Link This | Email this | Blog This | Comments (0)

Are patents important to your business?
May 3, 2007

That’s really a trick question. The answer has to be “yes,” because all businesses, no matter how big or small, make use of devices, technologies and systems that are either covered by existing or expired patents, or could potentially be the subject of a patent application.

The U.S. Supreme Court and patents

This week, there was a lot of press about patents due to two high-profile and important U.S. Supreme Court decisions on patents. Patents are governed exclusively by federal law, so the Court is the ultimate authority on interpreting patent law and patents. Both of those decisions were issued on the same day, Monday April 30.

Both decisions will have some immediate impacts on businesses (definitely on the companies involved in the litigation), and also some long-term effects.

How far does U.S. patent law extend?

Patent law is territorial; that means that U.S. patent law applies to activities that take place within the U.S., such as manufacturing or selling a device in the U.S., or importing it into the U.S. An invention that is under patent protection in the U.S. may not have patent protection abroad, however, so products and technologies that would infringe a U.S. patent can be manufactured or sold outside the U.S. But there is a special provision in patent law that extends the territorial reach of U.S. patent law by prohibiting the export from the U.S. of a “component” of a patented invention, for combination into the patented invention abroad.

In Microsoft v. AT&T, the dispute concerned software that Microsoft creates in the U.S. but does not distribute in the U.S. due to patents held by AT&T. Microsoft exports the software code abroad in the form of a “golden master disk,” The code on the master disk is installed as executable software on computers sold outside the U.S.

AT&T argued that Microsoft’s “golden master disk” is a component, and that exportation of the disk for use abroad violates U.S. patent law. The Supreme Court disagreed, ruling that software code on the golden master disk is not a component but is similar to blueprints and schematic drawings which are not considered components.  The Court concluded that the "component" was the copies made from the golden master disk, which in this case, were produced abroad and therefore did not result in liability under this provision of the Patent Act.

What impact does this decision have?

This decision is a huge win for Microsoft, potentially saving the company billions of dollars in its global operations. But more broadly, the decision may lessen the pressures on software companies in general to offshore software development, which is good news for U.S. companies in this sector, or for those that service the software development sector in the U.S.

On the other hand, if you’re a company trying to protect a patented product or technology from competition overseas, your ability to use U.S. law to stop U.S. activities that may support that competition, has been lessened by the ruling.

In our next post, we’ll cover the second U.S. Supreme Court case decided on April 30, on patent “obviousness.”

Sources: The Web site of the U.S. Patent and Trademark Office contains general information on U.S. Patent Law.

The posts on this blog reflect the personal views of Jeffrey D. Neuburger, in his individual capacity, and do not necessarily represent the views of his law firm or his clients, and are not sponsored or endorsed by them. The information contained in this blog is provided only as general information for educational purposes, and no warranty or representation is made about the accuracy of the information provided. Blog topics may or may not be updated subsequent to their initial posting. This information is not provided in the course of an attorney-client relationship and is not intended to constitute legal advice. This blog should not be used as a substitute for competent legal advice from a licensed attorney in your state.

Posted by Jeff Neuburger on May 3, 2007 | Comments (0)