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

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21LA

No. 05-1056

IN THE

Supreme Court of the United States

MicrOsOFT CORPORATION,

Petitioner,

v.

AT&T Corporation,

Respondent.

On Wait oF CERTIORARI TO THE

Unitep States Court OF APPEALS

FOR THE FEDERAL CIRCUIT

—— -—o-_-_oC- —_—-

BRIEF OF AMICUS CURIAE THE HOUSTON

INTELLECTUAL PROPERTY LAW ASSOCIATION IN

SUPPORT OF NEITHER PARTY

-—-- Orel

— -———

wore SEnEEnEnEiEnenEn

Abert B. Kimsa t, JR.

President

MICHAEL G LOcKLAR*

THomMas M. Morrow

HOUSTON INTELLECTUAL

PROPERTY LAW ASSOCIATION

4720 Three Allen Center

333 Clay Street

Houston, TX 77002

(713) 860-3303

* Counsel of Record Counsel for Amicus Curiae

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COUNSEL PRESS

(ROO) 274-3321 + (ROO) 389-6859

i

QUESTION PRESENTED

The amicus curiae will address the following question:

1. Whether digital software code—an intangible sequence

of _“‘l’s” and “O’s”—may be considered a “component[]

of a patent invention” within the meaning of section

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.”

TABLE OF CONTENTS

Page

QUESTION PRESENTED 2... ccccccccvccccess i

TABLE OF CONTENTS ............0c0ee0e0e: ii

TABLE OF CITED AUTHORITIES ............ iv

INTERESTS OF THE AMICUS CURIAE ....... l

ED 6 vauwis bbe uee deeb SEKE OKO DEDS 2

SUMMARY OF ARGUMENT ................. 3

PE Wa6 coc pcasshebbetassebemriéne ss 5

A. The Federal Circuit’s Conclusion that Digital

Software Code Constitutes a “Component”

Under Section 271(f) is Consistent with the

Text and the Legislative History of the

Statute, and Should Be Affirmed ......... 5

1. Neither Section 271(f) nor its Legislative

History Limit the Term “Component” in a

Manner that Excludes Software .......... 5

2. None of the Arguments Raised By Microsoft

Before the Federal Circuit Justify Excluding

Software from the Coverage of Section

BOER sci nddenenesacceapeaseberVeccdwds 6

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Contents

Page

B. The Federal Circuit’s Reading of “Supplied”

to Include “Copying” is _ Strained,

Unsupported by Section 271(f), and Should

ED a 6.55 bd reas ch bdebeennbiawe 8

CONCLUSION

iv

TABLE OF CITED AUTHORITIES

Page

Cases: ’

AT&T Corp. v. Microsoft Corp., 2004 WL 406640,

71 U.S.P.Q.2d 1118 (S.D.N.Y. 2004) .......... 2,6

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

es POE noi sc cbnnees dencswcdao wn 3, 10, 11

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

PETE i cWoleeé Ki xegaccbmavetanevawnays 9, 12

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

ey eee Pee 5, 10

In re Beauregard, 287 F.3d 1583 (Fed. Cir. 1995) ... 12

In re Berhart, 417 F.2d 1395 (C.C.P.A. 1969) .... 8

Statutes:

SUSE (Ie ............ ee aay 3, 12

SP OOD. cscdcbasccediesesivessaaent 3

I i de a wis aoe passim

v

Cited Authorities

Page

‘Miscellaneous:

130 Cong. Rec. 28,073 (1984) ................. 6,9

. .g § & & PPE pep Te 2,3

Replacement-Reply Brief for Def.-App. Microsoft

Corp. before the Federal Circuit ............. 6

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INTERESTS OF THE AMICUS CURIAE

The Houston Intellectual Property Law Association

(HIPLA) is an association of over 400 lawyers and other

professionals who work in the Houston, Texas area.'

The practice of most of the HIPLA membership relates in

substantial part to the field of intellectual property law.

Founded in 1961, HIPLA is one of the largest associations

of intellectual property practitioners. No HIPLA member has

served as record counsel to any party in the subject of this

appeal.

HIPLA members often are called upon to advise their

clients in matters involving the statute at issue in this case,

35 U.S.C. § 271(f). HIPLA believes that the Federal Circuit

correctly determined that the term “component” in section

271(f) is properly read to include “software.” However, the

other holding by the Federal Circuit in this case, that the

term “supplying” in section 271(f) is properly read, for

software cases only, to include “copying,” is a holding that

HIPLA believes to be erroneous.

Section 271(f) is a statutory provision of great

consequence to many clients of HIPLA members. These

clients depend upon HIPLA members for reliable advice in

determining whether current or prospective activities will or

will not run afoul of the statute. Because the Federal Circuit’s

holding that software constitutes a component within the

meaning of section 271(f) is a natural reading of the statute

' No counsel for a party authored this brief in whole or in part,

and no person or entity other than amicus curiae, its members or

counsel, has made a monetary contribution to the preparation or

submission of this brief.

2

and legislative history, this amicus respectfully requests this

Court to affirm such holding. Because the Federal Circuit’s

holding that “supplying” software under section 271(f)

includes copying is a strained reading of the statute and

legislative history, and requires the creation of an

unwarranted special exception in software cases, this amicus

respectfully requests this Court to reverse such holding.

BACKGROUND

Microsoft creates and tests in the United States certain

software related to digitally encoding and compressing

recorded speech. AT&T Corp. v. Microsoft Corp., 2004 WL

406640 at *1, 71 U.S.P.Q.2d 1118 (S.D.N.Y. 2004). Microsoft

distributes this software by first inscribing it on a “golden

disk” in the United States. Jd. This golden disk is then sent

to a foreign country where foreign original equipment

manufacturers replicate the code, and load the replicated code

onto foreign-assembled computers, which are then sold to

consumers. Jd. While the golden disk is created in and

shipped from the United States, all other steps described

above take place outside the United States. Jd. The software

on the golden disk is never directly incorporated into its

ultimate consumer’s computer system, but is always first

replicated outside the United States from the golden disk

and the replicated code transferred to the foreign-assembled

computer. /d.?

AT&T’s patent, RE 32,580, has claims drawn to

“a speech processor” and an “[a)]pparatus for encoding a

speech pattern.” See, e.g., RE 32,580 (claims 11 and 24). In

? Alternatively, rather than ship a “golden disk,” the transfer is

accomplished via electronic transmission. /d.

3

general, these claims include computer hardware on which

software is loaded that enables the hardware to encode speech

patterns. Jd.’ On June 4, 2001, AT&T filed suit against

Microsoft, alleging that certain of Microsoft’s products

containing “speech codecs”—software programs—infringed

AT&T’s patent. Jd. at *1 & n.1.

At trial, the parties stipulated to infringement of the

apparatus claims for sales in the United States under

35 U.S.C. §§ 271(a) and (b).AT&T Corp. v. Microsoft Corp.,

414 F.3d 1366, 1368 (Fed. Cir. 1995). The issue addressed

by the trial court and now on appeal is whether Microsoft

should be liable for sales in foreign countries under 35 U.S.C.

§ 271(f). The trial court and the Federal Circuit both found

liability under section 271(f) for Microsoft’s foreign

activities. According to the Federal Circuit, software

constitutes a “component” under section 271(f) and “[g]iven

the nature of the technology, the ‘supplying’ of software

commonly involves generating a copy.” AT&T, 414 F.3d at

1370. Based on this interpretation, the Federal Circuit found

that copying was subsumed in “supplying” for purposes of

section 271(f)(1) and liability attached to all of Microsoft's

computer systems created and sold outside of the United

States. According to the majority of the panel, “[t]o decide

otherwise would emasculate 271(f) for software inventions.”

Id. at n.2.

SUMMARY OF ARGUMENT

With regard to the first question presented, HIPLA agrees

with the district court and the Federal Circuit that software

> RE32580 also has method claims that are not at issue in this

appeal.

4

does constitute a component under section 271(f). This result

follows naturally from the statutory text and legislative

history, neither of which contain any suggestion that

“component” should be limited by technology so as to |

exclude software. Moreover, the arguments raised by

Microsoft in its briefing to the Federal Circuit do not justify

the judicial carve-out of an exception for software.

However, with regard to the second question presented,

HIPLA believes that “supplying” under section 271(f) does

not include copying, and Microsoft should not be liable under

section 271(f) for its overseas copying of golden disks

containing software loaded onto those disks in the United

States. Just as software should be treated the same as other

elements when determining whether it is a “component”

under section 271(f), so should software be treated when

determining whether it has been “supplied” within the

meaning of the statute. The Federal Circuit’s decision to read

“supplying” to include “copying,” exclusively for cases

involving software, is unsupported by the text of section

271(f) and its legislative history, and also directly conflicts

with the Federal Circuit’s own precedent. This holding by

the Federal Circuit greatly expands the extraterritorial reach

of the statute, and ignores viable alternative strategies that

companies such as AT&T could pursue to better compete

with companies like Microsoft overseas.

5

ARGUMENT

A. The Federal Circuit’s Conclusion that Digital

Software Code Constitutes a “Component” Under

Section 271(f) is Consistent with the Text and the

Legislative History of the Statute, and Should Be

Affirmed

The Federal Circuit held that software constitutes a

component under section 271(f), noting that the text of the

statute does not limit the term “to patented ‘machines’ or

patented ‘physical structures.’” /d. at 1369 (citing Eolas

Techs., Inc. v. Microsoft Corp., 399 F.3d 1325, 1339

(Fed. Cir. 2005)). Because this holding by the Federal Circuit

is consistent with the text and legislative history of the statute,

and because Microsoft has shown no justification for a

judicially-created exception for software, this Court should

affirm the Federal Circuit’s holding.

1. Neither Section 271(f) nor its Legislative History

Limit the Term “Component” in a Manner that

Excludes Software

Neither of the twin prongs of section 271(f) restrict the

term “component” so as to exclude software from the

meaning of the term. Paragraph (1) of section 271(f) places

no limitations on “component”, and paragraph (2) limits

“component” only in that the “component” be “especially

made or especially adapted for use” in the patented invention,

and thus “not a staple article or commodity of commerce

suitable for substantial noninfringing use... .” 35 U.S.C.

§ 271(f). Nothing in paragraph (2) automatically excludes

software from constituting a component of a patented

invention. Software can be written for a particular purpose

6

that falls within the scope of a patented invention, as in this

case. Microsoft does not dispute that its object code is

especially made for use in its Windows operating system,

which was found to infringe AT&T’s patent. AT&T Corp.,

2004 WL 406640, at *3. Having been written for such

purpose, Microsoft’s object code—software—is not a staple

article or commodity suitable for substantiai noninfringing

use.

The legislative history of section 271(f) similarly

provides no justification for the exclusion of software from

the statute’s scope. See 130 Cong. Rec. 28,073 (1984)

(statement of Rep. Kastenmeier). Software is not mentioned

in the legislative history, nor does anything in the legislative

history evidence an intent by Congress to exclude software

from coverage by the statute.

2. None of the Arguments Raised By Microsoft

Before the Federal Circuit Justify Excluding

Software from the Coverage of Section 271(f)

In its briefing to the Federal Circuit, Microsoft

sought to split “software” into two forms—” intangible

software information” and “tangible software media.”

See Replacement-Reply Brief for Def.-App. Microsoft Corp.

before the Federal Circuit, at 6-7. Having made this

distinction, Microsoft then frames the issue for appeal as

whether intangible software information qualifies as a

component under Section 271(f). /d. at 8. Microsoft argues

that it cannot, on the grounds that intangible software

information constitutes nothing more than a set of

instructions, which could even be expressed in a form stored,

for example, in the human mind. /d. at 7. Microsoft also

emphasizes that intangible software information is not

separately patentable. /d. at 10.

7

Accepting arguendo Microsoft’s division of software

into tangible and intangible portions, such division does

nothing to further Microsoft’s argument for an exception from

section 271(f). Neither the statutory text nor its brief

legislative history make reference to tangibility as a

requirement for coverage under the statute. Similarly, despite

the emphasis Microsoft places on the non-patentability of

intangible software information, protection under section

271(f) is not limited to only those components that

themselves could be separately patentable. Put simply, though

software information may be intangible and unpatentable by

itself, neither of these attributes bars it from constituting a

“component” under section 271(f).

Microsoft’s attempt to liken intangible software

information to a set of instructions, or a pattern for a key for

a lock, a pattern for a tire mold, or a pattern for a circuit

chip, id. at 11, disguises the critical difference separating

software from all of these comparators: software is capable

of becoming incorporated (i.e., stored) within a patented

product, whereas the others cannot. A keymaker, for example,

can lay a paper set of instructions next to his machinery while

creating the key, but the paper cannot become incorporated

within the key. The pattern depicted on the paper set of

instructions, or the tire mold, subsequently may be illustrated

by the appearance of the key, or the outer surface of the tire,

when the key or tire are created so as to resemble the pattern

depicted on the paper or the mold, respectively, but neither

the paper nor the mold have become incorporated within

the object they were used to create. In contrast, intangible

software information, unique among all the foregoing

examples, is capable of becoming incorporated within a

patented computer product.

8

Indeed, Microsoft’s treatment of the Berhart case

supports this conclusion. /d. at 12 (citing Jn re Berhart,

417 F.2d 1395 (C.C.P.A. 1969)). Microsoft acknowledges

without argument Berhart’s recognition that a programmed

computer “is physically different from the machine without

that program.” /d. (citing Berhart at 1400). This difference

arises because the programming of a computer using

intangible software information rearranges its memory

elements. Jd. Though Microsoft emphasizes that

“no molecules are added or subtracted during the

programming process,” it agrees that the computer is

“physically changed” by the incorporation of the software.

Id. Whether the physical change involves a numerical

difference in the number of molecules incorporated

within the product is unlikely to have been a concern of

Congress, and does not justify creating an exception from

section 271(f) for software.

Whether in tangible or intangible form, software is

capable of becoming incorporated into a patented product,

and thus is capable of being a component of a patented

product so as to qualify for protection under section 271(f).

This Court should affirm the Federal Circuit’s holding that

software constitutes a component within the meaning of

section 271(f).

B. The Federal Circuit’s Reading of “Supplied” to

Include “Copying” is Strained, Unsupported by

Section 271(f), and Should Be Reversed

Section 271(f) was enacted to “prevent copiers from

avoiding U.S. patents by supplying components of patented

products in this country so that the assembly of the

components may be completed abroad” and responded

9

“to the United States Supreme Court decision in Deepsouth

Packing Co. v. Laitram Corp., concerning the need for a

legislative solution to close a loophole in patent law.”

130 Cong. Rec. 28,073 (1984) (statement of Rep.

Kastenmeier) (citation omitted). There is no specific

discussion of the meaning of “supplying,” except as is

implied by the Deepsouth case.

In Deepsouth, this Court considered a defendant who

manufactured all of the parts of a shrimp-deveining machine

in the United States that would have infringed the plaintiff's

patent had it been assembled in the United States. Deepsouth

Packing Co. v. Laitram Corp., 406 U.S. 518, 523-24 (1972).

Instead, the defendant intended to ship all of the parts of the

machine outside the United States for assembly and use there

by foreign buyers. /d. at 523. Assembly was so minor as to

take less than an hour once all the parts were received.

Id. at 524. In Deepsouth, the components that were

manufactured in the United States were those that were

assembled into a device that fell within the claims of the

patent. /d. at 523. However, because there was no direct

infringement in the United States, this Court declined

to find liability in the absence of Congressional directive.

Id. at 526-27 & 532.

In contrast to the Deepsouth case, in this case, the

component that is shipped from the United States is never

combined into an apparatus that falls within the scope of the

claims. The golden disk is not combined into the apparatus,

nor is the software that is on the disk ever loaded onto the

apparatus—The Federal Circuit found liability for this

operation by redefining, for software only, “supplying” to-

include a manufacturing operation that operates wholly

outside of the United States, deciding that “copying” should

10

be included within the definition of “supplying.” AT&T, 414

F.3d at 1370.

If the component manufactured in the United States and

shipped to a foreign country for combination in the claimed

invention had been a special type of bolt and that prototype

bolt had been copied millions of times outside of the United

States for inclusion in machines that fell within the claims,

the Federal Circuit would have not found infringement of

the patent claims.‘ Yet, aside from the ease of copying

software, the Federal Circuit does not provide any reason

why software should be treated differently from other

components. Nothing in the statute implies that for software,

“copying” should be included in “supplying,” nor is any such

indication found in the legislative history.

: The Federal Circuit’s own precedent is to the contrary.

In Eolas Techs. Inc. v. Microsoft Corp., the Federal Circuit

found that “sound policy again counsels against varying the

definition of ‘component of a patented’ invention according

to the particular form of the part under consideration [].”

399 F.3d 1325, 1339-40. No sound reason exists to require

that software should be treated the same as other elements

when determining whether it is a “component” under section

271(f), and differently when determining whether it has been

“supplied.” The Federal Circuit’s reasoning in the Eolas case

was sound that software should be treated equally with all

other components under section 271(f).

* “Accordingly, for software “components,” the act of copying

is subsumed in the act of “supplying,” such that sending a single

copy abroad with the intent that it be replicated invokes § 271(f)

liability for those foreign-made copies.” AT&T, 414 F.3d at 1370

(emphasis added).

1]

As argued by the dissent, the majority’s reasoning does

not support reading “copying” into “supplying,” even for

software:

To the contrary, copying and supplying are

separate acts with different consequences—

particularly when the “supplying” occurs in the

United States and the copying occurs in

Diisseldorf or Tokyo. As a matter of logic, one

cannot supply one hundred components of a

patented invention without first making one

hundred copies of the components, regardless of

whether the components supplied are physical

parts of intangible software.

AT&T, 414 F.3d at 1373 (Rader, J., dissenting). It would no

doubt surprise a software manufacturer to learn that by

“supplying” a single copy of software to one of his customers

he was in fact also allowing that customer to copy the

software for use on many other machines.’

By expanding the scope of “supplying” to include

copying, the Federal Circuit greatly extends the

extraterritorial reach of section 271(f). With physical

components, the manufacture is largely within the United

States and the infringing act, that of shipping the items

* Had Microsoft chosen to stream its software electronically

and directly onto its ultimate customers’ computers, the Federal

Circuit’s decision result may very well have been the correct one.

In such a case, the software component would have been supplied

from the United States for incorporation into a machine that would

infringe th patent claims, had it been assembled in the United States.

Microsoft did not choose such a method of supplying its software to

its foreign customers and so docs not fall within section 271(f).

12

abroad, takes place within the United States. By including

copying within “supplying,” the Federal Circuit includes in

the infringing act an entire manufacturing operation that takes

places wholly outside of the United States. Congress has not

evidenced an intent to capture such activities.

“Supplying,” as used in the context of section 271(f)

means what would be expected from a fair reading of the

Deepsouth case and the congressional response — the

component that originates in the United States is incorporated

into a product that falls within the scope of the claims.

Manufacturing processes that occur outside the United States

do not fall within the definition of “supplying.”

The Federal Circuit’s fear of “emasculating” the statute

for software inventions is an ill-founded one. Many options

exist in drafting claims for software. For instance, software

developers have the option of drafting patent claims to

computer programs fixed in a tangible medium, such as the

golden disks used by Microsoft. The use of such claims would

protect the patentee from the unauthorized manufacture in

and shipment from the United States of software on “golden

disks,” as these unauthorized activities would be covered by

section 271(a).° It is unnecessary to stretch the definition of

“supplying” to encompass acts wholly outside of the United

States to accommodate claim-drafting decisions by a

patentee.

This Court should reject any expansion of the scope of

section 271(f) beyond that specifically covered by the statute.

° These claims are termed “Beauregard claims”, based on the

case in which they were first allowed. See In re Beauregard,

287 F.3d 1583 (Fed. Cir. 1995).

No special “software” scope expansion has been mandated

by Congress and no sound reason exists for this Court to

include one.

HIPLA respectfully requests that this Court affirm the

Federal Circuit’s holding that software constitutes a

component within the meaning of section 271(f), and reverse

the Federal Circuit’s holding that “supplying” software under

13

CONCLUSION

section 271(f) includes copying.

* Counsel of Record

Respectfully submitted,

ALBERT B. KIMBALL, JR.

President

MicHAgeL G LOcKLAR*

THomMas M. Morrow

HousTON INTELLECTUAL

Properry Law ASSOCIATION

4720 Three Allen Center

333 Clay Street

Houston, TX 77002

(713) 860-3303

Counsel for Amicus Curiae

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