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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0243%3A22

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2007
- **Citation:** 550 U.S. 437

## Text

/, \
Ld) Je , 3 c 35D
No. 05-1056 | OFFICE OF THE CLERK |
IN THE

Supreme Court of the United States

MICROSOFT CORPORATION,

Petitioner.

Vv.

AT&T Corp.,

Respondent.

On Writ of Certiorari to the
United States Court of Appeals
for the Federal Circuit

BRIEF OF AMICUS CURIAE
ELI LILLY AND COMPANY
IN SUPPORT OF PETITIONER

ROBERT A. ARMITAGE
JAMES J. KELLEY

Counsel of Record
EL! LILLY AND COMPANY
940 South East Street
Indianapolis, IN 46225
(317) 277-8110

December 15, 2006

pit
QUESTIONS PRESENTED

35 U.S.C. § 271(f}(1) provides that it is an act of patent
infringement to “suppl[y]. . . from the United States .. .
components of a patented invention . . . in such manner as to
actively induce the combination of such components outside
of the United States.” In this case, AT&T Corp (AT&T)
alleges that when Microsoft Corporation’s (Microsoft’s)
Windows operating system is installed on a_ personal
computer, the computer with the installed operating system
represents “the combination of such components” so as to
infringe AT&T’s patent purporting to claim a “Digital
Speech Coder” system. AT&T sought damages not only for
each Windows-based computer made or sold in the United
States, but also, under section 271(f)(1), for each computer
made and sold abroad. Microsoft infringed under section
271(f){1), it is alleged, when it supplied outside the United
States its Windows software code to foreign computer
manufacturers who then installed the code on foreign-
manufactured computers that were sold only to foreign
consumers. The two questions arising in this appeal can be
represented as follows:

(1) Whether software code that is recognized by a digital
computing machine and directs its functioning — such code
by itself being nothing more than an intangible sequence of
binary values, commonly expressed as sequence of 1’s and
0’s — can qualify as a “component” of a patented invention
within the meaning of section 271(f); and, if so,

(2) Whether the required duplication outside the United
States of the coding sequence, in order for it to be used in a
foreign country to operate computing machines, qualifies the
duplicated sequence-as having been “supplie[d] . . . from the
United States?”

TABLE OF CONTENTS
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J. INTEREST OF AMICUS CURIAE ........c.scscsssssesssereeseeeees l
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FS ______._ Ea EY aR aE ED OR NNO EIEN 3

A. The Federal Circuit’s Conclusion That Software
Necessarily Qualifies as a Component of a Patented
Combination is Based on Faulty Jurisprudential
Foundations That Clearly Conflict with Section 101
SF Ce ai iactccccinsicaiciscssscetinincrisieiscinininihiiinianiiasiaintadiiinpaiiie 3

1. Section 101 Limits Patent Eligible Subject
Matter to Tangible and Physical Products
I ccisessdeicnsincntniijenndianiensistniinsbbliiations 3

2. The Jurisprudential Foundations of the
Federal Circuit’s Decision Failed to
Recognize or Apply the Requirements for
Patent Eligibility Under Section 101................. 5

B. Software Code Cannot Represent a “Component” of
a Claim Directed to a Combination of “Elements.”........ 9

C. The IT Industry’s Complaints Against the Patent
System Are Partly Attributable to Failure of the
Lower Courts to Rigorously Apply Sections 101 and
SE PONE Di cicncttrintitiinenitaonnianemnniststasasenmsipitiadaradain 14

- ili -
TABLE OF AUTHORITIES
FEDERAL CASES

AT&T Corp. v. Microsoft Corp..,
414 F.3d 1366 (Fed. Cir. 2005)..............ceceeeeeeees

Cochrane v. Deener,
SE, SI int cee nniscnsiipn guna dibiemnaielmeabietinncsanid

Corning Glass Works v. Sumitomo Elec. U.S.A., Inc.,
868 F.2d 1251 (Fed. Cir. 1989).................c0ee. 14

Diamond vy. Chakrabarty,
4, |) 5 SS pe reo

Eolas Techs., Inc. v. Microsoft Corp.,
399 F.3d 1325 (Fed. Cir.),
cert. denied, 126 S. Ct. 568 (2005).............-..265 6

Lab. Corp. of Am. Holdings v. Metabolite Labs., Inc.,
a is Gk BE Ci cciaciscnidccoccnsscsiccaseresaces 2

O.1. Corp. v. Tekmar Co., Inc.,
lege ge) ae Rr ee 10

State Street Bank & Trust Co. v. Signature Fin. Group, Inc.,
149 F.3d 1368 (Fed. Cir. 1998),
cert. denied, 525 U.S. 1093 (1999)................05 6

-iv-

FEDERAL STATUTES, RULES and OTHER
AUTHORITIES

I i ae 4
ET ILA ET passim

35 U.S.C. § 112, para. 6......ccccsssssssesseeeeceeeeesseeesspassim

I ial i ah i lal passim
ls eo innnidospneanieictneessikquuituswuaiduathe i
Act of Apr. 10, 1790, ch 7, § 1, 1 Stat. 109. 0.0.0... eee 4
Act of Feb. 21, 1793, ch. 11, § 1, 1 Stat. 318.............0.00.. 4
MISCELLANEOUS

Carl Shapiro, Navigating the Patent Thicket: Cross Licenses,
Patent Pools, and Standard-Setting (Mar. 2001), at

http://ssrn.com/abstract=273550
(last visited December 14, 2006)...................00 ccc eeeeeees 17

Eli Lilly and Company Annual Report, 2005, af

http://www. lilly.com/investor/annual_report/lillyar2005.pdf
DG Ste ME oices See Petitioner's Brief at 1, 3-5.

efin

Section 101 completely refutes the notion that Congress
permitted an invention to be patented simply because the
inventor could point to a useful, concrete and tangible result
produced by an invention. It is the invention itself as set out
in the claim in the patent that must be tangible and physical,
as must — in the case of a combination — any of its discrete
elements.

The jurisprudential foundations of the present case, which
include the erroneous State Street Bank framework for
deciding issues of subject matter eligibility for patenting and,
more especially, the Eolas holding that software code alone
qualifies as an invention eligible for patenting, clearly
conflict with section 101 and led to the wrong decision in
this case. To resolve this case, therefore, this Court should
specifically disavow the analytical framework in State Street
Bank, which can be wrongly construed to support patent-
eligibility for software code and other intangible subject
matter so long as it produces “concrete results.” This Court
should hold that Congress, while making eligible for
patenting anything under the sun made by man through
expansive and inclusive language,* has for more than 200
years consistently limited what can be patented to physical
and tangible things, not intangibles that might produce some
“useful, tangible, and concrete results.” Finally, because
software code is not in and of itself subject matter eligible
for patenting, it does not automatically follow, as the Federal
Circuit has held in Eolas, that it can represent a “component”
under section 271(f) of a patented combination.

* This Court has properly construed § 101 broadly, noting that
Congress intended statutory subject matter to “include anything under the
sun that is made by man.” See Diamond v. Chakrabarty, 447 U.S. 303,
309 (1980) (quoting 82d Cong., 2d Sess., 5 (1952); H.R. Rep. No. 1923,
82d Cong., 2d Sess., 6 (1952)).

on

B. Software Code Cannot Represent a “Component” of a
Claim Directed to a Combination of “Elements.”

When an invention is claimed as a combination of
elements, as most are, the patent statute requires that each
such element itself must be physical and tangible. This
limitation exists because 35 U.S.C. § 112, sixth paragraph,
requires that the individual claim elements of combinations
must be limited to specific structures, materials or acts.
Thus, even if section 101 did not so require, every invention
expressed as a combination of elements must be physical and
tangible because section 112 commands that each of its
constituent elements must be structures, materials, or acts.

The provisions of section 112, sixth paragraph, state:

An element in a claim for a combination may be
expressed as a means or step for performing a specified
function without the recital of structure, material, or
acts in support thereof, and such claim shall be
construed to cover the corresponding structure,
material, or acts described in the specification and
equivalents thereof.

(emphases addea) !n this paragraph, Congress dealt with the
situation in which an inventor of a combination of discrete
elements seeks to describe one or more of the elements in a
claim of a patent wholly in terms of the function to be
pefformed by the element or elements.

A claim element of this type is commonly referred to as a
“means-plus-function” element where the claimed
combination represents a product (machine, manufacture or
composition of matter) or a “step-plus-function” element
where the claimed combination represents a process. Under
section 112, sixth paragraph, a means-plus-function or step-
plus-function element, although failing to explicitly set out a
specific structure, material, or act in the claim itself, will
nonetheless be limited to the corresponding structures or

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materials or acts described in the patent specification and the
equivalents thereof. The terms “structure” and “material”
relate to inventions claimed in terms of a product, while the
term “acts” relates to inventions claimed as processes. O. /.
Corp. v. Tekmar Co., Inc., 115 F.3d 1576, 1582-83 (Fed. Cir.
1997) (“In this paragraph, structure and material go with
means [products], acts go with steps [processes].”).

The plain meaning of section 112, sixth paragraph, is that
a discrete element of a claim to a combination must either be
set out as something tangible and physical (i.e., a structure,
material or act), or, if it is expressed as a means or step for
performing a specified function, then it will nonetheless be
interpreted as something tangible and physical, ie., the
structure, material, or acts described in the specification or
equivalents thereof. Either way, each and every element in a
claim to a combination can only be subject matter that is
tangible and physical.

The remaining inquiry in this case, then, involves the
relationship between the “components” of a claimed
combination and the constituent “elements” of the claimed
invention. In particular, must the component or components
of a patented invention that is claimed as a combination of
elements necessarily also be tangible and physical for the
purposes of determining infringement under section 271(f)?

The Federal Circuit’s erroneous holding that software
code by itself was patent-eligible permitted it to avoid
addressing the relationship between the terms “elements”
and “components.” More importantly, it meant that the
Federal Circuit could avoid grappling with the actual claims
of the patent and any analysis of the discrete elements of the
claimed combinations.

Claim 24 of the patent in suit is both illustrative and
representative of the patent claims. Claim 24 can be parsed
into its constituent elements as follows:

sas

24. Apparatus for encoding a speech pattern
comprising

[1] means for partitioning a speech pattern into
successive time frames;

[2] means responsive to the frame speech pattern for
generating for each frame a set of speech parameter
signals;

[3] means responsive to said frame speech
parameter signals and said frame speech pattern for
generating a signal representative of the differences
between said frame speech pattern and said frame
speech parameter signal set;

[4] means responsive to said frame speech
parameter signals and said differences representative
signal for generating a first signal corresponding to
said frame speech pattern;

[5] means responsive to said frame speech
parameter signals for generating a second frame
corresponding signal;

[6] means for generating a signal corresponding to
the differences between said first and second frame
corresponding signals; and

[7] means responsive to said frame differences
corresponding signal for producing a third signal to
modify said second signal to reduce the frame
differences corresponding signal.

The seven discrete elements of claim 24 are each
expressed in the means-plus-function format that is permitted
under section 112, sixth paragraph.° Under the provisions of

* Claims 10~18, 24-31, 33-36, and 40-41 of the patent at issue are all
subject to section 112, sixth paragraph, as claims set out in a “means-
plus-function” format. The remaining 20 claims are process claims that

-12.

section 112, sixth paragraph, each of these seven discrete
elements is limited to specific, corresponding structures,
materials, and acts set out in the patent specification and the
equivalents thereof.

If the Federal Circuit had not short-circuited its analysis
by concluding that software code itself was patent-eligible
subject matter, its inspection of the patent claims would have
led it to conclude that software code by itself could not have
formed any one of the discrete elements of the combination
claimed in the patent. The reason it would have made such a
conclusion is that, as discussed above, software code by
itself is neither a structure, a material, nor an act, as each
discrete element of the claims to a combination must be.

The only remaining question for the court would have
been whether the term “component” with respect to a
combination under 271(f) could have a different meaning
from the term “element” used in section 112, sixth
paragraph. While it might be possible to marshal an
argument that a component might consist of one or more
elements, it is not possible to support a contrary contention —
an element certainly cannot be subdivided into components
though any stretch of the patent laws.

First, there is no basis for concluding that, in enacting
section 271(f), Congress intended that a single component of
a patented combination would be anything different from —
most particularly anything lesser than — a discrete element of
a patented combination. In particular, Congress provided no
framework for parsing a claim into components in any
manner differently from parsing the claim into elements.

Second, nothing in the patent statute provides any basis
for concluding that, having explicitly set out the
requirements for claiming a combination of elements,

are not on their face set forth in a “step-plus-function” format.

ott.

Congress intended a different formulation for determining
the discrete components forming the claimed combination.
Indeed, a holding that the “components” of a claimed
combination should be ferreted out by subdividing the
discrete elements of that combination would only succeed in
making the law of patent infringement under section 271(f)
hopelessly uncertain and unpredictable. This would be the
last thing that Congress could have intended in crafting a
provision defining the infringement of a patent.

Furthermore, the terms “element” and “component” are
linguistically synonymous. An “element” is commonly
understood as a “fundamental, essential, or irreducible
constituent of a composite entity,”® or “a constituent part” or
“a distinct part of a composite device.”’ A “component” is
either the same (e.g., a “constituent element, as of a system”
or “a constituent part”) or very nearly so (e.g., a “part of a
mechanical or electrical complex.”*)

Finally, the Federal Circuit has interpreted the term
“element” to be either synonymous with or representative of
a subset of a “component” (but never vice versa) for the
purposes of interpreting other issues of patent infringement:
““Element’ may be used to mean a single limitation [in a
patent claim], but it has also been used to mean a series of
limitations which, taken together, make up a component of
the claimed invention.” Corning Glass Works v. Sumitomo
Elec. U.S.A., Inc., 868 F.2d 1251, 1259 (Fed. Cir. 1989).

In light of the entire statutory framework for patents,

6

http://www_answers com/topic/element (last visited Dec. 14, 2006).

. http://www.merriam-webster.com/dictionary/element (last visited
Dec. 14, 2006).

* _ http://www.merriam-webster.com/dictionary/component _ (ast

visited Dec. 14, 2006) or http://www.answers.com/topic/component (last
visited Dec. 14, 2006).

sit.

therefore, the “elements” and “components” of patented
combinations must be parsed in an identical fashion. The
conclusion that the terms “elements” and “components” have
synonymous meanings under the patent law is necessary not
only in view of the plain meaning of the terms themselves,
but also because this is the only logical implementation of
Congress’ intent in the use of the term “component” in
section 271(f). It necessarily follows that each component of
that combination must likewise be tangible and physical.

A proper analysis under the patent statute disqualifies the
Microsoft software code by itself as being a discrete
component of the patented combination because software, by
itself, is not tangible or physical. The supply of the software
code itself cannot, therefore, actively induce the
infringement of a patent under section 271(f).

C.The IT Industry’s Complaints Against the Patent
System Are Partly Attributable to Failure of the
Lower Courts to Rigorously Apply Sections 101 and
112 of Title 35.

The facts of this case provide especially compelling
policy reasons for this Court to clarify that patenting of
inventions must be reserved for subject matter that is
tangible and physical and, most particularily, where the
invention can be characterized as a combination of elements
or components, such discrete elements or components must
themselves be tangible and physical things.

Petitioner Microsoft and many other companies in the
information technology (“IT”) industry are members of a
group that has taken the name “Coalition for Patent
Fairness.” This group has described a wide-ranging set of
problems that its members assert they experience with the
patent system. The Coalition and its members are seeking
legislative redress, including sweeping changes to U.S.

P

patent law. One aspect of the redress they seek is legislation
that would repeal section 271(f) outright.

A prime complaint that Microsoft and other Coalition
members have with the current operation of the U.S. patent
system is the lack of appropriate notice. They cite the
difficulty in identification of adversely owned patents of
potential relevance to the products and services that come
from their respective research and marketing efforts. Their
search for greater certainty in the patent system has
undeniable validity - identifying potentially infringed
patents relevant to a new product offering should not be a
Magical Mystery Tour for the potential infringer.

It is apparent that Microsoft and the members of this
Coalition believe that the serious problems arising from such
occult patenting must be addressed:

[W]hen a business is developing a new product, it
often is extraordinarily difficult — notwithstanding the
business’s best efforts — to identify all of the existing
patents, let alone pending patent applications, that may
be relevant to each of the components that make up
that new product. This problem is compounded by the
fact that patent holders’ subsequent infringement
claims sometimes bear little relation to the invention
described in the patent and therefore cannot be
anticipated by the potential defendant.”

Without question, patents containing claims to subject
matter that is ephemeral and abstract, rather than clearly
identified as physical and tangible, complicates the ability to
identify those patents that may be relevant to making the

* “The Patent Reform Act of 2006, S. 3818, Enhances Innovation and

Promotes Economic Growth,” p. iI, at
http://www.patentfairness.org/CPF_White%20paper®o20v3 pdf (last

visited Dec. 14, 2006).

- 16-

commercial decisions to bring new products or services to
market.

Limiting patenting to what Congress dictated via
35 U.S.C. §§ 101 and 112 can be eligible for patenting will
squarely address the concerns of Microsoft and the IT
industry with regard to the ability to understand patents and
identify the relevance of what is being claimed. Claim 24 of
the AT&T patent provides a proverbial “poster child” for the
concerns of the Coalition for Patent Fairness as they relate to
the inability to identify potentially infringed patents.

Because inventors are permitted by Congress to set out a
claim entirely in the form of a series of means for performing
a set of functions, it is particularly important to require that
each such element of those claims relate to an identifiable
structure, material, or act for carrying out the described
function set forth in the claim itself or identified in the patent
specification. If the discrete elements of a claim can consist
solely of information, and the content of the information is,
in turn, identified only by its function when put to some use,
understanding the nature of what has been patented becomes
much more difficult.

The consequence of errant Federal Circuit rulings on what
is eligible for patenting has in large measure produced — or at
least seriously exacerbates — the concerns expressed by the
Coalition for Patent Fairness. The consequence of reversing
this errant jurisprudence of the Federal Circuit would at a
minimum substantially dilute such concerns. If this Court
clarifies that each element in a claimed combination must be
tied to a specific structure, material, or act —- either one
expressly set out in the claim or identified in the patent
specification — the task of identifying patents that will be of
relevance to a product could be remarkably simplified. What
is being patented should be identified with more specificity
than just that it is a set of machine-recognizable instructions
for carrying out some desired function.

. -

The Coalition for Patent Fairness is not the only entity
raising concerns over patenting in the information
technology industry sector. While the Coalition has
identified the problems with fully understanding the import
of individual patents, other commentators have noted that
such problems with individual patents are magnified when
such patents are sought and issue in the thousands and tens
of thousands, year after year, thereby creating so-called
“patent thickets.”'® By permitting individual patents to issue
that overreach the subject matter eligibility constraints on
patenting, the collective impact of the creation of “thickets”
of such patents in an affected area of technology creates the
possibility of patent overprotection beyond anything
envisioned by Congress in enacting rigorous requirements
for patenting.

The aggregate impact of patent overprotection has been
examined in a recent report published by the Council on
Foreign Relations. This report characterizes overprotection,
including the development of alleged “patent thickets” as a
possible threat to the Nation’s economic well-being:

America’s robust economic competitiveness is due in
no small part to a large capacity for innovation. That
Capacity is imperiled, however, by an increasingly
overprotective patent system. Over the past twenty-
five years, American legislators and judges have
operated on the principle that stronger patent
protection engenders more innovation. This principle
is misguided. Although intellectual property rights
(IPR) play an important role in innovation, the recent

‘© The term “patent thicket” has been used to describe the
proliferation of patents impacting some areas of technology. Carl
Shapiro, Navigating the Patent Thicket: Cross Licenses, Patent Pools,
and Standard-Setting (March 2001), at //ssrn.com/a =273550
(last visited Dec. 14, 2006).

-18-

increase in patent protection has not spurred ini.ovation
so much as it has impeded the development and use of
new technologies.''

Objective evidence that “overprotection” may be at work
in the information technology industry sector is difficult to
find. In its absence, however, empirical evidence
demonstrates an order of magnitude difference in patenting
in the IT industry sector compared to other high-technology
industry sectors, notably the pharmaceutical industry. As an
example of the comparative patenting intensity in relation to
research and development expenditures, Microsoft expended
$6 billion on R&D in its fiscal year 2005 ending on June
30.'2 During 2005, the United States Patent and Trademark
Office issued a total of 750 patents to Microsoft.’ By
comparison, Amicus Eli Lilly and Company expended $3
billion on R&D during 2005 and was issued 48 patents —
one-half of Microsoft's R&D expense, but one-fifteenth
fewer issued U.S. patent ."*

Comparable data for other leading companies in these two
high-technology industry sectors appears to confirm an order
of magnitude greater intensity of patenting for information

' Keith Maskus, Reforming U.S. Patent Policy: Getting the
Incentives Right, CSR No. 19, Council on Foreign Relations, p. 3, at

www cfr org/content/publications/attachments/PatentCSR.pdf (last
visited Dec. 14, 2006).

. Microsoft Corporation Annual Report, Fiscal Year 2005 at
. ft/ °

ml (last visited Dec. 14, 2006).
’ es 300 Organizations Granted U.S. Patents : 2005, at

conten (last visited December 14, =
* Eli Lilly and Company Annual Report, 2005, p. 1, at

Organizations Granted U.S. Patents in 2005, id

-19-

technology companies: '*

Information Technology Pharmaceutical
IBM 2941 Pfizer 389
Hewlett-Packard 1808 Johnson & Johnson 379
Micron 1561 Bayer 176
Intel 1549 Sanofi-Aventis 145
Texas Instruments 734 Bristol-Myers Squibb 113
Sun Microsystems 715 Merck 100

At least part of this apparent difference in the pattern of
patenting may be attributable to the ability (under current
Federal Circuit jurisprudence) to obtain patents by skirting
the statutory requirements under either or both of sections
101 and 112.

If such overreaching and overprotection are creating the
adverse consequences noted in recent reports and analyses,
the overreaching and overprotection phenomena could be
addressed by this Court holding that section 101’s subject
matter eligibility requirements, as set out by Congress in the
present patent statute and in each of its predecessors for over
200 years, must be rigorously observed - claims and their
constituent elements must be directed to tangible and
physical subject matter.

IV. DISPOSITION BY THIS COURT

Amicus Eli Lilly and Company, therefore, asks that this
Court declare the following:

(1) While Congress intended that anything under the sun
made by man is eligible for patenting, it has limited patent-
eligible subject matter to what is physical and tangible. This

'* Top 300 Organizations Granted U.S. Patents in 2005, id.

-20-

rule excludes patenting software and software code alone,
but does not bar from patent-eligibility tangible inventions
expressed as novel computing machines.

(2) It is not sufficient for patent eligibility that the
subject matter claimed in a patent produce a concrete, useful
and tangible result; the patented subject matter must itself be
concrete, useful and tangible.

(3) Subject matter that is not itself eligible for patenting
cannot represent a component of a combination invention
under 35 U.S.C. § 271(f) because each such component must
itself be a concrete and tangible entity, i.e., each component
must represent something that is or could be expressed as a
claim element that is expressly defined as a structure,
material, or act, or that would be so limited under the
provisions of 35 U.S.C. § 112, sixth paragraph

CONCLUSION

The ruling of the Court of Appeals for the Federal Circuit
should be reversed because it conflicts with the plain
meaning and purpose of sections 101 and 112 of the patent
Statute.

Respectfully submitted,

Robert A. Armitage
James J. Kelley

Counsel of Record
Eli Lilly and Company
940 South East Street
Indianapolis, IN 46225
(317) 277-8110

December 15, 2006

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0243%3A22. Public record. Not legal advice.