Order Code RL33923
An Overview of Recent U.S. Supreme Court
Jurisprudence in Patent Law
Updated June 6, 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
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 newfound 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 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
Co. v. Teleflex Inc., and Microsoft v. AT&T.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
October Term 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merck KGaA v. Integra Lifesciences I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
October Term 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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
October Term 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
MedImmune v. Genentech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
KSR International Co. v. Teleflex Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Microsoft v. AT&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

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An Overview of Recent U.S. Supreme Court
Jurisprudence in Patent Law
Introduction
While Congress may consider legislation to amend 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
October Term 2004.
October Term 2004
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
1 Bills have been introduced before both houses of the 110th Congress that would
substantially reform several provisions of the Patent Act. In the House of Representatives,
H.R. 1908, the “Patent Reform Act of 2007,” was introduced on April 18, 2007 by
Representative Howard Berman. On the same date, S. 1145, also titled the “Patent Reform
Act of 2007,” was introduced in the Senate by Senator Leahy. The two bills are identically
worded. For more information on these legislative efforts to amend the patent law, see CRS
Report RL33996, Patent Reform in the 110th Congress: 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.

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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
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
3 35 U.S.C. § 271(a).
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.
(continued...)

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“relatively directly” to information submitted to the Food and Drug Administration
(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
October Term 2005
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
8 (...continued)
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).
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.”)

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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
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
14 Unitherm Food Sys. v. Swift-Eckrich, Inc., 126 S.Ct. 980, 983-84 (2006). Such a “Walker
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).

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appellate printed transcript can impart.”20 Because ConAgra did not file such a
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
20 Id. at 985-86 (citation omitted).
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,
(continued...)

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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. MercExchange34
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.35 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.36 To prevent the violation of any right secured by a patent,
27 (...continued)
Inc., 371 U.S. 38 (1962).
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 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.
35 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).
36 35 U.S.C. § 271(a).

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the Patent Act provides that a federal court “may grant injunctions in accordance
with the principles of equity.”37
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.
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 35 U.S.C. § 283.
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
homocysteine 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 (October 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
October Term 2006
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 Co. v. Teleflex Inc.87
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 art88 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.”89 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.90
84 Id.
85 Id. at 773.
86 Id. at 777 (Thomas, J., dissenting).
87 For a more detailed explanation and analysis of the KSR case, see CRS Report RS22669,
The Obviousness Standard in Patent Law: KSR International Co. v. Teleflex Inc., by Brian
T. Yeh.
88 “Prior art” is a legal term of art that refers to the materials (usually called “references” in
patent law) that comprise the available knowledge regarding the subject matter of the
invention sought to be patented, such as other issued patents, publications, and evidence of
actual uses or sales of the technology. ROGER SCHECHTER & JOHN THOMAS, PRINCIPLES OF
PATENT LAW 4-1 (2d ed. 2004).
89 35 U.S.C. § 103(a).
90 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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In the landmark 1966 case Graham v. John Deere Co. of Kansas City, 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
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.91
While a single prior art reference could form the basis of a finding of
nonobviousness, multiple prior art references are often involved in the analysis. In
such a situation, the Federal Circuit had developed an approach in which an invention
would be considered obvious only if there was 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.92 Such a “teaching, suggestion,
or motivation” (“TSM”) could have 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.93
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 was designed, in part, to defend against
“the subtle but powerful attraction of a hindsight-based obviousness analysis.”94
The patents at issue in KSR International Co. v. Teleflex Inc. pertain to an
adjustable pedal system (APS) for use with automobiles having electronic throttle-
controlled engines. Teleflex Inc. holds an exclusive license for the patent 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, and in mid-2000, 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
91 383 U.S. 1, 17-18 (1966).
92 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).
93 Pro-Mold, 75 F.3d at 1573.
94 In re Dembiczak, 175 F.3d 994, 999 (Fed. Cir. 1999).

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to combine an adjustable pedal system with an electronic pedal position sensor for
it to work with electronically controlled engines.95
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
KSR.96 The court determined that there was “little difference between the teachings
of the prior art and claims of the patent-in-suit.”97 Furthermore, the court opined that
“it was inevitable” that APS would be combined with an electronic device to work
with electronically controlled engines.98
Upon Teleflex’s appeal, the Federal Circuit vacated the district court’s ruling.
The appellate court found that the district court had improperly applied the TSM test
by not adhering to it more strictly — the district court 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.”99 In the Federal
Circuit’s view, unless the “prior art references address the precise problem that the
patentee was trying to solve,” the problem would not motivate a person of ordinary
skill in the art to combine the prior art teachings — here, the placement of an
electronic sensor on an adjustable pedal.100
The Supreme Court granted certiorari on June 26, 2006, to review the KSR case,
in which the central question before the Court was whether the Federal Circuit had
erred in crafting TSM as the sole test for obviousness under § 103(a) of the Patent
Act.101 On April 30, 2007, the Court unanimously reversed the Federal Circuit’s
judgment, holding that the TSM test for obviousness was incompatible with § 103
and Supreme Court precedents.102 Associate Justice Anthony Kennedy, delivering
the opinion of the Court, explained that the proper framework for a court or patent
examiner to employ when determining an invention’s obviousness is that set forth in
the Court’s 1966 opinion, Graham v. John Deere Co. of Kansas City. That analytic
framework provides “an expansive and flexible approach” to the question of
obviousness that the “rigid” and “mandatory” TSM formula does not offer.103
95 Teleflex Inc. v. KSR Int’l Co., 298 F. Supp. 2d 581, 585 (E.D. Mich. 2003).
96 Id. at 596.
97 Id. at 592.
98 Id. at 593.
99 Teleflex, Inc. v. KSR Int’l Co., 119 Fed. Appx. 282, 288 (Fed. Cir. 2005) (internal
quotations and citation omitted).
100 Id.
101 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).
102 KSR Int’l Co. v. Teleflex Inc., 550 U.S. ___ , 127 S.Ct. 1727, 1735 (2007).
103 Id. at 1739, 1741.

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Justice Kennedy observed that the Graham approach, as further developed in
three subsequent Supreme Court cases decided within ten years of that case,104 is
based on several instructive principles for determining the validity of a patent based
on the combination of elements found in the prior art:
! When a work is available in one field of endeavor, design incentives
and other market forces can prompt variations of it, either in the
same field or a different one.
! If a person of ordinary skill can implement a predictable variation,
it is likely obvious under § 103 and unpatentable.
! If a technique has been used to improve one device, and a person of
ordinary skill in the art would recognize that it would improve
similar devices in the same way, using the technique is obvious
unless its actual application is beyond his or her skill.105
Justice Kennedy then provided additional guidance for courts in following these
principles. To determine whether there was an apparent reason to combine the
known elements in the manner claimed by the patent at issue, courts should explicitly
engage in an analysis that considers the following elements:
! the interrelated teachings of multiple patents,
! the effects of demands known to the design community or present in
the marketplace, and
! The background knowledge possessed by a person having ordinary
skill in the art.106
The Federal Circuit’s TSM test, and its mandatory application, is contrary to
Graham and its progeny because it limits the obviousness analysis and is too
formalistic, Justice Kennedy argued.107 In addition, he believed that the TSM test
hindered the ability of courts and patent examiners to rely upon “common sense.”108
However, Justice Kennedy allowed that TSM provides “a helpful insight” —
that a patent comprised of several elements is not obvious just because each of those
elements was, independently, known in the prior art.109 This “essence” of the TSM
test is not necessarily inconsistent with the Graham analysis, and thus he predicted
that the Federal Circuit has likely applied the TSM test on many occasions in ways
104 United States v. Adams, 383 U.S. 39 (1966); Anderson’s-Black Rock, Inc. v. Pavement
Salvage Co., 396 U.S. 57 (1969); Sakraida v. Ag Pro, Inc., 425 U.S. 273 (1976).
105 KSR, 127 S.Ct. at 1740.
106 Id. at 1740-41.
107 Id.
108 Id. at 1742.
109 Id.

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that accord with the Graham principles. It is the Federal Circuit’s rigid application
of its TSM rule, however, that the Court deemed was problematic in this case.110
Justice Kennedy identified four specific legal errors committed by the Federal
Circuit. First, the appellate court had held that courts and patent examiners should
look only to the problem the patentee was trying to solve, rather than other problems
addressed by the patent’s subject matter.111 Second, the appellate court had assumed
that a person of ordinary skill trying to solve a particular problem will be led only to
those elements of prior art designed to solve the same problem; however, “common
sense teaches ... that familiar items may have obvious uses beyond their primary
purposes, and in many cases a person of ordinary skill will be able to fit the teachings
of multiple patents together like pieces of a puzzle.”112 The third error of the lower
court was its erroneous conclusion that a patent claim cannot be proved obvious by
showing that the combination of elements was “obvious to try”; instead, Justice
Kennedy noted, “the fact that a combination was obvious to try might show that it
was obvious under § 103.”113 The final error was the Federal Circuit’s adherence to
“rigid preventative rules” to avoid the risk of hindsight bias on the part of courts and
patent examiners, because such rules “deny factfinders recourse to common sense.”114
As to the specific patent claim at issue in this case, the Court adopted the
obviousness analysis of the district court and expressly held that the claim “must be
found obvious” in light of the prior art.115
Microsoft v. AT&T116
In 1972, the Supreme Court ruled in Deepsouth Packing Co. v. Laitram Corp.117
that it was not an act of patent infringement to manufacture the components of a
patented invention in the United States and then ship them abroad for assembly into
an end product. In response to this loophole in the patent law that would have
allowed potential infringers to avoid liability, Congress added subsection (f) to § 271
of the Patent Act.118 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
110 Id.
111 Id. at 1742.
112 Id.
113 Id.
114 Id.
115 Id. at 1743-44.
116 For a more detailed explanation and analysis of the Microsoft case, see CRS Report
RS22670, Exporting Software and the Extraterritorial Reach of U.S. Patent Law: Microsoft
Corp. v. AT&T Corp., by Brian T. Yeh.
117 406 U.S. 518 (1972).
118 Patent Law Amendments Act of 1984, P.L. 98-622, Title I, § 101(a) (1984).

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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 concerned AT&T’s patent on a speech
coder-decoder (a codec). A speech codec is a software program that is capable of
converting spoken words into a compact code, or vice versa.119 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
software code of its Windows operating system;120 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.121 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.122 Then 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
patented invention under § 271(f).123 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.124
119 AT&T Corp. v. Microsoft Corp., 2004 U.S. Dist. LEXIS 3340, *1 n.1 (2004); AT&T
Corp. v. Microsoft Corp., 2003 U.S. Dist. LEXIS 10716, *2-3 (2003).
120 Microsoft also sends the Windows code to foreign computer manufacturers via encrypted
electronic transmission. AT&T Corp. v. Microsoft Corp., 414 F.3d 1366, 1367 (Fed. Cir.
2005).
121 Id. at 1368.
122 AT&T, 71 U.S.P.Q.2D (BNA) 1118, at *15-17.
123 Id. at *17-24.
124 AT&T, 414 F.3d at 1368; AT&T, 71 U.S.P.Q.2D (BNA) 1118, at *25.

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Upon Microsoft’s appeal, a divided panel of the Federal Circuit affirmed the
district court’s decision. The appellate court relied on prior Federal Circuit case law
that had held that “without 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).”125 The
Federal Circuit also ruled that, because “the act of copying is subsumed in the act of
‘supplying,’” 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.”126
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
effect, an impermissible “extraterritorial expansion” of U.S. patent law because it
reaches “copying” activity overseas.127 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.128
The Supreme Court accepted Microsoft’s petition for a writ of certiorari in
October 2006,129 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 a 7-1 decision130 issued in late April 2007, the Court reversed the Federal
Circuit’s judgment, holding that Microsoft was not liable for patent infringement
under § 271(f), as the statute is currently written, when foreign-manufactured
computers are loaded with Windows software that has been copied abroad from a
125 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).
126 AT&T, 414 F.3d at 1370.
127 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.”).
128 AT&T, 414 F.3d. at 1373 (Rader, J., dissenting).
129 Microsoft Corp. v. AT&T Corp., 127 S. Ct. 467 (2006).
130 Chief Justice John G. Roberts Jr. recused himself from consideration of and the rendering
of a decision in this case.

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master disk or an electronic transmission sent by Microsoft from the United States.131
In regard to the first question posed in the case, Associate Justice Ruth Bader
Ginsburg, writing for the majority, explained that there are two ways to conceptualize
software:
One can speak of software in the abstract: the instructions themselves detached
from any medium. (An analogy: The notes of Beethoven’s Ninth Symphony.)
One can alternatively envision a tangible “copy” of software, the instructions
encoded on a medium such as a CD-ROM. (Sheet music for Beethoven’s
Ninth.)132

Abstract software code does not qualify as a component, for purposes of triggering
liability under § 271(f), because it is an “idea” lacking physical embodiment and thus
it cannot be a “usable, combinable part of a computer.”133 Justice Ginsburg
analogized software in the abstract to a detailed set of instructions, similar to that of
a blueprint.134 But information sent abroad that instructs someone on how to build
the components of a patented invention does not come within the scope of § 271(f);
she observed that Congress, in enacting the statutory provision, did not include the
export of design tools such as blueprints, schematics, templates, and prototypes.135
Thus, for the Windows software to be considered a “component” under § 271(f), the
software code must be encoded or otherwise expressed in some sort of tangible
medium — a computer-readable software “copy” such as a CD-ROM.136 The Court
thus declined to adopt AT&T’s characterization of software in the abstract as a
combinable component that qualifies for § 271(f) liability.137
In reaching its answer to the second question, the Court largely agreed with
Judge Rader’s dissent from the Federal Circuit’s opinion. The copies of Windows
used for installation on the foreign computers had been made abroad; those copies
were not “supplied” from the United States, even though the master disk from which
they were duplicated had been exported, Justice Ginsburg noted. According to her,
this distinction is legally relevant for liability purposes under § 271(f); further, such
liability is not affected by the ease of copying software.138

Furthermore, Justice Ginsburg argued that the traditional presumption against
extraterritorial application of U.S. law, particularly in patent law, would help favor
the Court construing § 271(f) in a manner that excludes intangible software code and
131 Microsoft Corp. v. AT&T Corp., 550 U.S. ___ , 127 S. Ct. 1746, 1750-51 (2007).
132 Id. at 1754.
133 Id. at 1755-56.
134 Id. at 1755.
135 Id. at 1756, 1759.
136 Id. at 1755-56.
137 Indeed, the Court acknowledged that if it were to accept AT&T’s position, “it would not
matter that the master copies of Windows software dispatched from the United States were
not themselves installed abroad as working parts of the foreign computers.” Id. at 1754.
138 Id. at 1757.

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copies of software made abroad.139 Echoing Judge Rader’s advice, Justice Ginsburg
observed that “[i]f AT & T desires to prevent copying abroad, its remedy lies in
obtaining and enforcing foreign patents.”140
At the end of the opinion, Justice Ginsburg conceded that the Court’s decision
effectively creates a “loophole” for software makers to avoid liability under
§ 271(f).141 However, she explained that the Court would resist using the “dynamic
judicial interpretation” that would be needed to adjust the patent law “to account for
the realities of software distribution.”142 The majority opinion expressly invited
Congress to consider whether this apparent loophole in favor of software companies,
to the extent that it may exist, merits closing.143
Associate Justice Samuel Alito, joined by Justices Thomas and Breyer, filed a
concurring opinion in which he asserted that a “component” of an infringing physical
device under § 271(f) “must be something physical”;144 thus, “[b]ecause no physical
object originating in the United States was combined with these computers, there was
no violation of § 271(f).”145 He further observed that “[n]o physical aspect of a
Windows CD-ROM — original disk or copy — is ever incorporated into the
computer itself” because the CD-ROM is removed from the computer after the
installation process copies the Windows code to the computer’s hard drive.146
In lone dissent, Associate Justice John Paul Stevens explained that he would
affirm the Federal Circuit’s majority opinion in the case, because he deemed that
judgment to be “more faithful to the intent of the Congress that enacted § 271(f).”147
In his view, abstract software code, as well as the master disks that Microsoft had
exported for copying abroad, should be considered “components” within the meaning
of § 271(f). Justice Stevens also objected to the Court’s comparison of abstract
software to blueprints: “[U]nlike a blueprint that merely instructs a user how to do
something, software actually causes infringing conduct to occur. It is more like a
roller that causes a player piano to produce sound than sheet music that tells a pianist
what to do.”148
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139 Id. at 1758.
140 Id. at 1759.
141 Id.
142 Id. at 1759-60 (citation omitted).
143 Id. at 1759.
144 Id. at 1761 (Alito, J., concurring).
145 Id. at 1762.
146 Id. at 1761-62.
147 Id. at 1762 (Stevens, J., dissenting).
148 Id.

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