Wednesday, February 21, 2007

Supreme Court Hears Microsoft v. AT&T Arguments

The Supreme Court heard oral arguments today on the Microsoft v. AT&T case, which considered

Whether, by exporting the golden masters containing machine-readable object code from which foreign replicated copies were made in foreign countries, installed overseas in foreign-made computers, and sold to foreign end users, Microsoft “supplie[d] . . . from the United States” the “components of a patented invention” in a manner that induced “the combination of such components outside of the United States.”

Theodore Olson argued for Microsoft, while Seth Waxman argued for AT&T (both, incidentally, are former solicitor generals). DOJ attorney Darryl Joseffer argued on behalf of the United States as amicus curiae in support of Microsoft.

To be sure, the arguments quickly became metaphysical, where the Court immediately started digging to determine what the "component" actually was.

Microsoft argued that, if the "component" is the golden master itself, then there is no infringement, because the golden master was not combined in an infringing manner within the U.S. as required by the statute. Moreover, AT&T argued that the object code itself could not be a component, since the object code itself is only an idea:

MR. OLSON: Our position is that it's not a component of the final product computers that are made abroad. What is a component is a replication, a copy of a new hard drive or a new disk that's made a part of those computers which, without which -

JUSTICE KENNEDY: Just the disk but not the information on the disk is the component.

MR. OLSON: The information on the disk is of no use to the computer unless it's made into a physical machine readable document -- object.

* * *

MR. OLSON: The making of the master disk if actually used in a computer with a microphone and a speaker, and that's the liability that existed in the stipulation under 271(a). Making copies is liability domestically under 271(b). If it's going to be liable for foreign made replications, then it must be under 271(f). The language of the statute, we submit is clear. Physical things must be components under 271(f) because they must be supplied from somewhere. Ideas have no physical from. They're in the air. The words used, "supplied from" tells us that it must be a physical thing combined with. Ideas don't combine with physical things to make a patented invention. Physical things do.

The Court accepted (for the most part) that the code and the functional aspects of the code embodied on a physical disk are separable, and thus formed parts of a component that had patentable and non-patentable aspects. Using this rationale, the Court gave AT&T a rough ride on its' position that the object code, and not the disk itself, was the actual component, and that the transmission of the code alone constituted infringement:

JUSTICE STEVENS: [Microsoft doesn't] send [the master disk software] directly from the United States to each of the individual computers in Germany. They send it to a central point which then redistributes it. Is that not right.

MR. WAXMAN: Well, I think that paragraph 7 of the stipulation, it doesn't specify one way or the other, but their case, Justice Stevens, depends upon the following. Because if I -

JUSTICE STEVENS: If you're correct that they're just sending from New York direct to the 500 different machines all on one transmission from New York, there's no lawsuit here.

* * *

JUSTICE SOUTER: Why doesn't that get you right back to the point that Justice Breyer was making? You are saying, I think, in essence if you send a blueprint -- this is like a blueprint. It tells, it tells a machine which may be in Europe how to put the object code on other disks or on hard drives. The machine in Europe is following instructions just the way an artisan would follow a blueprint.

The Jurisdictional Reach of U.S. Patent Law

The Court also raised concerns about applying U.S. patent law on "instructions" that are sent overseas that create an infringing product or process:

JUSTICE KENNEDY: Well, is it an answer to Justice Breyer, or maybe it isn't, that we have no conceptual problem saying there would be liability if this happened within the territorial limits of the United States?

MR. WAXMAN: Absolutely not.

JUSTICE KENNEDY: And so there shouldn't be a greater conceptual problem if you prevail, in applying it abroad.

MR. WAXMAN: That's -

JUSTICE BREYER: Well, sure, there is. It's a bigger [problem].

The CAFC

JUSTICE BREYER: [Y]ou're right, Justice Ginsburg, that the court of appeals for the Federal Circuit thought it was bringing this statute up to date and it even said so. We are making an extension of the statute to keep up to date with the technology. That is not for courts to do.

Software Patents

The Court continued to tease the patent bar with the notion that the Supreme Court may reconsider the patentability of software. During Joseffer's oral argument, the Court raised the issue twice:

JUSTICE BREYER: I take it that we are operating under the assumption that software is patentable? We have never held that in this Court, have we?

MR. JOSEFFER: No, but as I was saying before -

JUSTICE BREYER: So what should we do here? Should, if we are writing this, since it's never been held that it's patentable in this Court -

MR. JOSEFFER: I think if -

JUSTICE BREYER: If I were writing something, should I say on the assumption that it's patentable? Since the issue isn't raised?

* * *

JUSTICE STEVENS: Your time is up, but I want to ask you one yes or no question. In your view is software patentable?

MR. JOSEFFER: Standing alone in and of itself, no.

Read the oral argument transcript here.

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