Guest Column on Extraterritoriality

This is the first in what I hope to be many guest columns. If you or anyone you know would like to post an article on WApatents.com, just send it to me for review. I reserve the right not to publish or to edit any articles you send me. Articles posted do not necessarily reflect my own views on the law; so if you disagree with something in a guest column, post a comment and contact the author.

This article is from Paul Beattie, an experienced Seattle patent litigator. What follows is a brief snippet from Paul's article. The full article is attached.

Extraterritorial Abdication: Extraterritorial Infringement Outpaces Extraterritorial Protection

By Paul Beattie[1]

The past twenty years have seen a progressive shift in economic activity, particularly manufacturing, away from the United States, Japan, and Europe to developing countries.[2] More and more inventions conceived in the “West” are being exploited in developing countries, often with no royalty payments to the inventors or their assignees. We are living through a colossal transfer of knowledge and invention from the developed to the developing world – although this transfer is seldom remarked upon.[3] U.S. patent law has been slow to recognize these realities and to extend U.S. patent protection to “infringing” activities abroad, perhaps out of sympathy for the developing world and out of fear that other countries will follow suit and attempt to enforce their laws here. Politics aside, U.S. patent law has failed to adapt to a world in which more and more infringement takes place overseas.

U.S. patent law has traditionally not been given so-called “extraterritorial” effect. As the Supreme Court stated in the recent case of Microsoft Corp. v. AT&T Corp., “[i]t is the general rule under United States patent law that no infringement occurs when a patented product is made and sold in another country.”[4] This is reflected in the main infringement provision in the U.S. patent statute, which states that “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention . . . infringes the patent.”[5] U.S. patent law thus generally targets infringing activities within the United States, with minor exceptions.

Footnotes:

[1] Paul H. Beattie is a shareholder in the Seattle Office of Schwabe, Williamson & Wyatt. He can be reached at pbeattie@schwabe.com or at (206) 407-1566.
[2] Pete Engardio et al., The New Global Job Shift, Business Week Online, http://www.businessweek.com/%20magazine/content/03_05/b3818001.htm (Feb. 3, 2003); Josh Bivens, Economic Policy Institute Briefing Paper, Trade Deficits and Manufacturing Job Loss: Correlation and Causality.
[3] See, e.g., The Sydney Morning Herald, Chinese Accused of Stealing American Technology, http://www.smh.com.articles/2007/11/16/1194766968231.html.; Jacob Goldstein, Brazil Breaks Merck’s Patent on Aids Drug, Wall Street Journal.com, http://blogs.wsj.com/health/2007/05/04/brazil-breaks-mercks-patent-on-aids-drug/ (May 4, 2007); Mary Kopczynski, Robin Hood versus the Bullies: Software Piracy and Developing Countries, Rutgers Comp. & Tech. L. J. (Summer, 2007).
[4] Microsoft Corp. v. AT&T Corp., 127 S. Ct. 1746, 1750 (2007).
[5] 35 U.S.C. § 271(a) (emphasis added).

Extraterritorial%20Abdication1.doc

Microsoft Settles Mouse Patent Case

Two related patent cases brought by Plaintiff F and G Research Inc. against Microsoft were consolidated by Judge Martinez, and then re-assigned to Judge Jones. The cases involved U.S. Patent No. 5,313,229 for a "Mouse and Method for Concurrent Cursor and Scrolling Position." In an order dismissing the cases with prejudice, Judge Jones indicated that the parties have reached a settlement. So far, details of the settlement remain confidential.

Peter Sklar and Microsoft Resolve Patent Dispute

Individual patent holder Peter Sklar and Microsoft resolved their dispute over infringement allegations stemming from claim 5 of U.S. Patent Nos. 6,025,843 and in claims 11 and 19 in 6,243,094. The parties entered a stipulation dismissing all claims with prejudice. The case was pending in the ED of Texas, case No. 2:06-CV-7, before Judge Leonard Davis. In July, Judge Davis entered a claim construction ruling favorable to Sklar, which prompted a motion to reconsider by Microsoft, which was promptly denied. Those orders are attached below. From the looks of the case history and the claims construction ruling, one can speculate that some kind of settlement was reached. The claims at issue were drawn to user interfaces. From Judge Davis' claims construction order:

"Sklar co-developed an improved user interface for performing computer database searches
and filtering search results that resulted in U.S. Patent No. 5,790,121 (“the ‘121 patent”). The
improved user interface uses selective clustering of the items to be displayed. Selective clustering is a way for the user interface to group items that will not fit side-by-side in the display area due to crowding, while leaving ungrouped those items that can be displayed without interfering with one another."
SklarclaimconstructionOrder.pdfSklarreconsidDeniedOrder.pdf

Z4 files New Patent Infringement Suit Against Microsoft

After winning a huge victory againts Microsoft before the Federal Circuit Court of Appeals (I had reported the verdict was $160M here, this includes the $18M verdict against co-defendant Autodesk, Inc.), Plaintiff Z4 Technologies filed a new infringement lawsuit against Microsoft's Office 2007 and Vista products. The case is filed in The Eastern District of Texas on the same patents. According to Z4's Complaint, “In its Vista and Office 2007 products, Microsoft has made an insignificant change in Product Activation technology found to infringe in [the prior case against Microsoft].” After victory before the Federal Circuit it will be interesting to see where this case goes. According to an article in IP 360, damages have not been estimated and Microsoft denies that its Vista and Office 2007 Products violate the patents. The patents at issue are U.S. Patent Numbers 6,044,471 and 6,785,825. The ‘825 patent, issued in August 2004, is titled “Method for securing software to decrease software piracy” and deals with using an authorization code to enable software. The ‘471 patent, issued in March 2000, has a similar title, “Method and apparatus for securing software to reduce unauthorized use,” and relates to using a password or a series of passwords to operate software. Click here for a link to download the patents.

In Defense of Software Patents

Software patents are under attack and have been for quite some time. The debate is most polarized between small software start-ups and large multi-national technology companies who rely on software either as a direct source of revenue or to increase profits in other ways. The momentum against patenting software is greatest in the open-source community. More and more politicians are engaging in the patent debate and surely will be asked to take a position one way or another on the issue of patenting software. Anyone working in technology has an opinion about whether software should be patented. Some Justices of the U.S. Supreme Court seem against patenting software. At February's oral argument in the ATT v. Microsoft case, Justices Breyer and Stevens raised the issue, which was merely collateral to the issues on review.

MR. OLSON [For Microsoft]: The '580 patent is a program, as I understand it, that's married to a computer, has to be married to a computer in order to be patented.
JUSTICE SCALIA: You can't patent, you know, on-off, on-off code in the abstract, can you?
MR. OLSON: That's correct, Justice Scalia.
JUSTICE SCALIA: There needs to be a device.
MR. OLSON: An idea or a principle, two plus two equals four can't be patented. It has to be put together with a machine and made into a usable device.

...

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 . . . that's not relevant here . . .

...

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.

. . .

MR. WAXMAN [For AT&T]: The code is not patentable.

It appears to be only a matter of time before the Court enters the fray surrounding software patents. Last year, the Court granted certiorari in LabCorp v. Metabolite, a medical method case that many (myself included) saw as potentially damaging to the patentability of software. The petition in LabCorp was dismissed in response to numerous amicus briefs, including one I helped write on behalf of the Federal Circuit Bar Association. In short, many patent lawyers, legal scholars, and businesses thought LabCorp was an inappropriate case for Supreme Court jurisdiction. The Court should not have taken the case in the first place, so it was properly dismissed. The dismissal of the petition in LabCorp only swelled fear and anxiety among those who own or pursue patent protection for software. They know all to well what could happen if the Court decides to change the way patent law has viewed software over the last 25 years.

In a word, restriction to the scope of patentable subject matter in a way that would exclude software inventions as they are now and have been claimed for the last 25 years (in method steps, or tied to "systems" "articles of manufacture," such as "a computer readable medium") would be devastating. Devastating not just in terms of the financial loss that would be suffered by those who own patented software, but also devastating to the economy which (despite statements to the contrary) depends on a strong patent system to provide incentives for innovation and adequate disclosure of otherwise secret inventions.

The arguments for restricting the scope of patentable subject matter (to exclude software)simply do not hold water. First, it should be recognized that only Congress (not the Courts) have Constitutional authority to define the scope of patentable subject matter. They did so in 1952 by enacting (among other provisions) 35 USC Section 101, which states in relevant part that one who "invents or discovers any new and useful process, machine, manufacture, or composition of matter . . . may obtain a patent, subject to the conditions and requirements of this title." I emphasize the last part of the statute because this is the language most commonly overlooked by those who argue against software as a class of invention subject to protection by patent law. It is not enough for the invention to be "new and useful," it must also be nonobvious and adequately disclosed. What makes some software patentable is not the mere fact that it exists in a "machine" "method" or "article of manufacture," but because (in some cases) it is sufficiently nonobvious and adequately described and disclosed in a patent to merit protection. I will readily admit that many software patents do not meet the tests for obviousness and disclosure. The patent office also is responding to this problem and has initiated a number of pilot projects aimed at improving the quality of examination. Anyone who currently prosecutes software patents can confirm that the allowance rate these days is very very low. I think it is somewhere under 10%.

In short, the way to get rid of bad software patents is not to scrap all of them, but to be more selective and to endeavor to increase the quality of examination. Getting rid of software patents all together would have many deleterious effects on the economy including encouraging parties to seek protection under trade secret law and deprive the public with important knowledge concerning advances in software. Also, there is no easy way to interpret 35 USC Section 101 (without a Congressional amendment) in a way that would not spill over into other technologies, and therefore harm (or eliminate all together) the important incentives for innovation in existing or emerging technologies. In order to function, the incentives created by the patent system must be broadly available to all sectors of technology, lest they exclude some unforeseen or emerging advancement in science or engineering.