identified by

Deepsouth — to attach liability where components were all

manufactured within the United States but then shipped

abroad for final assembly of the infringing product. But the

enactment of Section 271(f) was addressed to the evasion

identified by Deepsouth, and does not in any way expand

the extraterritorial scope of the patent law to the facts of

this case.

Congress later amended the patent laws to

change the specific holding of Deepsouth so that a

person cannot avoid liability for infringement

simply by shipping the parts of an invention from

the United States for assembly abroad. This

15

change, however, did not disturb the basic prem-

ise of Deepsouth that the patent laws of the

United States do not have an exterritorial effect

unless there is a clear signal from Congress that

they should. The amended law was merely this

“clear and certain signal.”

Nicholas Oros, Infringement Twice Removed: Inducement

of Patent Infringement for Overseas Manufacture of In-

fringing Products Imported by Another, 10 COMPUTER L.

Rev. & TECH. J. 163, 175 (2006).

The fundamental error below is that the Federal

Circuit took the clear state ment provided by Section 271(f)

beyond its intended limits. “Nothing in §271(f) or its

enacting documents expresses an intent to attach liability

to manufacturing occurring wholly abroad.” AT&T, 414

F.3d at 1375 (Rader, J., dissenting). Yes, Section 271(f)

provided a sufficiently clear statement to attach liability

for the foreign assembly of domestically manufactured

parts. But beyond the limits of that clear statement, the

presumption against extraterritoriality holds — and indeed

holds with the additional force of the maxim expressio

unius est exclusio alterius. See Chevron U.S.A. Inc. v.

Echazabal, 536 U.S. 73, 80 (2002).

As the Court explained in declining to apply the

Federal] Torts Claims Act extraterritorially:

The applicability of the presumption is not de-

feated here just because the FTCA specifically

addresses the issue of extraterritorial application

in the foreign-country exception. To the contrary,

as we stated in United States v. Spelar, 338 U.S.

217, 222 (1949), “that presumption, far from be-

ing overcome here, is doubly fortified by the lan-

guage of this statute and the legislative purpose

underlying it.” Petitioner does not assert, nor

could she, that there is clear evidence of congres-

sional intent to apply the FTCA to claims arising

in Antarctica.

Smith v. United States, 507 U.S. 197, 204 (1993).

16

Just so here. The majority opinion below all but

acknowledged that Section 271(f) on its face does not

extend to the facts of this case when it held that the

golden master disk was “deemed supplied” or that the

resulting copies had “essentially been supplied.” AT&T,

414 F.3d at 1369-70 (emphasis added). Whatever merit

such judicial liberty with statutory text may hold in other

contexts, it simply has none where, as here, the text must

be interpreted in light of a long standing clear statement

rule, a presumpiion against extraterritoriality and an

implicit congressional decision not to go further when it

enacted Section 271(f).

Quite independently, the interpretive leap below

transgresses another canon of statutory construction: “An

act of Congress ought never to be construed to violate the

law of nations if any other possible construction remains.”

Murray v. Charming Betsy, 6 U.S. (2 Cranch) 64, 118

(1804). See also Hartford Fire Ins. Co. v. California, 509

U.S. 764, 814-15 (1993) (Scalia, J., dissenting) (citing

Aramco, 499 U.S. at 264 (Marshall, J., dissenting)). “[T)his

Court ordinarily construes ambiguous statutes to avoid

unreasonable interference with the sovereign authority of

other nations.” Empagran, 542 U.S. at 164 (citing

McCulloch v. Sociedad Nacional de Marineros de Hondu-

ras, 372 U.S. 10, 20-22 (1963); Romero v. Int'l Terminal

Operating Co., 358 U.S. 354, 382-83 (1959); Lauritzen v.

Larsen, 345 U.S. 571, 578 (1953)). As the Court recently

explained, “This rule of statutory construction cautions

courts to assume that legislators take account of the

legitimate sovereign interests of other nations when they

write American laws. It thereby helps the potentially

conflicting laws of different nations work together in

harmony — a harmony particularly needed in today’s

highly interdependent commercial world.” Empagran, 542

U.S. at 164-65.

There is little doubt that the decision below implicates

the Nation’s interests in “a harmony particularly needed

in today’s highly interdependent commercial world.” The

17

United States government so states in this very litigation.

Even where the United States urges the contravention of

the law of nations and international comity, “[wjhen

construing a statute with potential foreign policy implica-

tions, we must presume that the President has evaluated

the foreign policy consequences of such an exercise of

United States law and determined that it serves the

interests of the United States.” United States v. Corey, 232

F.3d 1166, 1179 n.9 (9th Cir. 2000). A fortiori, the United

States position in this case that the Court should follow

international norms and respect international comity

carries special, if not dispositive, weight. See Empagran,

542 U.S. at 165.

The Federal Circuit’s interpretive transgression

creates yet another potential consequence — that other

countries will expand the reach of their own patent laws to

include purely foreign actions, thereby subjecting Ameri-

can companies to liability abroad for actions that occur

within the United States. The presumption against the

extraterritorial application of United States statutes sets a

precedent for the scope and interpretation of other coun-

tries’ laws with respect to American citizens and compa-

nies. This approach acknowledges “the legitimate

sovereign interest of other nations. .. . It thereby helps the

potentially conflicting laws of different nations work

together in harmony... .” Empagran, 542 U.S. at 164. The

decision below throws this balance into turmoil by pre-

scribing overlapping and potentially conflicting patent

protection and by opening the possibility of extraterritorial

application of foreign patent law to United States conduct.

The Federal Circuit fails to acknowledge that foreign

patent law already provides a remedy. Essentially ignored

in the lower court’s decision is the fact that United States

inventors may protect their innovations from foreign

infringement by applying for and enforcing patents in

foreign jurisdictions. As Judge Rader correctly asserts in

dissent, “while copying in Dusseldorf or Tokyo may indeed

constitute infringement, that infringement must find its

18

remedy under German or Japanese law.” AT&T, 414 F.3d

at 1371. Such a remedy would square with principles of

international comity and afford all interested parties — the

inventor, the software developer, the home country and the

foreign jurisdiction — the protection of an orderly and

predictable transnational patent regime.

Il. The “Software Is Special” Jurisprudence Cre-

ated by the Federal Circuit Offends the Text

and Purpose of 35 U.S.C. § 271(f).

There is little question that the decision below ex-

pands Section 271(f) beyond its intended reach and normal

reading. That much is evident from the panel’s own

statements in the opinion. The court below, apparently,

thought it could take such liberties because it needed to

account for “realities of software distribution” and “cannot

disregard the nature of the relevant technology and

business practices underlying a particular litigation.”

AT&T, 414 F.3d at 1370. The meaning of text should not

change, the canons of interpretation should not vary, and

the patent law should not be special just for software.

Absent the “software is special” lens adopted by the

panel decision, Section 271(f) simply does not reach the

conduct at issue in this case. Congress used the word

“supply” deliberately, and its meaning is distinct from any

possible act of copying or replication. Moreover, the reach

of 271(f), predicated on the limited Congressional intent to

overturn Deepsouth, extends only to physical components

and not to abstract instructions such as software object

code. Deprived of textual and logical support for its read-

ing, the panel decision relies on an old saw: “A literal

reading of which would lead to absurd results is to be

avoided.” Haggar Co. v. Helvering, 308 U.S. 389, 394

(1940). But this limited exception to textual fealty simply

does not stretch to support the panel’s proposition that “an

interpretation that allows liability to attach only when a

party acts in an unrealistic manner is unlikely to be

correct.” AT&T, 414 F.3d at 1369-70.

19

A. Software Should Not Be Singled Out for

Special Treatment.

The panel below abused the text of Section 271(f) in

its attempt to divine special meaning of the terms “supply”

and “component” for particular application to computer

software. Software and computers have allowed people

worldwide to interact and conduct their business more

efficiently, but they have not changed the meaning of the

words “supply” and “component” nor Congress’s intent in

using them. To divine a software penalty under Section

271(f) is contrary to the proper role of the courts. “As

interpreter of the Congressional Acts that have expressed

the patent policy of this nation since its beginning this

Court is entrusted with the protection of that policy

against intrusions upon it.” United States v. Line Material

Co., 333 U.S. 287, 332 (1948).

The Federal Circuit exceeded this role by rewriting in

two ways Section 271(f) without regard to a plain reading

of the law or any indication of Congressional intent: first,

by declaring that software is to be treated differently from

other patented material, including other intellectual

property; and second, by making “copying” outside the

territory of the United States equivalent to “supplying”

from the United States. The Federal Circuit’s straining of

the statutory text for special application to software is

particularly problematic in light of the fact that Congress

knew about software and other forms of non-physical

intellectual property when it enacted Section 271(f). It was

Congress that chose not to distinguish between software-

related inventions and other patentable inventions. Courts

shouid not rewrite from the bench what Congress did not

from the Capitol.

The Federal Circuit decided that Section 271(f) should

be interpreted “in a manner that is appropriate to the

nature of the technology at issue,” AT&T, 414 F.3d at

1371. This pronouncement and its contorted application to

reach the result below offends the traditional rule that the

patent law accords “the same treatment to all forms of

20

invention.” Eolas Techs. Inc. v. Microsoft Corp., 399 F.3d

1325, 1339 (Fed. Cir. 2005) (citing TRIPS Agreement, Part

II, Section 5 (1994) (“Patents shall be available and patent

rights enjoyable without discrimination as to the place of

invention[] [and] the field of technology... .”) (alteration

in original)).

The lower court’s decision flouts the example the

Court set in Deepsouth. The Court in Deepsouth fulfilled

its proper role to “[construe] the language Congress has

employed,” Diamond v. Chakrabarty, 447 U.S. 303, 315

(1980), by holding that it “should not expand patent rights

by overruling or modifying prior cases construing the

patent statutes, unless the argument for expansion of

privilege is based on more than mere inference from

ambiguous statutory language.” Deepsouth, 406 U.S. at

531. In so doing, the Court decided the case based upon

the current law - allowing a “loophole” in the statutory

text to stand — and left it to Congress to respond with a

“clear and certain signal,” id., of its intent. In accordance

with its proper function as the lawmaking body of the

nation, Congress responded to this “loophole,” by enacting

Section 271(f). If, as the court below surmises, there is a

software loophole in 271(f), it is for Congress to close, not

the judiciary.

Congress could have re-written Section 271(f) to make

a clear statement about the applicability of the statute in

the software context. Yet, neither the plain language of the

statute nor legislative history specify that software — or

any particular patentable subject matter — should receive.

special treatment under Section 271(f). When Congress

intends for products to receive disparate treatment under

patent law, it so specifies in the statutory text. For exam-

ple, in Section 271(g), enacted after Section 271(f), Con-

gress explicitly distinguished between different types of

patents by providing for specific treatment of process

patents. See 35 U.S.C. §271(g) (2000). This express

language singling out process patents for protection in

Section 271(g) indicates that “Congress knew how to

21

protect against foreign use of process patents, and chose to

limit such protection to uses which result in the introduc-

tion of products into the United States.” ENPAT, Inc. v.

Microsoft Corp., 6 F. Supp. 2d 537, 539 (E.D. Va. 1998).

Similarly, Congress knew (and indeed, still knows) about

the existence of software when enacting Section 271(f),

and could have chosen to extend Section 271(f) to include

the copying of software. If Congress had intended for any

type of patentable material, including software, to be

treated differently under Section 271(f), it would have said

so explicitly. See ENPAT, 6 F. Supp. 2d at 539 (“Clearly,

had Congress intended to prohibit U.S. companies from

exporting products which allow foreign companies to make

unauthorized use of patented methods, it could have done

so in clear, unambiguous language like that found in

§ 271(g).”).

It is not the province of the court to construe patent

law to apply differently to different types of patentable

subject matter. See Brown v. Duchesne, 60 U.S. (19 How.)

183 at 196-97 (1856) (holding that the judiciary should not

construe laws to reach cases “which Congress evidently

could not have contemplated, without departing from the

principle upon which they were legislating, and going far

beyond the object they intended to accomplish”). The case

is even stronger here, where software was not an “unan-

ticipated invention,” but rather one of which Congress was

and continues to be acutely aware. As such, the Court is

confined to applying the statutory text of Section 271(f) in

a consistent manner, whether to software or other prod-

ucts. See Chakrabarty, 447 U.S. at 315-16.

Indeed, after Eolas Technologies Inc. v. Microsoft

Corp., 399 F.3d 1325 (Fed. Cir. 2005), signaled the “soft-

ware is special” jurisprudence of the decision below,

Congress became keenly aware of the interpretive trans-

gression and actively considered curative action. S. 3818

proposed outright repeal of Section 271(f), and H.R. 2795

proposed to change Section 271(f) as follows: “Section

271(f) of title 35, United States Code, is amended by

22

adding at the end the following: ‘(3) An item supplied in or

from the United States is not a “component” under this

section unless the item is a tangible item that is itself

combined physically with other components to create the

combination that is alleged to infringe.’” S. 3818, 109th

Cong. § 5 (2006), H.R. 2795, 109th Cong. § 5 (2005). Both

of these proposals evince a desire to ensure that software

is on the same footing as other patentable material, and

that it should receive neither increased scrutiny nor added

protections, a proposition that this amicus strongly sup-

ports. Congress decided that it could not “take a position

on this proposal without further study.” Staff of H: Comm.

On the Judiciary, 109th Cong., Patent Act of 2005 (Comm.

Print 2005). Until Congress decides to act or to express

- clearly its intention to expand the scope of Section 271(f),

the courts are constrained to interpret Section 271(f) in its

current form and not on a form that they preferred Con-

gress to have adopted.

B. To Copy Is Not To Supply

Liability under Section 271(f) does not attach for the

simple fact that neither the software object code nor the

Windows program at issue was “supplied” from the United

States. Section 271(f) proscribes “suppl[ying] or caus[ing]

to be supplied” components of a patented invention to be

combined overseas. See 35 U.S.C. § 271(f) (2000). Although

the multitude of software codes installed on computers

overseas are not supplied from the United States, the

court nevertheless ascribed liability because it thought

those installed codes are “copied” in a way that can be

“subsumed” in the term “supplied.” AT&T, 414 F.3d at

1370.

Leaving aside the incredible weight the court below

hoisted on the shoulders of the one word “subsumed,” its

analysis misses one key analytical step. What is supplied

from the United States is the software code, contained on

the golden master disk, Pet. App. 47A 9 10, akin to in-

structions or blueprints. The golden master disks are not

23

simply “copied” abroad. Instead, physical duplicates of the

golden master disks are manufactured in foreign factories.

While software perhaps can be copied more easily than

other products, this duplication still entails a physical

process that happens much the way any other commodity

would be manufactured abroad: via factories, machines

and workers. The physical manufacturing process cannot

be ignored. The lower court ignores this step when it

conflates copying and supplying to achieve a result that is

not intended by Section 271(f) — the proscription of behav-

ior that is permissible under patent law generally and

Section 271(f) specifically.

Even ignoring the physical replication process prior to

assembly with the computer hardware, “t]he act of sup-

plying is separate and distinct from copying, reproducing,

or manufacturing,” and “one act of ‘supplying’ cannot give

rise to liability for multiple acts of copying.” AT&T, 414

F.3d at 1373 (Rader, J., dissenting). The proper function of

the judiciary is to interpret statutes as they are written —

starting with the language of the statute. See, e.g., Wil-

liams v. Taylor, 529 U.S. 420, 431 (2000); see also Parker v.

Flook, 437 U.S. 584, 596 (1978). Unless a statute contains

particularized definitions of the words used therein, “words

will be interpreted as taking their ordinary, contemporary

common meaning.” Chakrabarty, 447 U.S. at 308 (quoting

Perrin v. United States, 444 U.S. 37, 42 (1979)). Section

271(f) contains no specific definitions of “supplying,” either

in the statute itself or in the legislative history. Thus

Congress has not directed that “supplying” is to bear any

other import than that accompanying its contemporary,

common meaning. It is not within the province of the Court

to read other words or word meanings into the statute

when they have not been specifically provided by Con-

gress. See Williams, 529 U.S. at 431 (citing Walters v.

Metro. Educ. Enters., Inc., 519 U.S. 202, 207 (1997)).

A simple analogy iLustrates the fallacy in the lower

court’s reading. Suppose that, instead of the manufacture of

computer object code, this case involved the manufacture of

24

a computer spacebar key. If a single infringing spacebar

key were manufactured in the United States, exported,

and installed on a foreign computer, liability could attach

to that computer under Section 271(f). But if the infringing

exported spacebar key were used as a model for foreign-

manufacture of duplicate spacebar keys, there could be no

liability under Section 271(f) because the foreign-

manufactured spacebar keys were not “supplie[d] .. . from

the United States.” 35 U.S.C. § 271(f)(1). The United

States manufacturer of the spacebar key could even send

the foreign manufacturer instructions detailing the proper

way to manufacture the spacebar key without being

subject to liability under Section 271(f). See Pellegrini v.

Analog Devices, Inc., 375 F.3d 1113, 1117-18 (Fed. Cir.

2004). The decision below imposes liability for foreign-

manufactured software in legally indistinguishable cir-

cumstances.

The lower court’s own language betrays a recognition

that it is reading into the law something that simply is not

there. The Federal Circuit notes that the infringing

component is “deemed supplied,” AT&T, 414 F.3d at 1369

(emphasis added), and that “[aJll of such resulting copies

have essentially been supplied,” id. at 1370 (emphasis

added), to try to squeeze the act of copying into that of

supplying.

If ambiguity appears when interpreting a statute, the

court should look to its legislative history and statutory

purpose in order to determine congressional intent. See

Chakrabarty, 447 U.S. at 315; see also Parker, 437 U.S. at

596; Brown, 60 U.S. at 196-97. But the statute here

provides no ambiguity. Indeed, the legislative history of

the statute and the congressional purpose for passing the

statute further reinforce that only the act of supplying —

not copying — is proscribed by Section 271(f). Congress

enacted Section 271(f) in response to Deepsouth in order to

close the particular loophole that the case exposed: the

statute, in its pre-Deepsouth iteration, technically permit-

ted components of a patented product to be shipped

25

overseas for assembly. Congress intended to prevent

companies “from avoiding U.S. patents by supplying

components of a patented product in this country so that

the assembly of the components may be completed

abroad.” Section by Section Analysis: Patent Law Amend-

ments of 1984, 130 Conc. Rec. 28069 (Oct. 1, 1984),

available at 1984 U.S.C.C.A.N. 5827, 5828, 1984 WL

37541. This legislative history confirms that it is only the

supplying of components which Section 271(f) forbids —

companies still may copy such components overseas to

create the patented product without being subject to any

liability under Section 271(f). Nothing contained in the

legislative history suggests a different interpretation.

Indeed, the congressional history further establishes

that Congress intended to address “the need for a legisla-

tive solution to close a loophole in patent law,” id., and the

Court should not mistake the intention to close a particu-

lar loophole with a desire to apply the statute to the facts

before it. Congress’s rectification of the Deepsouth loophole

also demonstrates that the legislature will not rely on

courts to effectuate changes in the law. Thus, the interpre-

tive position that AT&T and the lower court impress upon

Section 271(f) should be addressed to Congress, not to the

courts, because the courts may not read limitations and

conditions into patent law that have not been clearly

expressed by the legislature. See Chakrabarty, 447 U.S. at

317; Gottschalk v. Benson, 409 U.S. 63, 73 (1972).

The lower court’s attempt to justify its decision by

claiming that it must hold Microsoft liable to prevent a

“technical avoidance” of the statute, AT&T, 414 F.3d at

1371, is unavailing. Despite the obvious difference be-

tween the terms “supply” and “copy,” the lower court

refused to recognize their divergence: “[w]ere we to hold

that Microsoft’s supply by exportation of the master

versions of the Windows® software —- specifically for the

purpose of foreign replication - avoids infringement, we

would be subverting the remedial nature of § 271(f),

26

permitting a technical avoidance of the statute... .” Jd.

Thus, to prevent this “technical avoidance,” the lower

court held Microsoft liable for copying - not supplying -

software. However, there is no interpretive exception to

proper judicial statutory construction for “technical avoid-

ance of the statute.”

This exception to statutory interpretation adopted by

the lower court would transform the narrow “absurd

results” exception that this Court has articulated into an

interpretive black hole that swallows the textual rule. It is

the function of the courts to interpret and apply the law as

it appears, not to create the law by misconstruing statu-

tory language for their own purposes. To be sure, the

courts do have some discretion to reject statutory interpre-

tations which produce “absurd results,” but this discretion

is quite narrow and applies only where a literal reading

would result in “absurd results or would thwart the

obvious purpose of the statute.” Helvering v. Hammel, 311

U.S. 504, 510-11 (1941). Although, once enacted, statutes

may sometimes lead to “mischievous, absurd or otherwise

objectionable” results, the proper remedy lies with Con-

gress, not the courts. Crooks v. Harrelson, 282 U.S. 55, 60

(1930). Were the courts to take free license to widen or

narrow the scope of statutory text at their discretion,

statutes would be rendered meaningless. In accordance

with proper judicial restraint, the Court has qualified the

“absurd results test” by stating that it “rarely invokes such

a test to override unambiguous legislation.” Barnhart v.

Sigmon Coal Co., Inc., 534 U.S. 437, 459 (2002). In the

instant case, a literal reading of Section 271(f) does not

creat’ absurd results, but instead creates uniform results

that apply consistently for software as they do for other

patentable products. Further, a literal reading does not

“thwart the obvious purpose of the statute” since that

purpose, as discussed supra at Part I.B, was to address the

particular loophole at issue in Deepsouth. Since there is

nothing implausible about Section 271(f) applying only to

the supplying of components overseas, and not the copy-

ing, the court “cannot escape this unambiguous statutory

27

command by proclaiming it would produce an absurd

result.” Koons Buick Pontiac GMC, Inc. v. Nigh, 543 U.S.

50, 65 (2002) (Stevens, J., concurring).

The act of copying, as a separate and distinct act from

the act of supplying, is not proscribed by Section 271(f).

The statute does not state nor did Congress intend that

patented items be banned from being copied overseas. As

such, the lower court erred when it held Microsoft liable

for copying software overseas.

C. The Software Object Code at Issue Is Not a

“Component” Under Section 271(f).

Separately, liability does not attach because neither

the golden master disk shipped abroad, nor the software

object code within it, can constitute a “component” under

Section 271(f).

The text and history of Section 271(f) demonstrate

that the term “component” contemplates a United States-

manufactured physical product, the original of which

when combined (in a way that meets the threshold of

271(f)) in a foreign-assembled invention infringes on a

U.S. patent. In Bayer AG v. Housey Pharmaceuticals, Inc.,

340 F.3d 1367 (Fed. Cir. 2003), the Federal Circuit recog-

nized that the term “component,” as used in Section

271(g), must “refer| | to tangible objects and not intangibles

such as information. Thus, the production of information

is not within the scope of processes of ‘manufacture.’” Jd.

at 1372 (emphasis added). The term “component” under

Section 271(f) should be given its textual meaning -

“tangible objects and not intangibles” — the same meaning

the term is given under Section 271(g).

The text and history of Section 271(f) also indicate

that the section requires any “component” under its ambit

to be produced, or at least physically present, in the

United States. The only thing that was ever present in the

28

United States that eventually became a part of the final

allegedly infringing product was the information contained

on the golden master disk. Even the lower court, with the

liberties it has taken with the statutory text, could not

stretch the information contained on the disk to be a

tangible object.

Furthermore, if the component is considered to be the

physical manifestation of that information - the golden

master disk — Section 271(f) still cannot apply because of

the further requirement that the component be exported

in a manner to induce a “combination of such components

outside of the United States.” Nothing that was ever

physically present in the United States was ever combined

with anything else “in a manner that would infringe the

patent.” The Federal Circuit stated in Pellegrini that

Section 271(f) is “clear on its face” and applies “only where

components of a patent invention are physically present in

the United States and then either sold or exported ‘in such

a manner as to actively induce the combination of such

components outside the United States in a manner that

would infringe the patent if such combination occurred

within the United States.’” 375 F.3d at 1117 (internal

citation omitted) (emphasis added).

In this case, nothing produced in the United States

was ever installed on foreign-manufactured computers.

Only the golden master disk was shipped out of the

United States, and this disk was only duplicated on

foreign machines — not placed in foreign-manufactured

computers to create the alleged final infringing product.

As applied to this case, Section 271(f)'s “component”

requirement can only properly refer to a foreign-made copy

of the golden master disk installed onto a particular for-

eign-manufactured computer. Since foreign-manufactured

duplicates are not covered by United States patent laws

or the text of Section 271(f), such a duplicate cannot be a

“component” under Section 271(f).

29

The panel below ignores the duplication steps involved,

rationalizing that foreign manufacturing of duplicates of the

Microsoft golden master disks is less than an arduous

process. “It is inherent in the nature of software that one can

supply only a single disk that may be replicated — saving

material, shipping, and storage costs — instead of supplying a

separate disk for each copy of the software to be sold abroad.”

AT&T, 414 F.3d at 1370. The ease of manufacturing should

be irrelevant for purposes of extraterritorial application of

United States patent law. Many components of patented

inventions are easy to duplicate. ixtending liability to

foreign-manufactured duplicates whenever a court finds that

a company has “taken full advantage of the replicable

nature” of the product, id. at 1370, is untenable.

The panel below extends Section 271(f) to cover not only

combinations of United States-manufactured components of

a patented invention not assembled within the United

States, but also to combinations of material not even manu-

factured within the United States. Such judicial extension of

Section 271(f), umsupported by the text or history of the

statute, and indeed contrary to long-settled notions of

statutory interpretation, should not be allowed to stand.

CONCLUSION

For the foregoing reasons, the decision below should

be reversed.

Respectfully submitted,

Viet D. DINH

Counsel of Record

LizeETTeE D. BENEDI

BANCROFT ASSOCIATES PLLC

601 13th Street, N.W.

Suite 930 South

Washington, D.C. 20005

(202) 234-0090

Counsel for the Business

DECEMBER 15, 2006 Software Alliance

a