At & T Corp. v. Microsoft Corp., 04-1285.

• Citation: 414 F.3d 1366
• Decision Date: 13 July 2005
• Docket Number: No. 04-1285.,04-1285.
• Parties: AT & T CORP., Plaintiff-Appellee, v. MICROSOFT CORPORATION, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

414 F.3d 1366

AT & T CORP., Plaintiff-Appellee, v. MICROSOFT CORPORATION, Defendant-Appellant.

No. 04-1285.

United States Court of Appeals, Federal Circuit.

July 13, 2005.

Stephen C. Neal, Cooley Godward LLP, of Palo Alto, California, argued for plaintiff-appellee. With him on the brief were Jonathan G. Graves and Nathan K. Cummings, of Reston, Virginia. Of counsel on the brief was Laura A. Kaster, AT & T Corp., of Bedminster, New Jersey.

Dale M. Heist, Woodcock Washburn LLP, of Philadelphia, Pennsylvania, argued for defendant-appellant. With him on the brief were David R. Bailey and Lynn B. Morreale. Of counsel on the brief were James H. Carter and James T. Williams, Sullivan & Cromwell LLP, of New York, New York, and Thomas Andrew Culbert, Microsoft Corporation, of Redmond, Washington.

John D. Vandenberg, Klarquist Sparkman, LLP, of Portland, Oregon, for amici curiae Wacom Technology Corporation, et al.

Frank E. Scherkenbach, Fish & Richardson P.C., of Boston, Massachusetts, for amici curiae Adobe Systems, Inc., et al. With him on the brief was Kurt L. Glitzenstein. Of counsel on the brief was Jennifer K. Bush, of San Diego, California.

Before MAYER, LOURIE, and RADER, Circuit Judges.

Opinion for the court filed by Circuit Judge LOURIE.

Dissenting opinion filed by Circuit Judge RADER.

LOURIE, Circuit Judge.

Microsoft Corporation ("Microsoft") appeals from the judgment of the United States District Court for the Southern District of New York in favor of AT & T Corp. ("AT & T"), holding that Microsoft was liable for infringement of AT & T's United States Reissue Patent 32,580 under 35 U.S.C. § 271(f) for copies of the Windows® operating system that had been replicated abroad from a master version sent from the United States. AT & T Corp. v. Microsoft Corp., No. 01-CV-4872 (S.D.N.Y. Mar. 5, 2004). We affirm.

BACKGROUND

To facilitate international distribution of its flagship product, Microsoft supplies a limited number of master versions of the Windows® software to foreign computer manufacturers and authorized foreign "replicators," who, pursuant to their licensing agreements with Microsoft, replicate the master versions in generating multiple copies of Windows® for installation on foreign-assembled computers that are then sold to foreign customers. The master versions are created in the United States and are sent abroad on so-called "golden master" disks or via electronic transmissions.

The master versions of Windows® thus exported incorporate certain speech codecs,¹ which, when installed on a computer, are alleged to infringe AT & T's '580 patent. During the course of AT & T's suit against Microsoft for patent infringement, Microsoft moved in limine to exclude evidence of purported liability under 35 U.S.C. § 271(f) arising from foreign sales of Windows®. In support of its motion, Microsoft argued that: (1) software is intangible information such that it could not be a "component" of a patented invention within the meaning of § 271(f); and (2) even if the Windows® software were a "component," no actual "components" had been "supplied" from the United States as required by § 271(f) because the copies of Windows® installed on the foreign-assembled computers had all been made abroad.

By stipulation, the parties subsequently converted Microsoft's motion in limine into a motion for partial summary judgment of noninfringement under § 271(f), which the district court denied on the basis that neither the jurisprudence surrounding § 271(f) nor its legislative history supported Microsoft's reading of the words "component" and "supplied." Reasoning that the patentability of software was well-established and that the statute did not limit "components" to tangible structures, the district court rejected Microsoft's argument that software could not be a "component" of a patented invention under § 271(f). As for copies made abroad from a master version sent from the United States, the district court ruled that such copies were not shielded from § 271(f) in light of the statute's purpose of prohibiting the circumvention of infringement through exportation. The parties thereafter agreed to the entry of a stipulated final judgment holding Microsoft liable for infringement under § 271(f), while expressly reserving Microsoft's right to appeal that issue.

This appeal followed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

DISCUSSION

On appeal, Microsoft argues that the district court erred in its determination of infringement under § 271(f), insisting that the master versions of the Windows® software that it exports for copying abroad are not "components" within the meaning of § 271(f). It also argues that liability under § 271(f) should not attach to the copies of Windows® made abroad because those copies are not "supplied" from the United States.

The first question, i.e., whether software may be a "component" of a patented invention under § 271(f), was answered in the affirmative in Eolas Techs. Inc. v. Microsoft Corp., 399 F.3d 1325 (Fed.Cir.2005), which issued while the instant appeal was pending. In that case, we held that "[w]ithout question, software code alone qualifies as an invention eligible for patenting," and that the "statutory language did not limit section 271(f) to patented `machines' or patented `physical structures,'" such that software could very well be a "component" of a patented invention for the purposes of § 271(f). Id. at 1339.

The remaining question, then, is whether software replicated abroad from a master version exported from the United States-with the intent that it be replicated—may be deemed "supplied" from the United States for the purposes of § 271(f). That question is one of first impression, the answer to which turns on statutory interpretation, an issue of law that we review de novo. Romero v. United States, 38 F.3d 1204, 1207 (Fed.Cir.1994). The statute at issue, 35 U.S.C. § 271(f), provides that:

(1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

35 U.S.C. § 271(f) (2000) (emphases added).

In its briefs, Microsoft maintains that no liability attaches under § 271(f) for foreign-replicated copies of Windows® because they are not "supplie[d] or cause[d] to be supplied in or from the United States." According to Microsoft, a foreign-replicated copy made from a master version supplied from the United States has actually been "manufactured" abroad by encoding a storage medium with the Windows® software. We disagree that no liability attaches.

When interpreting a statutory provision "[w]e start, as always, with the language of the statute," giving the words "their ordinary, contemporary, common meaning, absent an indication Congress intended them to bear some different import." Williams v. Taylor, 529 U.S. 420, 431, 120 S.Ct. 1479, 146 L.Ed.2d 435 (2000) (internal quotation marks and citations omitted). As the statute sets forth no specific definition of the word "supplied," we accordingly look to its "ordinary, contemporary, common meaning," which is necessarily context-dependent. In the present case, § 271(f) is being invoked in the context of software distribution. Therefore, in order for us to properly construe the "supplie[d] or cause[d] to be supplied in or from the United States" requirement, we must look at the way software is typically "supplied."

Given the nature of the technology, the "supplying" of software commonly involves generating a copy. For example, when a user downloads software from a server on the Internet, the server "supplies" the software to the user's computer by transmitting an exact copy. Uploading a single copy to the server is sufficient to allow any number of exact copies to be downloaded, and hence "supplied." Copying, therefore, is part and parcel of software distribution. 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.²

Indeed, Microsoft has taken full advantage of the replicable nature of software to efficiently distribute Windows® internationally. At the same time, however, Microsoft posits that § 271(f) liability should attach only to each disk that is shipped and incorporated into a foreign-assembled computer. See Tr. of Dec. 12, 2003 Hearing, at 16:10-17 (J.A. 359). We reject this theory of liability as it fails to account for the realities of software distribution. "[T]he appellate process is not a mere academic exercise," Rosemount, Inc. v. Beckman Instruments, Inc., 727 F.2d 1540, 1543 (Fed.Cir.1984), and we cannot disregard the nature of the relevant technology and business practices underlying a particular litigation. It is inherent in the nature of software that one can supply only a single disk that may be replicated-saving material, shipping, and storage costs—instead of supplying a separate disk for each copy of the software to...