An Overview of Recent U.S. Supreme Court Jurisprudence in Patent Law

Prepared for Members and Committees of Congress

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.

Introduc tion ..................................................................................................................................... 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.......................................................................................4
eBay v. MercExchange..............................................................................................................5
Laboratory Corporation of America Holdings v. Metabolite Labs...........................................7
October Term 2006..........................................................................................................................9
MedImmune v. Genentech.........................................................................................................9
KSR International Co. v. Teleflex Inc......................................................................................12
Microsoft v. AT&T...................................................................................................................15
Author Contact Information..........................................................................................................19

While Congress may consider legislation to amend the U.S. patent system to address perceived 1
deficiencies, 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 2
courts’ interpretation and application of patent law. 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.

It is normally an infringement of a patent holder’s rights for anyone, without prior authorization, 3
to use, make, offer to sell, or sell any patented invention within the United States. 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 4
submission of information” under the Federal Food, Drug, and Cosmetic Act. 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

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, thePatent Reform Act of 2007,” was
introduced on April 18, 2007 by Representative Howard Berman. On the same date, S. 1145, also titled thePatent
Reform Act of 2007,” was introduced in the Senate by Senator Leahy. The two bills are identically worded. For more th
information on these legislative efforts to amend the patent law, see CRS Report RL33996, Patent Reform in the 110
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.
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.

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 7
likely to be relevant to the drug approval regulatory process. 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 8
clinical research activities that contribute “relatively directly” to information submitted to the 9
Food and Drug Administration (FDA) for consideration in the drug approval process. 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 10
and Drug Administration (FDA), are exempted from infringement by 35 U.S.C. § 271(e)(1).” 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 11
preclinical use of patented inventions in the drug research and development process. 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 12
FDA or drug experiments that are not ultimately the subject of an FDA submission.

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).
9 Integra, 331 F.3d at 867.
10 Merck, 545 U.S. at 195.
11 Id at 202.
12 Id. at 206.

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. 14
Patent and Trademark Office.
The U.S. District Court for the Western District of Oklahoma ruled that ConAgra’s patent was 15
invalid 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 16
antitrust issue. 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 17
the evidence on the antitrust claim. 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 18
remanded the case for a new trial.

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 aWalker 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.

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 19
had permitted to stand.” 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 20
impart.” Because ConAgra did not file such a motion in the district court, it is not entitled to 21
pursue a new trial on appeal, the Court ruled.
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) 22
agree to purchase their ink exclusively from Trident, although such ink itself is unpatented.
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 23
violation of federal antitrust laws. 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 24
nor of Trident’s position in it. 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 25
product.” In so ruling, the appellate court emphasized that it had a “duty ... to follow the 26
precedents of the Supreme Court until the Court itself chooses to expressly overrule them.” 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 27
market power to support an antitrust violation. Congress, however, rejected this presumption for

19 Unitherm Food Sys., 126 S.Ct. at 985 (citation omitted).
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; th
Systemcare, Inc. v. Wang Laboratories Corp., 117 F.3d 1137, 1142-3 (10 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. Loews, Inc., 371 U.S. 38 (1962).

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 31
presumption.” 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 32
power” presumption. 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 33
defendant has market power in the tying product.”

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 35
States. Whoever performs any one of these five acts during the term of the invention’s patent, 36
without the patent holder’s authorization, is liable for infringement. To prevent the violation of
any right secured by a patent, the Patent Act provides that a federal court “may grant injunctions 37
in accordance with the principles of equity.”
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 38
than bid for them, comes within the claims of its patent, 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

28 The doctrine of patent misuse is an affirmative defense to patent infringement, thatrequires 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).
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).

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 39
MercExchange “does not practice its patents” and “exists merely to license its patented 40
technology to others.”
On appeal, the Federal Circuit unanimously affirmed the jury’s verdict on the finding of 41
infringement. 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 42
for refusing to issue an injunction. 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 43
that a permanent injunction will issue once infringement and validity have been adjudged.”
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 44
in this case. Although the Court noted that “we take no position on whether permanent 45
injunctive relief should or should not issue in this particular case,” the Court clarified that the
traditional principles of equity that govern issuance of injunctive relief “apply with equal force to 46
disputes arising under the Patent Act,” 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 47
patent infringement, consistent with the “long tradition of equity practice.” 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.

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.
46 Id. at 1839. Justice Clarence Thomas, the author of the Courts 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).

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 48
cases.” 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 49
infringement and an injunction may not serve the public interest.
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 50
obtain a patent therefore, subject to the conditions and requirements of this title.” 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 51
abstract ideas” may not be patented. The Court has elaborated on this restriction in several
[A] new mineral discovered in the earth or a new plant found in the wild is not patentable 2
subject matter. Likewise, Einstein could not patent his celebrated law that E=mc; nor could
Newton have patented the law of gravity. Such discoveries are “manifestations of ... nature, 52
free to all men and reserved exclusively to none.”
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 53
vitamins can cause serious illnesses in humans. 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

48 Id. at 1842-43 (Kennedy, J., concurring).
49 Id. at 1842.
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).

particular amino acid (homocysteine), and second, noticing that an elevated level of this amino 54
acid correlates with a deficiency in the two vitamins.
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 5556
homocysteine) with B vitamin deficiencies. This is the “direct” infringement of the patent, for 57
which LabCorp was held liable for inducing. 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 58
correlates to vitamin deficiencies.
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 59
merely by thinking about the relationship after looking at a test result.”
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 60
jurisprudence that prohibit patenting laws of nature, natural phenomena, and abstract ideas.
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 61
properly raised or addressed in LabCorp’s arguments before the district court or Federal Circuit.

54 Id. at 1358-59.
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
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.

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 63
the writ of certiorari was improvidently granted. The effect of the dismissal is that the Federal
Circuit’s judgment affirming infringement liability and the patent’s validity is left undisturbed.
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 64
Court’s authoritative answer.” 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 65
deficiency ... is a ‘natural phenomenon’” that is not patentable.
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 66
it produces a “useful, concrete, and tangible result.” (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 67
held the contrary.”

Under Article III of the U.S. Constitution, the jurisdiction of federal courts is limited to actual, 69
ongoing cases and controversies. The Declaratory Judgment Act, codified at 28 U.S.C. § 2201,

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).
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 For a more detailed explanation and analysis of the MedImmune case, see CRS Report RL34156, A Nonrepudiating
Patent Licensee’s Right To Seek Declaratory Judgment of Invalidity or Noninfringement of the Licensed Patent:
MedImmune v. Genentech, by Brian T. Yeh.
69 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.”).

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 70
relief qualifies as a “case or controversy” under Article III; 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 71
and reality to warrant the issuance of a declaratory judgment.”
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 72
declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed.
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 73
chains in recombinant host cells.” 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 74
for the license agreement.
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 75
to sue for patent infringement if it failed to comply with the demands therein.
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 granted the motion, dismissing the case for lack of subject matter 7677
jurisdiction. The district court explained that it was obliged to dismiss the case 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

70 Nashville, Chattanooga & St. Louis Railway Co. v. Wallace, 288 U.S. 249 (1933); Aetna Life Ins. Co. v. Haworth,
300 U.S. 227 (1937).
71 Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941).
72 MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764, 767 (2007).
73 Id.
74 Id.
75 Id.
76 MedImmune, Inc. v. Genentech, Inc., 2004 U.S. Dist. LEXIS 28680, at *13 (C.D. Cal. 2004).
77 Dismissal of an action is required if a court lacks subject matter jurisdiction. Ex parte McCardle, 74 U.S. 506 (1869).

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 78
infringement.” 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, 79
the court reasoned.
On appeal, the Federal Circuit affirmed the district court’s judgment, relying on its earlier Gen-80
Probe decision in determining that there was a lack of a justiciable controversy.
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 81
patent is invalid, unenforceable, or not infringed. However, the Court “express[ed] no opinion”
on whether such a nonrepudiating licensee is relieved of its contract obligations during the suit 82
challenging the patent’s validity.
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 83
payments. 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 84
constitutionality of a law threatened to be enforced.” In such a case, courts have not found
Article III jurisdiction to be lacking despite the fact that the plaintiff’s own action (or inaction) in 85
failing to violate the law eliminates the imminent threat of prosecution. 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 86
argued. 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 87
breach its license prior to challenging the validity of the underlying patent. 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.

78 MedImmune, 127 S.Ct. at 768 (quoting Gen-Probe, Inc. v. Vysis, Inc., 359 F.3d 1376, 1381 (Fed. Cir. 2004)).
79 MedImmune, 2004 U.S. Dist. LEXIS 28680, at *13-14.
80 MedImmune, Inc. v. Genentech, Inc., 427 F.3d 958, 963 (Fed. Cir. 2005).
81 MedImmune, 127 S.Ct. at 777.
82 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.
83 Id. at 771-72.
84 Id. at 772.
85 Id.
86 Id. at 773.
87 Id. at 777 (Thomas, J., dissenting).

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 89
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 90
matter pertains.” 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 91
abilities of a person of ordinary skill in the art in the appropriate field.
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 92
patented. As indicia of obviousness or nonobviousness, these inquiries may have relevancy.
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 93
skill to combine multiple prior art references to produce an invention. 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 94
inventors to look to references relating to possible solutions to that problem. Because § 103 of
the Patent Act requires that an invention’s obviousness be determined from the standpoint of a

88 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.
89 “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).
90 35 U.S.C. § 103(a).
91 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).
92 383 U.S. 1, 17-18 (1966).
93 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).
94 Pro-Mold, 75 F.3d at 1573.

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 95
obviousness analysis.”
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 to combine an adjustable pedal system with an electronic pedal 96
position sensor for it to work with electronically controlled engines.
The U.S. District Court for the Eastern District of Michigan agreed with KSR that the patent was 97
invalid for obviousness, granting summary judgment in favor of KSR. The court determined
that there was “little difference between the teachings of the prior art and claims of the patent-in-98
suit.” Furthermore, the court opined that “it was inevitable” that APS would be combined with 99
an electronic device to work with electronically controlled engines.
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 100
claimed.” 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 101
sensor on an adjustable pedal.
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 102
the sole test for obviousness under § 103(a) of the Patent Act. On April 30, 2007, the Court
unanimously reversed the Federal Circuit’s judgment, holding that the TSM test for obviousness 103
was incompatible with § 103 and Supreme Court precedents. Associate Justice Anthony

95 In re Dembiczak, 175 F.3d 994, 999 (Fed. Cir. 1999).
96 Teleflex Inc. v. KSR Int’l Co., 298 F. Supp. 2d 581, 585 (E.D. Mich. 2003).
97 Id. at 596.
98 Id. at 592.
99 Id. at 593.
100 Teleflex, Inc. v. KSR Int’l Co., 119 Fed. Appx. 282, 288 (Fed. Cir. 2005) (internal quotations and citation omitted).
101 Id.
102 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).
103 KSR Int’l Co. v. Teleflex Inc., 550 U.S. ___ , 127 S.Ct. 1727, 1735 (2007).

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 104
“mandatory” TSM formula does not offer.
Justice Kennedy observed that the Graham approach, as further developed in three subsequent 105
Supreme Court cases decided within ten years of that case, 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
• 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 106
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 107
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 108
argued. In addition, he believed that the TSM test hindered the ability of courts and patent 109
examiners to rely upon “common sense.”
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,

104 Id. at 1739, 1741.
105 United States v. Adams, 383 U.S. 39 (1966); Andersons-Black Rock, Inc. v. Pavement Salvage Co., 396 U.S. 57
(1969); Sakraida v. Ag Pro, Inc., 425 U.S. 273 (1976).
106 KSR, 127 S.Ct. at 1740.
107 Id. at 1740-41.
108 Id.
109 Id. at 1742.

independently, known in the prior art.110 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 that accord with the Graham principles. It is the
Federal Circuit’s rigid application of its TSM rule, however, that the Court deemed was 111
problematic in this case.
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 112
matter. 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 113
teachings of multiple patents together like pieces of a puzzle.” 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 114
combination was obvious to try might show that it was obvious under § 103.” 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 115
common sense.”
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 116

In 1972, the Supreme Court ruled in Deepsouth Packing Co. v. Laitram Corp.118 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 119
subsection (f) to § 271 of the Patent Act. 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

110 Id.
111 Id.
112 Id. at 1742.
113 Id.
114 Id.
115 Id.
116 Id. at 1743-44.
117 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.
118 406 U.S. 518 (1972).
119 Patent Law Amendments Act of 1984, P.L. 98-622, Title I, § 101(a) (1984).

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 120
compact code, or vice versa. 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 121
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 122
then sold to foreign customers. 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 123
proposition that software is patentable. 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 124
could not be a “component” of a patented invention under § 271(f). 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 125
prohibit the circumvention of infringement through exportation.
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 § 126
271(f).” 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

120 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).
121 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).
122 Id. at 1368.
123 AT&T, 71 U.S.P.Q.2D (BNA) 1118, at *15-17.
124 Id. at *17-24.
125 AT&T, 414 F.3d at 1368; AT&T, 71 U.S.P.Q.2D (BNA) 1118, at *25.
126 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).

replicated abroad, is an act that comes within the meaning of § 271(f)’s “supplied or caused to be 127
supplied in or from the United States.”
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 128
expansion” of U.S. patent law because it reaches “copying” activity overseas. In his view,
AT&T’s remedy lies not in U.S. law, but rather the law of the foreign country in which the 129
infringement due to copying occurred.
The Supreme Court accepted Microsoft’s petition for a writ of certiorari in October 2006,130 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 decision131 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 master disk or an electronic transmission sent by Microsoft from 132
the United States. 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-133
ROM. (Sheet music for Beethoven’s Ninth.)
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, 134
combinable part of a computer.” Justice Ginsburg analogized software in the abstract to a 135
detailed set of instructions, similar to that of a blueprint. But information sent abroad that
instructs someone on how to build the components of a patented invention does not come within

127 AT&T, 414 F.3d at 1370.
128 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.”).
129 AT&T, 414 F.3d. at 1373 (Rader, J., dissenting).
130 Microsoft Corp. v. AT&T Corp., 127 S. Ct. 467 (2006).
131 Chief Justice John G. Roberts Jr. recused himself from consideration of and the rendering of a decision in this case.
132 Microsoft Corp. v. AT&T Corp., 550 U.S. ___ , 127 S. Ct. 1746, 1750-51 (2007).
133 Id. at 1754.
134 Id. at 1755-56.
135 Id. at 1755.

the scope of § 271(f); she observed that Congress, in enacting the statutory provision, did not 136
include the export of design tools such as blueprints, schematics, templates, and prototypes.
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-137
readable software “copy” such as a CD-ROM. The Court thus declined to adopt AT&T’s
characterization of software in the abstract as a combinable component that qualifies for § 271(f) 138
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); 139
further, such liability is not affected by the ease of copying software.
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) 140
in a manner that excludes intangible software code and copies of software made abroad.
Echoing Judge Rader’s advice, Justice Ginsburg observed that “[i]f AT & T desires to prevent 141
copying abroad, its remedy lies in obtaining and enforcing foreign patents.”
At the end of the opinion, Justice Ginsburg conceded that the Court’s decision effectively creates 142
a “loophole” for software makers to avoid liability under § 271(f). However, she explained that
the Court would resist using the “dynamic judicial interpretation” that would be needed to adjust 143
the patent law “to account for the realities of software distribution.” The majority opinion
expressly invited Congress to consider whether this apparent loophole in favor of software 144
companies, to the extent that it may exist, merits closing.
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 145
something physical”; thus, “[b]ecause no physical object originating in the United States was 146
combined with these computers, there was no violation of § 271(f).” He further observed that
“[n]o physical aspect of a Windows CD-ROM—original disk or copy—is ever incorporated into

136 Id. at 1756, 1759.
137 Id. at 1755-56.
138 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.
139 Id. at 1757.
140 Id. at 1758.
141 Id. at 1759.
142 Id.
143 Id. at 1759-60 (citation omitted).
144 Id. at 1759.
145 Id. at 1761 (Alito, J., concurring).
146 Id. at 1762.

the computer itself” because the CD-ROM is removed from the computer after the installation 147
process copies the Windows code to the computer’s hard drive.
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 148
the intent of the Congress that enacted § 271(f).” 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 149
that causes a player piano to produce sound than sheet music that tells a pianist what to do.”
Brian T. Yeh
Legislative Attorney, 7-5182

147 Id. at 1761-62.
148 Id. at 1762 (Stevens, J., dissenting).
149 Id.