Order Code RL33923
An Overview of Recent U.S. Supreme Court
Jurisprudence in Patent Law
March 16, 2007
Brian T. Yeh
Legislative Attorney
American Law Division

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An Overview of Recent U.S. Supreme Court
Jurisprudence in Patent Law
Summary
The U.S. patent law is subject to change through legislation, the regulations and
rules of the U.S. Patent and Trademark Office, and judicial interpretation. The 109th
Congress considered, without passing, legislation that would have significantly
reformed provisions of the Patent Act; similar patent bills may be introduced in the
110th Congress. In 2006, the U.S. Patent and Trademark Office issued requests for
public comments regarding its proposed rule amendments and new guidelines
governing the patent application and approval process.
Patent law jurisprudence is continually being developed through litigation over
activities that allegedly infringe a patent holder’s rights. The losing party in these
cases may appeal the district court’s decision to the U.S. Court of Appeals for the
Federal Circuit, a specialized tribunal established by Congress that has exclusive
appellate jurisdiction in patent cases. Parties dissatisfied with the Federal Circuit’s
rulings may petition the U.S. Supreme Court to review the appellate court’s decision.
However, the Supreme Court is not required to entertain the appeal; it has discretion
to decide whether to grant certiorari to review the case. While the Supreme Court
has left the Federal Circuit’s opinions undisturbed in the vast majority of patent cases
since the creation of the specialized patent court in 1982, the Court has shown, over
the past three terms, an increased willingness to hear cases that raise patent law
issues. The Supreme Court Justices’ apparent new found interest in patent cases
perhaps stems from a recognition of the growing importance of intellectual property
to the nation’s information-based economy, as well as a need to correct perceived
errors in lower courts’ interpretation and application of patent law.
This report provides a brief summary of the Supreme Court’s patent law
jurisprudence in the following eight cases that have been argued or decided since
2005: Merck KGaA v. Integra Lifesciences I, Unitherm Food Systems v.
Swift-Eckrich, Illinois Tool Works v. Independent Ink, eBay v. MercExchange,
Laboratory Corporation of America Holdings v. Metabolite Labs., MedImmune v.
Genentech, KSR International v. Teleflex, and Microsoft v. AT&T.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2004-2005 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merck KGaA v. Integra Lifesciences I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2005-2006 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Unitherm Food Systems v. Swift-Eckrich . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Illinois Tool Works v. Independent Ink . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
eBay v. MercExchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Laboratory Corporation of America Holdings v. Metabolite Labs . . . . . . . . 9
2006-2007 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
MedImmune v. Genentech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
KSR International v. Teleflex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Microsoft v. AT&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

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An Overview of Recent U.S. Supreme Court
Jurisprudence in Patent Law
Introduction
While Congress recently has considered legislation to reform the U.S. patent
system to address perceived deficiencies,1 the U.S. Supreme Court also plays a
significant role in clarifying vague or ambiguous language in the Patent Act that is
often at the heart of disputes between parties involved in patent infringement suits.
In the latter half of this decade, the Supreme Court has granted certiorari in eight
patent cases, perhaps in recognition of the increasing importance of intellectual
property to technological innovation, as well as in order to correct errors in lower
courts’ interpretation and application of patent law.2 What follows is a general
overview of the facts and outcomes of these recent cases, presented in chronological
order starting from the 2004-2005 term.
2004-2005 Term
Merck KGaA v. Integra Lifesciences I
It is normally an infringement of a patent holder’s rights for anyone, without
prior authorization, to use, make, offer to sell, or sell any patented invention within
the United States.3 However, there are exceptions to this general rule; for example,
a statutory exception codified at 35 U.S.C. § 271(e)(1) provides: “It shall not be an
act of [patent] infringement to … use … or import into the United States a patented
1 See, e.g., H.R. 2795, 109th Cong., the “Patent Reform Act of 2005”; S. 3818, 109th Cong.,
the “Patent Reform Act of 2006.” For more information on legislative efforts to amend the
patent law, see CRS Report RL32996, Patent Reform: Innovation Issues, by John R.
Thomas and Wendy H. Schacht.
2 By Supreme Court custom, a petition for a writ of certiorari is granted when four of the
nine Supreme Court justices vote to review a decision of a lower appellate court. Since
1982, patent cases have reached the Court from the U.S. Court of Appeals for the Federal
Circuit, a specialized tribunal that has exclusive jurisdiction to hear appeals from all district
court judgments in civil actions arising under federal patent law. 28 U.S.C. §1295. The
purpose for the latter court’s creation twenty-five years ago by Congress was to promote
predictability and uniformity in the patent law. For more information on the Federal Circuit,
see CRS Report RL31703, Patent Law and Innovation: The Creation, Operation and a
Twenty-Year Assessment of the U.S. Court of Appeals for the Federal Circuit, by John R.
Thomas.
3 35 U.S.C. § 271(a).

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invention … solely for uses reasonably related to the development and submission
of information” under the Federal Food, Drug, and Cosmetic Act.4 This is a “safe
harbor” provision that immunizes parties from liability for their otherwise infringing
acts.
The factual history of Merck KGaA v. Integra Lifesciences I is as follows.5
Integra Lifesciences I, Ltd. (“Integra”) is an American pharmaceutical company that
owns patents related to compounds known as RGD peptides. Merck KGaA
(“Merck”) is a German pharmaceutical corporation that was interested in developing
a drug to control angiogenesis, a process that plays a critical role in the spread of
many diseases, including cancerous tumor growth, diabetic retinopathy, and
rheumatoid arthritis.6 Merck conducted experiments using the RGD peptides to
determine their efficacy in inhibiting angiogenesis. Integra sued Merck, seeking
monetary damages for Merck’s alleged infringement of its patented compounds. In
defense, Merck asserted, in part, that its actions involving the RGD peptides came
within the statutory safe harbor discussed above.
At trial, the U.S. District Court for the Southern District of California instructed
the jury that, for Merck to prevail on the “safe harbor” defense, it must prove by a
preponderance of the evidence that it was objectively reasonable for the company to
believe that “there was a decent prospect” that the experiments “would contribute,
relatively directly,” to the generation of information likely to be relevant to the drug
approval regulatory process.7 The jury found Merck liable for infringing Integra’s
patents because Merck had failed to show that § 271(e)(1) protected its research
activities.
In June 2003, a divided panel of the U.S. Court of Appeals for the Federal
Circuit (“Federal Circuit”) affirmed the district court’s determination as to Merck’s
liability. The panel majority narrowly construed the safe harbor provision as
exempting from infringement liability only clinical research activities8 that contribute
“relatively directly” to information submitted to the Food and Drug Administration
4 35 U.S.C. § 271(e)(1).
5 For a more detailed discussion of the Merck case, see CRS Report RL33114, Safe Harbor
for Preclinical Use of Patented Inventions in Drug Research and Development: Merck
KGaA v. Integra Lifesciences I, Ltd., by Brian T. Yeh.
6 Integra Lifesciences I, Ltd. v. Merck KGaA, 331 F.3d 860, 863 (Fed. Cir. 2003).
7 Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193, 200 (2005).
8 Drug development may be divided into three general stages: basic research, preclinical
research, and clinical studies. Basic research involves the testing of thousands of
compounds to discover any biological activity relevant to understanding the cause of a
disease; the preclinical stage involves more focused research on a smaller group of chemical
compounds in the hopes of finding the best candidate for clinical development; and clinical
studies are the testing of the drug on human subjects in preparation for FDA approval.
James N. Czaban & Nishita Doshi, Supreme Court Applies Broad Interpretation of Bolar
Amendment to Protect Innovative Drug Research From Claims of Patent Infringement, 70
PAT., TRADEMARK, & COPYRIGHT J. (BNA) 1726 (June 24, 2005).

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(FDA) for consideration in the drug approval process.9 Merck appealed the Federal
Circuit’s decision to the U.S. Supreme Court.
The question presented to the Supreme Court was “whether uses of patented
inventions in preclinical research, the results of which are not ultimately included in
a submission to the Food and Drug Administration (FDA), are exempted from
infringement by 35 U.S.C. § 271(e)(1).”10 In vacating the Federal Circuit’s
interpretation of the safe harbor provision, the Supreme Court unanimously ruled that
the exemption applies to all uses of patented inventions that are “reasonably related”
to the process of developing any information for FDA submission, including
preclinical use of patented inventions in the drug research and development
process.11 The Court explained that, under certain conditions, the safe harbor
provision is even “sufficiently broad” to protect the use of patented compounds in
experiments that are not ultimately submitted to the FDA or drug experiments that
are not ultimately the subject of an FDA submission.12
2005-2006 Term
Unitherm Food Systems v. Swift-Eckrich
One of the statutory bars to patentability of an invention is “novelty.”13 For an
invention to be considered “novel,” it must not be wholly “anticipated” by the
so-called “prior art,” or public domain materials such as publications and other
patents.
In early 2000, the food company ConAgra informed companies that sold
equipment and/or processes for browning precooked meats that such browning
processes may infringe its patent on “A Method for Browning Precooked Whole
Muscle Meat Products,” and offered those companies the opportunity to license its
patent. A competitor, Unitherm, sued ConAgra for a declaratory judgment that the
patent was invalid and unenforceable, and that ConAgra had violated federal antitrust
laws by attempting to enforce a patent that was obtained by committing fraud on the
U.S. Patent and Trademark Office.14
9 Integra, 331 F.3d at 867.
10 Merck, 545 U.S. at 195.
11 Id at 202.
12 Id. at 206.
13 See 35 U.S.C. § 102 (“A person shall be entitled to a patent unless — (a) the invention
was known or used by others in this country, or patented or described in a printed
publication in this or a foreign country, before the invention thereof by the applicant for
patent, or (b) the invention was patented or described in a printed publication in this or a
foreign country or in public use or on sale in this country, more than one year prior to the
date of the application for patent in the United States.”)
14 Unitherm Food Sys. v. Swift-Eckrich, Inc., 126 S.Ct. 980, 983-84 (2006). Such a “Walker
(continued...)

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The U.S. District Court for the Western District of Oklahoma ruled that
ConAgra’s patent was invalid15 because of evidence that Unitherm’s president had
invented the process described in that patent six years before ConAgra had filed its
patent application. The court then allowed the antitrust claim to proceed to trial.
Before the case was submitted to the jury, ConAgra filed a motion with the court for
a judgment as a matter of law, on the grounds that no reasonable jury would have a
legally sufficient evidentiary basis to support a verdict in favor of Unitherm on the
antitrust issue.16 The District Court denied the motion, and the jury returned a verdict
for Unitherm. ConAgra, however, failed to renew its request for judgment as a
matter of law by filing another motion after the verdict, a procedural requirement
under Federal Rules of Procedure 50(b), nor did it request a new trial under Federal
Rules of Procedure 59.
ConAgra appealed to the Federal Circuit, asserting that there was insufficient
evidence to sustain the jury’s verdict. The Federal Circuit determined that
ConAgra’s failure to file a postverdict motion did not preclude the company on
appeal from raising the challenge to the sufficiency of the evidence on the antitrust
claim.17 The appellate court then proceeded to review the evidence and after
concluding it was insufficient, vacated the jury’s judgment in favor of Unitherm and
remanded the case for a new trial.18
In a 7-2 decision, the U.S. Supreme Court held that the Federal Circuit was
precluded from reviewing the case, and reversed its judgment. The Court explained
that a party’s failure to file a postverdict motion challenging the sufficiency of the
evidence under Rule 50(b) renders an “appellate court without power to direct the
District Court to enter judgment contrary to the one it had permitted to stand.”19
Strict compliance with this postverdict motion rule is necessary, according to the
Court, because “[d]etermination of whether a new trial should be granted or a
judgment entered under Rule 50(b) calls for the judgment in the first instance of the
judge who saw and heard the witnesses and has the feel of the case which no
appellate printed transcript can impart.”20 Because ConAgra did not file such a
14 (...continued)
Process” claim stems from the Supreme Court’s 1965 decision in Walker Process
Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965), which
permitted an antitrust claim for monopolization or attempted monopolization based on
enforcement of a patent procured by fraud.
15 Interpreting the construction and validity of patent claims is a matter of law reserved
exclusively for the court; it is not an issue for a jury to decide. Markman v. Westview
Instruments, 517 U.S. 370 (1996).
16 FED. R. CIV. P. 50(a).
17 Unitherm Food Sys. v. Swift-Eckrich, Inc., 375 F.3d 1341, 1365 n.7 (2004).
18 Id. at 1362-65.
19 Unitherm Food Sys., 126 S.Ct. at 985 (citation omitted).
20 Id. at 985-86 (citation omitted).

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motion in the district court, it is not entitled to pursue a new trial on appeal, the Court
ruled.21
Illinois Tool Works v. Independent Ink
This case involved the practice of Trident (a subsidiary of Illinois Tool Works) of
selling its patented printing systems (consisting of patented ink jet printheads and
patented ink containers) to manufacturers of printers only on the condition that those
manufacturers (and their customers) agree to purchase their ink exclusively from
Trident, although such ink itself is unpatented.22 Independent Ink, a competitor
manufacturer of ink that could be used in those printheads, sued Trident, alleging that
Trident’s practice was an illegal tying arrangement and monopolization in violation
of federal antitrust laws.23 Traditionally, for tying to constitute an antitrust violation,
the plaintiff must affirmatively establish that the defendant has market power (i.e.,
control over the market in which his product competes). Independent Ink asserted
that Trident “necessarily ha[d] market power in the market for the tying product
[printheads] as a matter of law” solely by virtue of its patent on the printhead system.
The U.S. District Court for the Central District of California rejected that claim and
found that there had been no affirmative evidence of the relevant market nor of
Trident’s position in it.24 Thus, the court granted summary judgment in favor of
Trident.
In January 2005, the Federal Circuit reversed the district court’s decision,
holding that “a rebuttable presumption of market power arises from the possession
of a patent over a tying product.”25 In so ruling, the appellate court emphasized that
it had a “duty ... to follow the precedents of the Supreme Court until the Court itself
chooses to expressly overrule them.”26 The Supreme Court has held for more than
sixty years that where a patented product was the “tying” product, there was a
presumption that the existence of a patent monopoly creates sufficient market power
to support an antitrust violation.27 Congress, however, rejected this presumption for
21 Id. at 987.
22 For a more detailed discussion of the Illinois Tool Works decision, see CRS Report
RS22421, Antitrust Effect of Patent on Tying Product: Illinois Tool Works Inc. v.
Independent Ink, Inc., by Janice E. Rubin.
23 Conditioning the purchase of a product (“tying product”) on the simultaneous purchase
of some other product (“tied product”) is considered unlawful under the antitrust laws.
Also, an agreement not to purchase any future requirements for the tied product from any
source other than the original vendor is considered an unlawful tie. See 15 U.S.C. § 1;
Systemcare, Inc. v. Wang Laboratories Corp., 117 F.3d 1137, 1142-3 (10th Cir. 1997).
24 Independent Ink, Inc. v. Trident, Inc. 210 F. Supp.2d 1155, 1163-1168 (C.D. Cal. 2002).
25 Independent Ink, Inc. v. Ill. Tool Works Inc., 396 F.3d 1342, 1344 (Fed. Cir. 2005).
26 Id. at 1351.
27 International Salt Co. v. United States, 332 U.S. 392 (1947); United States v. Loew’s,
Inc., 371 U.S. 38 (1962).

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purposes of establishing the patent misuse defense28 when it amended the Patent Act
in 1988.29 Yet neither Congress nor the Supreme Court had decided whether the
presumption remained in antitrust jurisprudence when the tying product is patented.
In March 2006, the Supreme Court vacated the Federal Circuit’s judgment
without dissent,30 holding that “the mere fact that a tying product is patented does not
support such a presumption.”31 The Court explained that its reevaluation of its
precedents establishing the per se rule was prudent in light of Congress’s narrowing
of the patent misuse defense, as well as the “vast majority of academic literature” that
had extensively criticized the “patent equals market power” presumption.32 Thus, the
Court in this case eliminated the presumption in antitrust law and stated that “in all
cases involving a tying arrangement, the plaintiff must prove that the defendant has
market power in the tying product.”33
eBay v. MercExchange
A patent holder has the right to exclude others from making, using, offering for sale,
or selling the invention throughout the United States, or importing the protected
invention into the United States.34 Whoever performs any one of these five acts
during the term of the invention’s patent, without the patent holder’s authorization,
is liable for infringement.35 To prevent the violation of any right secured by a patent,
the Patent Act provides that a federal court “may grant injunctions in accordance
with the principles of equity.”36
28 The doctrine of patent misuse is an affirmative defense to patent infringement, that
“requires that the alleged infringer show that the patentee has impermissibly broadened the
physical or temporal scope of the patent grant with anticompetitive effect.” Windsurfing
Int’l v. AMF, Inc., 782 F.2d 995, 1001-02 (Fed. Cir. 1996) (internal quotations and citation
omitted).
29 35 U.S.C. § 271(d)(5) now requires that, in order for a patentee to be found guilty of
patent misuse on account of a “tie,” a specific finding that “in view of the circumstances,
the patent owner has market power in the relevant market for the patent or patented product
on which the license or sale is conditioned.”
30 The case was decided 8-0; Justice Samuel Alito did not participate in the consideration
or decision of the case because he was not a member of the Court when the case was argued.
31 Ill. Tool Works Inc. v. Indep. Ink, Inc., 126 S. Ct. 1281, 1284 (2006).
32 Id. at 1290-91.
33 Id. at 1293 (emphasis added).
34 35 U.S.C. § 154(a)(1). However, there is no statutory requirement that a patentee make,
use, or sell its invention. Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1547 (Fed. Cir.
1995).
35 35 U.S.C. § 271(a).
36 35 U.S.C. § 283.

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eBay operates a website that allows sellers to list products for sale and buyers
to purchase those goods either through an auction system or at a fixed price.37
MercExchange alleged that eBay’s “Buy It Now” functionality on its website, which
permits users to buy items at fixed prices rather than bid for them, comes within the
claims of its patent,38 and filed a patent infringement lawsuit against eBay in
September 2001. Although the jury returned a verdict finding that eBay had willfully
infringed MercExchange’s patent, the U.S. District Court for the Eastern District of
Virginia refused to issue an injunction against the Internet auctioneer, after
determining that 1) monetary damages would be an adequate remedy at law, 2)
MercExchange would not be irreparably harmed in the absence of an injunction, 3)
the balance of hardships fell slightly in eBay’s favor; and 4) the public interest would
not necessarily be furthered in this case, because MercExchange “does not practice
its patents”39 and “exists merely to license its patented technology to others.”40
On appeal, the Federal Circuit unanimously affirmed the jury’s verdict on the
finding of infringement.41 However, the appellate court ruled that MercExchange
was entitled to an injunction to prevent further infringement by eBay, finding
inadequate the district court’s reasons for refusing to issue an injunction.42
According to the Federal Circuit, “Because the right to exclude recognized in a patent
is but the essence of the concept of property, the general rule is that a permanent
injunction will issue once infringement and validity have been adjudged.”43
In May 2006, the Supreme Court unanimously vacated the Federal Circuit’s
judgment and remanded the case to the district court for further proceedings
consistent with the Court’s opinion in this case.44 Although the Court noted that “we
take no position on whether permanent injunctive relief should or should not issue
in this particular case,”45 the Court clarified that the traditional principles of equity
that govern issuance of injunctive relief “apply with equal force to disputes arising
37 For a more detailed explanation and analysis of the eBay case, see CRS Report RL33429,
Availability of Injunctive Relief in Patent Cases: eBay, Inc. v. MercExchange, L.L.C., by
Brian T. Yeh.
38 MercExchange’s patent “pertains to a system for selling goods through an ‘electronic
network of consignment stores.’” MercExchange, L.L.C. v. eBay, Inc., 401 F.3d 1323, 1327
(Fed. Cir. 2005).
39 MercExchange, L.L.C. v. eBay, Inc, 275 F. Supp. 2d 695, 714-15 (E.D. Va. 2003).
40 Id. at 712.
41 MercExchange, L.L.C. v. eBay, Inc., 401 F.3d 1323, 1329 (Fed. Cir. 2005).
42 Id. at 1339.
43 Id. at 1338 (citation and internal quotations omitted).
44 eBay, Inc. v. MercExchange, L.L.C., 126 S. Ct. 1837 (2006).
45 Id. at 1841.

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under the Patent Act,”46 thus dispelling any notion that patent disputes are subject to
different standards than those applicable to cases arising under other areas of law.
The Court explained that neither of the lower courts had “fairly” applied the
traditional equitable principles in determining whether injunctive relief should issue
in this case. The district court had erred by improperly suggesting that injunctive
relief was categorically unavailable in cases where patent holders only license their
patents rather than commercialize the invention themselves. On the other hand, the
Federal Circuit was incorrect in pronouncing a rule, unique to patent cases, that
strongly favored injunctions when infringement has been adjudged.
Two concurring opinions, written by Chief Justice John Roberts, Jr., and Justice
Anthony Kennedy, were filed in eBay v. MercExchange and reveal an apparent
disagreement among the justices. Chief Justice Roberts’ concurring opinion, joined
by Justices Antonin Scalia and Ruth Bader Ginsburg, predicted that injunctive relief
will likely continue to be the usual remedy for patent infringement, consistent with
the “long tradition of equity practice.”47 A district court’s equitable discretion in
granting or denying an injunction in patent cases, therefore, is not unfettered, in the
view of these three justices.
While agreeing with Chief Justice Robert’s concurrence that “history may be
instructive” in applying the four-factor test when the circumstances of a patent case
are similar to those of earlier cases, Justice Kennedy’s concurring opinion, joined by
Justices John Paul Stevens, David Souter, and Stephen Breyer, suggested that
historical practice might not necessarily be helpful for courts to follow when dealing
with some patent infringement suits in the current business environment: “[T]rial
courts should bear in mind that in many instances the nature of the patent being
enforced and the economic function of the patent holder present considerations quite
unlike earlier cases.”48 Justice Kennedy acknowledged the emergence of patent
holding companies and their impact on patent litigation today:
An industry has developed in which firms use patents not as a basis for
producing and selling goods but, instead, primarily for obtaining licensing fees.
... For these firms, an injunction, and the potentially serious sanctions arising
from its violation, can be employed as a bargaining tool to charge exorbitant fees
to companies that seek to buy licenses to practice the patent. ... When the
patented invention is but a small component of the product the companies seek
to produce and the threat of an injunction is employed simply for undue leverage
in negotiations, legal damages may well be sufficient to compensate for the
infringement and an injunction may not serve the public interest.49
46 Id. at 1839. Justice Clarence Thomas, the author of the Court’s opinion, noted that this
observation finds express statutory support in the Patent Act, which states that district courts
“may” issue injunctions “in accordance with the principles of equity.” 35 U.S.C. § 283.

47 eBay, 126 S.Ct. at 1841-42 (Roberts, C.J., concurring).
48 Id. at 1842-43 (Kennedy, J., concurring).
49 Id. at 1842.

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Laboratory Corporation of America Holdings v. Metabolite
Labs
According to the Patent Act, one who “invents or discovers any new and useful
process, machine, manufacture, or any composition of matter, or any new and useful
improvement thereof, may obtain a patent therefore, subject to the conditions and
requirements of this title.”50 Thus, an invention may be patented if it falls within one
of these statutory classes of subject matter: processes, machines, manufactures, and
compositions of matter. The Supreme Court has articulated limits for patentability,
previously stating that “laws of nature, natural phenomena, and abstract ideas” may
not be patented.51 The Court has elaborated on this restriction in several cases:
[A] new mineral discovered in the earth or a new plant found in the wild is not
patentable subject matter. Likewise, Einstein could not patent his celebrated law
that E=mc2; nor could Newton have patented the law of gravity. Such
discoveries are “manifestations of ... nature, free to all men and reserved
exclusively to none.”52
The patent at issue in Laboratory Corporation v. Metabolite Labs involves a
way of detecting a deficiency in two B vitamins, cobalamin and folate, in the human
body. Low levels of these vitamins can cause serious illnesses in humans.53
Metabolite Laboratories holds a license to a patent that claims a medical diagnostic
method for detecting cobalamin or folate deficiency. This patented method requires
two separate steps: first, measuring a body fluid for elevated levels of a particular
amino acid (homocysteine), and second, noticing that an elevated level of this amino
acid correlates with a deficiency in the two vitamins.54
Metabolite filed a patent infringement lawsuit against Laboratory Corporation
(LabCorp), a clinical reference laboratory that performs tests to help health care
providers in diagnosing and treating their patients. The lawsuit asserted that LabCorp
committed infringement on the patented method when it induced doctors to infringe
by performing homocysteine tests and making the correlation. In November 2001,
a jury found that the patent was valid and deemed LabCorp guilty for willful patent
infringement. The U.S. District Court for the District of Colorado entered an
injunction against LabCorp from performing any homocysteine tests.
In June 2004, the Federal Circuit affirmed the district court’s decision. The
appellate court explained that infringement of the patent at issue occurs when a
physician determines there is a cobalamin or folate deficiency by “correlating” a
particular test result (of elevated levels of homocysteine) with B vitamin
50 35 U.S.C. § 101.
51 Diamond v. Diehr, 450 U.S. 175, 185 (1981).
52 Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980) (quoting Funk Brothers Seed Co. v.
Kalo Inoculant Co., 333 U.S. 127, 130 (1948)).
53 Metabolite Labs., Inc. v. Lab. Corp. of Am. Holdings, 370 F.3d 1354, 1358 (Fed. Cir.
2004).
54 Id. at 1358-59.

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deficiencies.55 This is the “direct” infringement of the patent,56 for which LabCorp
was held liable for inducing.57 The Federal Circuit cited evidence in the record that
LabCorp was liable for such infringement because its educational publications and
informational materials distributed to medical doctors stated that elevated total
homocysteien correlates to vitamin deficiencies.58
The question presented on which the Supreme Court granted certiorari in this
case was: “Whether a method patent setting forth an indefinite, undescribed, and
non-enabling step directing a party simply to ‘correlat[e]’ test results can validly
claim a monopoly over a basic scientific relationship used in medical treatment such
that any doctor necessarily infringes the patent merely by thinking about the
relationship after looking at a test result.”59
In its petitions submitted to the Supreme Court on this question, LabCorp urged
reversal of the Federal Circuit’s judgment. LabCorp argued that upholding the patent
claim in this case would amount to allowing a patent on a scientific principle or
scientific fact, in violation of patent jurisprudence that prohibit patenting laws of
nature, natural phenomena, and abstract ideas.60
In reply, Metabolite’s briefs argued that the Supreme Court should dismiss the
case on procedural grounds. Metabolite noted that the issue of whether the
diagnostic method met subject matter patentability requirements should not be
considered by the Court, because the matter was never properly raised or addressed
in LabCorp’s arguments before the district court or Federal Circuit.61 Therefore,
Metabolite reasoned, the Court should dismiss the writ of certiorari or affirm the
Federal Circuit’s decision.
In a per curiam decision62 issued on June 22, 2006, the Court dismissed the case,
stating only that the writ of certiorari was improvidently granted.63 The effect of the
dismissal is that the Federal Circuit’s judgment affirming infringement liability and
the patent’s validity is left undisturbed.
55 Id. at 1363-64.
56 Id. at 1364 (“The record shows that physicians order assays and correlate the results of
those assays, thereby directly infringing.”)
57 Inducement of patent infringement is punishable under 35 U.S.C. § 271(b)(“Whoever
actively induces infringement of a patent shall be liable as an infringer.”).
58 LabCorp, 370 F.3d at 1365.
59 Metabolite Labs., Inc. v. Lab. Corp. of Am. Holdings, 370 F.3d 1354 (Fed. Cir. 2004),
cert. granted, 126 S. Ct. 543 (Oct. 31, 2005) (No. 04-607).
60 Brief for Petitioner at 17, Lab. Corp. of Am. Holdings v. Metabolite Labs., Inc., 126 S.
Ct. 2921 (2006) (No. 04-607).
61 Brief for Respondent at 19-26, Lab. Corp. of Am. Holdings v. Metabolite Labs., Inc., 126
S. Ct. 2921 (2006) (No. 04-607).
62 Chief Justice John G. Roberts Jr. did not take part in consideration or decision of the case.
63 Lab. Corp. of Am. Holdings v. Metabolite Labs., Inc., 126 S. Ct. 2921 (2006).

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Three justices dissented to the dismissal of the writ. Justice Stephen Breyer,
writing for himself and Justices John Paul Stevens and David Souter, argued that the
question is not unusually difficult to decide, the parties have fully briefed the
question, and that the Court has the authority to decide it. Furthermore, he opined
that “those who engage in medical research, who practice medicine, and who as
patients depend upon proper health care, might well benefit from this Court’s
authoritative answer.”64 Justice Breyer explained that he would have held the patent
invalid because “[t]here can be little doubt that the correlation between
homocysteine and vitamin deficiency ... is a ‘natural phenomenon’” that is not
patentable.65
In addition, Justice Breyer offered insight into his views regarding the legal
correctness of the Federal Circuit’s State Street Bank decision in 1998, which had
held that a process is patentable if it produces a “useful, concrete, and tangible
result.”66 (This controversial Federal Circuit decision has paved the way for
inventors to obtain patents on “methods” or techniques of doing business; for
example, the patent in the eBay case discussed above is a so-called “business
method” patent.) Justice Breyer criticized the State Street Bank ruling, asserting that
“[T]his Court has never made such a statement and, if taken literally, the statement
would cover instances where this Court has held the contrary.”67
2006-2007 Term
MedImmune v. Genentech
Under Article III of the U.S. Constitution, the jurisdiction of federal courts is
limited to actual, ongoing cases and controversies.68 The Declaratory Judgment Act,
codified at 28 U.S.C. § 2201, authorizes a federal court to issue a judgment declaring
the legal rights of any interested party seeking such declaration, “whether or not
further relief is or could be sought,” in a “case of actual controversy within its
jurisdiction.” The Supreme Court has held that an action for declaratory relief
64 Id. at 2922 (Breyer, J., dissenting).
65 Id. at 2927.
66 State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368, 1373
(Fed. Cir. 1998)). For more information about this decision, see CRS Report RL30572,
Patents on Methods of Doing Business, by John R. Thomas.
67 LabCorp, 126 S. Ct. at 2928 (Breyer, J., dissenting).
68 U.S. CONST. art. III, § 2, cl. 1 (“The Judicial Power shall extend to all Cases, in Law and
Equity, arising under this Constitution, the Laws of the United States, and Treaties made,
or which shall be made, under their Authority; — to all Cases affecting Ambassadors, other
public Ministers and Consuls; — to all Cases of admiralty and maritime Jurisdiction; to
Controversies to which the United States shall be a Party; — to Controversies between two
or more States; between a State and Citizens of another State; between Citizens of different
States, — between Citizens of the same State claiming Land under Grants of different
States, and between a State, or the Citizens thereof, and foreign States, Citizens or
Subjects.”).

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qualifies as a “case or controversy” under Article III;69 furthermore, it has explained:
“[T]he question in each case is whether the facts alleged, under all the circumstances,
show that there is a substantial controversy, between parties having adverse legal
interests, of sufficient immediacy and reality to warrant the issuance of a declaratory
judgment.”70
The question that the Supreme Court faced in MedImmune v. Genentech is
whether a patent licensee must terminate or breach its license agreement before it can
bring suit to obtain a declaratory judgment that the underlying patent is invalid,
unenforceable, or not infringed.71
MedImmune, Inc. is a pharmaceutical company that manufactures a drug,
Synagis, used to prevent respiratory tract disease in infants and young children. A
year before the U.S. Food and Drug Administration approved Synagis for marketing
to consumers, MedImmune had entered into a patent license agreement with the
biotechnology company Genentech in 1997, concerning an existing Genentech patent
relating to the production of “chimeric antibodies” (the Cabilly I patent) and also a
then-pending patent application for “the coexpression of immunoglobulin chains in
recombinant host cells.”72 MedImmune agreed to pay royalties on sales of any
“licensed products” that it may make or sell which would infringe the claims of either
of the patents, if not for the license agreement.73
In December 2001, Genentech was awarded a patent on the “coexpression”
application that was the subject of the licensing agreement (“Cabilly II patent”).
Genentech sent MedImmune a letter, asserting that the Synagis drug came within the
scope of the new Cabilly II patent, and that therefore it was a “licensed product” for
which royalties are owed under the 1997 license agreement. MedImmune, however,
believed the Cabilly II patent invalid and unenforceable or, alternatively, that Synagis
did not infringe the patent’s claims. Despite this assessment, MedImmune paid the
royalties “under protest,” because it considered Genentech’s letter a threat to sue for
patent infringement if it failed to comply with the demands therein.74
MedImmune initiated a declaratory judgment action against Genentech, seeking
a declaration that the patent was invalid. Genentech filed a defense motion pursuant
to Federal Rules of Civil Procedure 12(b)(1), asserting that the federal courts lacked
Article III jurisdiction over the claim because no “actual controversy” existed
between the parties. The U.S. District Court for the Central District of California
69 Nashville, Chattanooga & St. Louis Railway Co. v. Wallace, 288 U.S. 249 (1933); Aetna
Life Ins. Co. v. Haworth, 300 U.S. 227 (1937).
70 Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941).
71 MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764, 767 (2007).
72 Id.
73 Id.
74 Id.

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granted the motion, dismissing the case for lack of subject matter jurisdiction.75 The
district court explained that it was obliged to dismiss the case76 due to the controlling
precedent of the Federal Circuit’s Gen-Probe Inc. v. Vysis, Inc. decision in 2004,
which had held that “a patent licensee in good standing cannot establish an Article
III case or controversy with regard to validity, enforceability, or scope of the patent
because the license agreement ‘obliterates any reasonable apprehension’ that the
licensee will be sued for infringement.”77 Because MedImmune continued to pay
royalties under the license agreement, it was a licensee in good standing and was not
under threat or in reasonable apprehension of suit, the court reasoned.78
On appeal, the Federal Circuit affirmed the district court’s judgment, relying on
its earlier Gen-Probe decision in determining that there was a lack of a justiciable
controversy.79
In a 8-1 decision, the Supreme Court reversed the Federal Circuit’s judgment
and remanded the case to the district court. The Court held that a patent licensee is
not required to repudiate its license agreement before seeking a declaratory judgment
in federal court that the underlying patent is invalid, unenforceable, or not infringed.80
However, the Court “express[ed] no opinion” on whether such a nonrepudiating
licensee is relieved of its contract obligations during the suit challenging the patent’s
validity.81
Writing for the majority, Justice Antonin Scalia first explained that the Article
III “case or controversy” requirement would have been satisfied if MedImmune had
refused to make royalty payments.82 At issue here, however, was whether a case or
controversy still existed when MedImmune’s compliance with the license terms
eliminated the immediate threat of injury from a patent infringement lawsuit. Justice
Scalia offered a comparison to a situation where the government threatens legal
action, in which there is no requirement that “a plaintiff [] expose himself to liability
before bringing suit to challenge the basis for the threat — for example, the
constitutionality of a law threatened to be enforced.”83 In such a case, courts have not
found Article III jurisdiction to be lacking despite the fact that the plaintiff’s own
75 MedImmune, Inc. v. Genentech, Inc., 2004 U.S. Dist. LEXIS 28680, at *13 (C.D. Cal.
2004).
76 Dismissal of an action is required if a court lacks subject matter jurisdiction. Ex parte
McCardle, 74 U.S. 506 (1869).
77 MedImmune, 127 S.Ct. at 768 (quoting Gen-Probe, Inc. v. Vysis, Inc., 359 F.3d 1376,
1381 (Fed. Cir. 2004)).
78 MedImmune, 2004 U.S. Dist. LEXIS 28680, at *13-14.
79 MedImmune, Inc. v. Genentech, Inc., 427 F.3d 958, 963 (Fed. Cir. 2005).
80 MedImmune, 127 S.Ct. at 777.
81 Id. at 769-70. This comment leaves open the question of whether the nonrepudiating
patent licensee may be able to recover those royalties if the patent is finally held invalid.
82 Id. at 771-72.
83 Id. at 772.

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action (or inaction) in failing to violate the law eliminates the imminent threat of
prosecution.84 Although a private party rather than the government threatened the
enforcement action in MedImmune, this distinction does not make a significant legal
difference that would eliminate jurisdiction, Justice Scalia argued.85 Thus, the
Federal Circuit erred when it upheld the district court’s dismissal of the case for lack
of jurisdiction.
In lone dissent, Justice Clarence Thomas maintained that a patent licensee in
good standing must breach its license prior to challenging the validity of the
underlying patent.86 He stated: “[T]he declaratory judgment procedure cannot be
used to obtain advanced rulings on matters that would be addressed in a future case
of actual controversy.” In his view, MedImmune’s suit was an attempt to seek a
ruling on hypothetical or conjectural matters, and thus federal courts lacked Article
III jurisdiction over its claims.
KSR International v. Teleflex
Section 103(a) of the Patent Act provides one of the statutory bars for
patentability of inventions, such that a patent claim is invalid if “the differences
between the subject matter sought to be patented and the prior art are such that the
subject matter as a whole would have been obvious at the time the invention was
made to a person having ordinary skill in the art to which said subject matter
pertains.”87 In other words, for the subject matter of an alleged invention or
discovery to be patentable, it must be “nonobvious” at the time of its creation. The
nonobviousness requirement is met if the subject matter claimed in a patent
application is beyond the ordinary abilities of a person of ordinary skill in the art in
the appropriate field.88
In the landmark case Graham v. John Deere Co., the Supreme Court established
an analytic framework for courts to determine “nonobviousness.” The so-called
Graham test describes several factors that must be assessed:
While the ultimate question of patent validity is one of law ... the § 103
condition, which is but one of three conditions, each of which must be satisfied,
lends itself to several basic factual inquiries. Under § 103, the scope and content
of the prior art are to be determined; differences between the prior art and the
claims at issue are to be ascertained; and the level of ordinary skill in the
84 Id.
85 Id. at 773.
86 Id. at 777 (Thomas, J., dissenting).
87 35 U.S.C. § 103(a).
88 The Federal Circuit has previously set forth a list of factors that are relevant to the inquiry
into the level of ordinary skill in the art: “(1) the educational level of the inventor; (2) type
of problems encountered in the art; (3) prior art solutions to those problems; (4) rapidity
with which innovations are made; (5) sophistication of the technology; and (6) educational
level of active workers in the field.” Environmental Designs, Ltd. v. Union Oil Co., 713
F.2d 693, 698 (Fed. Cir. 1983).

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pertinent art resolved. Against this background, the obviousness or
nonobviousness of the subject matter is determined. Such secondary
considerations as commercial success, long felt but unsolved needs, failure of
others, etc., might be utilized to give light to the circumstances surrounding the
origin of the subject matter sought to be patented. As indicia of obviousness or
nonobviousness, these inquiries may have relevancy.89
While a single prior art reference could form the basis of a finding of
nonobviousness, often multiple prior art references are involved in the analysis. In
such a situation, the Federal Circuit has developed an approach in which an invention
is considered obvious if there is an explicit or implicit “teaching, suggestion, or
motivation” that would lead a person of ordinary skill to combine multiple prior art
references to produce an invention.90 Such a “teaching, suggestion, or motivation”
could come from either 1) the references themselves, 2) knowledge of those skilled
in the art, or 3) the nature of a problem to be solved, leading inventors to look to
references relating to possible solutions to that problem.91 Because § 103 of the
Patent Act requires that an invention’s obviousness be determined from the
standpoint of a person having ordinary skill in the art “at the time the invention was
made,” the “TSM” test is designed, in part, to defend against “the subtle but powerful
attraction of a hindsight-based obviousness analysis.”92
The patents at issue in KSR International v. Teleflex pertain to an adjustable
pedal system (APS) for use with automobiles having electronic throttle controlled
engines. Teleflex Inc. is the holder of the patents on this device that allows a driver
to adjust the location of a car’s gas and break pedal so that it may reach the driver’s
foot. KSR International Co. also manufactures an adjustable pedal assembly.
Initially, KSR supplied APS for cars with engines that use cable-actuated throttle
controls; thus, the APS that KSR manufactured included cable-attachment arms.93
In mid-2000, KSR designed its APS to incorporate an electronic pedal position
sensor in order for it to work with electronically controlled engines, which are being
increasingly used in automobiles. In 2002, Teleflex filed a patent infringement
lawsuit against KSR, asserting that this new design came within the scope of its
patent claims. In defense, KSR argued that Teleflex’s patents were invalid because
they were obvious under § 103(a) of the Patent Act — that someone with ordinary
skill in the art of designing pedal systems would have found it obvious to combine
an adjustable pedal system with an electronic pedal position sensor for it to work
with electronically controlled engines.94
The U.S. District Court for the Eastern District of Michigan agreed with KSR
that the patent was invalid for obviousness, granting summary judgment in favor of
89 383 U.S. 1, 17-18 (1966).
90 Pro-Mold & Tool Co. v. Great Lakes Plastics, Inc., 75 F .3d 1568, 1572-73 (Fed. Cir.
1996); Tec Air, Inc. v. Denso Mfg. Mich. Inc., 192 F.3d 1353, 1359-60 (Fed. Cir. 1999).
91 Pro-Mold, 75 F.3d at 1573.
92 In re Dembiczak, 175 F.3d 994, 999 (Fed. Cir. 1999).
93 Teleflex Inc. v. KSR Int’l Co., 298 F. Supp. 2d 581, 584 (E.D. Mich. 2003).
94 Id. at 585.

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the defendant.95 The court opined that “it was inevitable” that APS would be
combined with an electronic device to work with electronically controlled engines.96
Teleflex appealed the decision to the Federal Circuit. The appellate court
vacated the district court’s ruling, after finding that the district court had made errors
in its obviousness determination. Specifically, the Federal Circuit noted that the
district court had improperly applied the TSM test — it had reached its obviousness
ruling “without making findings as to the specific understanding or principle within
the knowledge of a skilled artisan that would have motivated one with no knowledge
of [the] invention to make the combination in the manner claimed.”97 District courts
are “required” to make such specific findings pursuant to Federal Circuit case law
establishing the TSM standard.98
The Supreme Court granted certiorari on June 26, 2006 to review the KSR case,
in which the central question that the Court will answer is whether the Federal Circuit
erred in crafting TSM as the sole test for obviousness under § 103(a) of the Patent
Act.99 In its submitted briefs in the case that is still pending before the Court, the
petitioners, KSR, argue that the TSM test has no basis in the text of § 103(a) and
conflicts with numerous Supreme Court precedents in patent law jurisprudence.100
Furthermore, KSR asserts that, in creating and mandating the TSM test, the Federal
Circuit has erroneously interpreted § 103 as providing:
not a “condition for patentability” ... but as a condition for challenges to
patentability that is very difficult for the PTO or an alleged infringer to meet, and
effectively forces the issuance and upholding of patents even where, as in this
case, claimed subject matter differs from undisputed prior art in only trivial
respects.101
In its brief, Teleflex urges the Court to affirm the Federal Circuit’s judgment,
arguing that the TSM test comports with prior Supreme Court decisions, the statutory
text of the Patent Act, and “sound patent policy.”102 Teleflex notes that a “change in
settled doctrine is exceptionally disruptive” and is concerned that “an opinion
unnecessarily casting doubt on this particular settled doctrine would extract a very
95 Id. at 596.
96 Id. at 593.
97 Teleflex, Inc. v. KSR Int’l Co., 119 Fed. Appx. 282, 288 (Fed. Cir. 2005) (internal
quotations and citation omitted).
98 Id.
99 KSR Int’l Co. v. Teleflex, Inc., 119 Fed. Appx. 282 (Fed. Cir. 2005), cert. granted, 74
U.S.L.W. 3720 (U.S. June 26, 2006).(No. 04-1350).
100 Brief for Petitioner at 15, KSR Int’l Co. v. Teleflex, Inc., 119 Fed. Appx. 282 (Fed. Cir.
2005), cert. granted, 74 U.S.L.W. 3720 (U.S. June 26, 2006).(No. 04-1350).
101 Id. at 16.
102 Brief for Respondents at 9, KSR Int’l Co. v. Teleflex, Inc., 119 Fed. Appx. 282 (Fed. Cir.
2005), cert. granted, 74 U.S.L.W. 3720 (U.S. June 26, 2006).(No. 04-1350).

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substantial cost from the judiciary and from industry.”103 Thus, Teleflex appeals to
the Court to exercise caution in rendering a judgment in the case.104
The Court heard oral argument in KSR on November 28, 2006; a decision is
expected by the end of the Court’s term in June 2007. In reaching its decision, the
Court will likely consider whether the TSM standard conflicts with Supreme Court
precedent (namely, Graham), if the TSM should be the “exclusive” test for
obviousness, if obviousness could still be determined using a case-by-case approach
involving the Graham factors, or whether a modified test for obviousness is needed.
Microsoft v. AT&T
In 1972, the Supreme Court ruled in Deepsouth Packing Co. v. Laitram Corp.105
that it was not an act of patent infringement to manufacture the components of a
patented invention in the United States and then shipping them abroad for assembly
into an end product. In response to this loophole in the patent law that would have
allowed potential infringers avoid liability, Congress added (f) to § 271 of the Patent
Act.106 This statutory provision now states:
(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.
The patent at issue in Microsoft v. AT&T concerns AT&T’s patent on a speech
coder-decoder (a codec). A speech codec is a software program that is capable of
103 Id. at 14.
104 Id. at 15. (“Literally millions of patents have been issued in reliance on the suggestion
test, each of which would become susceptible to post hoc litigation in federal district courts
around the nation if this Court were to call that standard into question. ... A standard that
materially differs from existing law will invite a blizzard of litigation, including challenges
to existing licensing agreements. A new approach to obviousness will also cast aside the
many dozens of Federal Circuit decisions and hundreds of district court rulings that have
built up a body of governing precedent.”).
105 406 U.S. 518 (1972).
106 Patent Law Amendments Act of 1984, P.L. 98-622, Title I, § 101(a) (1984).

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converting spoken words into a compact code, or vice versa.107 AT&T brought suit
against Microsoft in 2001, alleging that the speech codec included in Microsoft’s
Windows operating system infringes its patent.
Microsoft filed a motion to exclude evidence of alleged liability arising from
foreign sales of Windows, pursuant to § 271(f) of the Patent Act. Microsoft exports
overseas a limited number of U.S.-made “golden master disks” containing the
machine-readable “object code”108 of its Windows operating system; foreign
computer manufacturers may use these disks to replicate the master disk in
generating multiple copies of Windows for installation on foreign-assembled
computers that are then sold to foreign customers.109 In support of its motion to limit
liability and any damages award, 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.110
In considering Microsoft’s motion, the U.S. District Court for the Southern
District of New York first cited previous Federal Circuit decisions supporting the
proposition that software is patentable.111 Furthermore, the court explained that §
271(f) does not limit “components” to only physical machines or tangible structures,
but rather could include intangible information or data. Thus, the district court
rejected Microsoft’s argument that software could not be a “component” of a
107 AT&T Corp. v. Microsoft Corp., 2004 U.S. Dist. LEXIS 3340, *1 n1 (2004); AT&T
Corp. v. Microsoft Corp., 2003 U.S. Dist. LEXIS 10716, *2-3 (2003) (AT&T’s patent
“provides a faster way to send speech over a telephone or Internet network, for example, by
using fewer digital signals and less storage while enhancing the perceived sound quality of
the synthesized speech. This technology can be used in devices such as certain computer
software, digital cellular telephones, audio-video conferencing, voice messaging and Internet
voice communications.”).
108 “Object code — also called ‘machine language’ — is expressed as a precise sequence
of binary digits (1s and 0s) that turn particular switches within a computer’s microchip
circuitry ‘on’ and ‘off.’” Brief for Respondent at 5, AT&T Corp. v. Microsoft Corp., 414
F.3d 1366 (Fed. Cir. 2005), cert. granted, 75 U.S.L.W. 3233 (U.S. Oct. 27, 2006) (No. 05-
1056) (citing R. WHITE, HOW COMPUTERS WORK 53 (8th ed. 2006)). Human software
programmers usually write software not as object code, but in a programming language such
as BASIC, C++, or FORTRAN. Once written by a software programmer, the software is
known as “source code.” A “source code” must then be translated into “object code”
through a process called “compiling” before it can be understood by a computer. Id. at n1.
109 AT&T Corp. v. Microsoft Corp., 414 F.3d 1366, 1368 (Fed. Cir. 2005).
110 Id.
111 AT&T, 71 U.S.P.Q.2D (BNA) 1118, at *15-17.

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patented invention under § 271(f).112 As for the copies made abroad from the golden
master disk sent from the United States, the district court held that such copies still
came within the scope of § 271(f) in light of the legislative intent of the statute to
prohibit the circumvention of infringement through exportation.113
Microsoft appealed the decision to the Federal Circuit, arguing that (1) the
district court had erred in holding that the master disks containing object code of
software are not “components” within the meaning of § 271(f), and (2) the court was
also wrong to conclude that the foreign-made copies of the master disk are copies
that are “supplied” from the United States. In a divided panel of the Federal Circuit
affirmed the district court’s decision. Rejecting Microsoft’s first point, the appellate
court relied on prior Federal Circuit case law that had held that:
[W]ithout question, software code alone qualifies as an invention eligible for
patenting, and ... statutory language [does] not limit section 271(f) to patented
“machines” or patented “physical structures,” such that software [can] very well
be a “component” of a patented invention for the purposes of § 271(f).114
The Federal Circuit also was unpersuaded by Microsoft’s second argument,
holding instead that the exportation of the golden master disks, with the specific
intent that they be replicated abroad, is an act that comes within the meaning of §
271(f)’s “supplied or caused to be supplied in or from the United States.” The
appellate court explained:
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.115
In dissent, Federal Circuit Judge Randall R. Rader objected to the majority
opinion’s view that “supplies” within the meaning of § 271(f) includes the act of
foreign “copying.” Judge Rader expressed concerns that such an interpretation is, in
112 Id. at *17-24.
113 AT&T, 414 F.3d at 1368; AT&T, 71 U.S.P.Q.2D (BNA) 1118, at *25 (“The fact that
Microsoft ships one golden master disk or sends one electronic transmission with the
infringing object code to each foreign OEM [original equipment manufacturer], rather than
shipping one CD for each computer for efficiency purposes, cannot shield Microsoft from
the letter and intent of the statute - to prohibit circumvention of infringement of a United
States patent by supplying certain infringing components from the United States, and
shipping them abroad for incorporation into a finished product that would infringe if
assembled in the United States.”).
114 AT&T, 414 F.3d at 1369, citing Eolas Techs. Inc. v. Microsoft Corp., 399 F.3d 1325,
1339 (Fed. Cir. 2005) (internal quotations omitted).
115 Id. at 1370.

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effect, an impermissible “extraterritorial expansion” of U.S. patent law because it
reaches “copying” activity overseas.116 In his view, AT&T’s remedy lies not in U.S.
law, but rather the law of the foreign country in which the infringement due to
copying occurred.117
The Supreme Court accepted Microsoft’s petition for a writ of certiorari in
October 2006, in order to answer two questions:
1. Whether digital software code — an intangible sequence of “1’s” and “0’s”
— may be considered a “component[] of a patented invention” within the
meaning of Section 271(f)(1); and, if so,
2. Whether copies of such a “component[]” made in a foreign country are
“supplie[d] ... from the United States.”
In its brief submitted to the Supreme Court, Microsoft argues that the Federal
Circuit committed the same two errors that the company had previously claimed were
made by the district court. Microsoft also cited Judge Rader’s dissenting opinion that
recognized what it considers to be a legally significant difference for purposes of
liability under § 271(f): “[t]he act of supplying is separate and distinct from copying,
reproducing, or manufacturing.”118
AT&T’s brief argues that the Court should answer in the affirmative to both
questions to which it had granted certiorari. AT&T urged the Court to conclude that
intangible object code is a “component” of a patented invention, and that § 271(f)
encompasses both physical and non-physical components.119 Second, AT&T appeals
to the ordinary meaning of “supply,” and asserts that Microsoft “supplies” the object
code to foreign computer manufacturers when it ships the golden master disks to
those entities for combination with physical components abroad.120 AT&T drew a
distinction between the physical disks that Microsoft sent abroad and the object code
contained on those disks; it is the object code that is the “component,” AT&T
contends, and not the physical container of that code.121 Finally, AT&T argued that
Microsoft’s liability here is not based on foreign conduct, but rather domestic actions
116 Id. at 1372-73 (Rader, J., dissenting). Patent rights are effective only in the United
States. Dowagiac Mfg. Co. v. Minnesota Moline Plow Co., 235 U.S. 641, 650 (1915) (“The
right conferred by a patent under our law is confined to the United States and its Territories
... and infringement of this right cannot be predicated of acts wholly done in a foreign
country.”).
117 AT&T, 414 F.3d. at 1373 (Rader, J., dissenting).
118 Brief for Petitioner at 8, AT&T Corp. v. Microsoft Corp., 414 F.3d 1366 (Fed. Cir. 2005),
cert. granted, 75 U.S.L.W. 3233 (U.S. Oct. 27, 2006) (No. 05-1056).
119 Brief for Respondent at 19, AT&T Corp. v. Microsoft Corp., 414 F.3d 1366 (Fed. Cir.
2005), cert. granted, 75 U.S.L.W. 3233 (U.S. Oct. 27, 2006) (No. 05-1056).
120 Id. at 28.
121 Id. at 30-31.

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CRS-21
— the act of shipping its U.S.-developed Windows software from the United
States.122
The Court heard oral argument in Microsoft v. AT&T on February 21, 2007; a
decision is expected by the end of the Court’s term in June 2007.
crsphpgw
122 Id. at 41-42.

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