Software on a Master Disk or Electronically Transmitted from the U.S. is Not a “Component” under §271(f)

United States patents are generally unenforceable against persons that make and sell the patented article abroad.  However, the Patent Act does provide U.S. Patent owners with a remedy against anyone who manufactures a component of a patented article in the U.S. and then exports it abroad where it can be combined with other components to make the patented invention.

In the case of Microsoft Corp. v. AT&T Corp., the Supreme Court grappled with the issue of whether software sent from the U.S. to a foreign manufacturer for inclusion in a device which would thereupon become infringing (the device being destined for markets outside the U.S.) is a “component” that is “combinable” for purposes of §271(f).  The Court held that such software is not and that, therefore, no infringement occurs under these circumstances.

AT&T holds a patent on a computer used to digitally encode and compress recorded speech. Microsoft’s Windows operating system has the potential to infringe that patent because Windows incorporates software code that, when installed, enables a computer to process speech in the manner claimed by the patent.  Microsoft admitted that software bundled with Windows violated an AT&T patent, but argued that it should not be required to pay royalties on copies of the software sold to foreign manufacturers who install the software onto the computers they sell.  AT&T, on the other hand, contended that Microsoft “supplie[d] . . . from the United States,” for “combination” abroad, “components” of AT&T’s patented speech-processing computer, and, accordingly, was liable under §271(f).

The Supreme Court held that because Microsoft does not actually export from the United States the copies of Windows installed on the foreign-made computers in question, Microsoft does not “suppl[y] . . . from the United States” “components” of those computers, and therefore is not liable under §271(f) as drafted by Congress.  The Court reasoned that only a copy of Windows, not Windows in the abstract, qualifies as a “component” under §271(f). Until expressed as a computer-readable “copy,” e.g., on a CD-ROM, Windows—indeed any software detached from an activating medium—remains un-combinable. It is an idea without physical embodiment, and as such, it does not fall within §271(f)’s specification of “components” amenable to “combination.” 

Section 271(f) was a direct response to a gap in U. S. patent law revealed by Deep-south Packing Co. v. Laitram Corp., 406 U. S. 518, in which the items exported were kits containing all the physical, readily-assembleable parts of a machine (not an

intangible set of instructions) that themselves (not foreign-made copies of them) would be combined abroad by foreign buyers. While reading §271(f) to exclude from coverage foreign-made copies of software may create a “loophole” in favor of software makers, the Court deemed that such a so-called “loophole” is properly left for Congress to consider, and to close if it finds such action warranted.

For more information, contact:
William Trueba
wtrueba@kpkb.com
305-379-9000