By Kevin E. Noonan --
Lost in the reaction to KSR Int'l Co. v. Teleflex Inc. two weeks ago was the Court's decision in Microsoft Corp. v. AT&T Corp., rendered on the same day. While not directed to a biotechnology invention, the case has interesting implications for the relationship between activities overseas and the extraterritorial reach of U.S. patent law.
AT&T holds a patent on an apparatus for speech recognition technology. The patented apparatus comprises in combination a computer and software loaded on the computer. The parties agreed that stand-alone copies of the software, or a computer, did not infringe AT&T's apparatus claim, but that a computer running the Microsoft Windows operating system would infringe. At issue was whether Windows-based computers outside the U.S. would infringe and be included in the damages calculus owed by Microsoft.
Microsoft's extra-territorial activities consist of sending a master (or "golden") disk to foreign computer manufacturers, who (significantly for the majority decision here) copy this master disk into several working disks that are actually used to upload the Windows software into their OEM computers. (Under certain circumstances, the Windows software is "streamed" over the Internet rather than being sent as a physical disk, but these delivery methods had no effect on the Court's decision.) These working disks are thus the means by which the software was loaded onto computers sold abroad, and it was admitted that loading the software onto a computer produced an apparatus that, were it to be made, used, sold, offered for sale or imported into the U.S., would constitute an act of infringement.
The Court was called upon to determine the scope of 35 U.S.C. § 271(f) as it applies to computer software. This statute, which has the effect of providing patent infringement liability for infringing actions performed abroad, was enacted in response to the Supreme Court's earlier decision in Deepsouth Packing Co. v. Laitram. In that case, the Court had determined that it was not an act of infringement to produce the parts of a patented device and ship them abroad, where they were reassembled into the patented machine. The Court declined the opportunity to declare such activity to be patent infringement, since declaring this activity to be patent infringement would have extended the reach of U.S. patent law beyond the country's borders, and the Court considered this extraordinary step to require Congressional action. In enacting 35 U.S.C. § 271(f), Congress responded by making the shipment of "all or a substantial portion" of a patented device out of the country to be reassembled abroad an infringing activity subjecting a party to liability for patent infringement.
The technology in Deepsouth Packing was a mechanical device – a shrimp deveining machine. There is a clear analogy between the facts of the Deepsouth Packing case and the situation in the Microsoft case, but here one of the components was software. Once again, the Court decided that extending extraterritorial liability for assembling a patented apparatus by loading software onto a computer was beyond its Constitutional mandate, leaving it to Congress to amend 35 U.S.C. § 271(f).
The relevance of this case to biotechnology is based on the Court's distinction between the facts in Deepsouth Packing and those before it in Microsoft. The majority based its decision, at least in part, on the fact that the apparatus "component" shipped from this country (i.e., the "golden disk" containing the software program) was not used directly to produce the patented apparatus, but rather, that the information on the disk was copied into working copies used for the production phase. To AT&T's argument that this was merely an easily-performed, trivial reproduction step that did not change the nature of the infringing activity, the Court stated:
Keys or machine parts might be copied from a master; chemical or biological substances might be created by reproduction; and paper products might be made by electronic copying and printing. (Slip op. at 14)
The analogy of the Microsoft case for biotechnology is evident. Where the apparatus is a recombinant cell (that produces a particular protein or otherwise performs a function), the computer is a cell capable of expressing the protein, and a recombinant expression construct comprising a gene encoding said protein is equivalent to "software." Under the teachings of the Microsoft case, sending such a recombinant expression construct abroad should not be considered an act of infringement if such a construct was introduced into a cell and used to produce the encoded protein, even in the face of U.S. patent claims on the recombinant cell. Whether the act would be infringing could depend on whether the construct was also claimed, and whether sending the construct overseas would constitute a "use." But merely sending DNA out of the country is unlikely to be a use of the construct, since it is not being used in any way (analogous to sending the "golden disk" overseas).
The Supreme Court's Microsoft decision did not address other aspects of this hypothetical situation, and there are ancillary activities that could constitute infringement (such as preparing the construct or producing useful quantities of it). However, in view of the similarities between the facts in Microsoft and a recombinant cell, and the potential for Congress to address legislatively the question of whether 35 U.S.C. § 271(f) should be extended to encompass the situation in Microsoft, there is a possibility that Congress could change the statutory language in a way not limited to software. Any such change would inure to the benefit of the biotechnology industry, preventing efficient recombinant genetic technology from being shipped overseas and used to produce useful biological products; this would be particularly important in cases where the product itself is either unpatented or for which patent protection has been exhausted.
Microsoft Corp. v. AT&T Corp. (2007)
Opinion by Justice Ginsburg
Concurring in part: Justice Alito with Justices Thomas and Breyer
Dissenting: Justice Stevens
Additional information regarding this case can be found at Patently-O.