Extraterritoriality in Patent Infringement Cases

The Recent Expansion of Extraterritoriality in Patent Infringement Cases
by Katherine E. White*

INTRODUCTION

[¶1] The rapid pace of globalization has intensified the desire to expand the territorial reach of United States law to determine patent infringement.[1] Historically, enforcement of patent rights was limited to infringement activity occurring solely within the borders of the United States.[2] The concept of territoriality is not unique to patent law, but is instead a venerable principle of the law of the United States generally.[3] However, the fundamental and traditional principal of territoriality recently has been expanding to find patent infringement for activity occurring entirely outside of the United States.[4]

[¶2] Previously, the Supreme Court and the Federal Circuit have expanded the territorial reach of patent laws only in very limited circumstances. One circumstance has been when the nature of a system or device is such that it cannot be physically located in any single country's territory. An example of this would be when the nature of a system's components permits their use to be separated from their physical location, such that the system may not be located wholly within one jurisdiction.[5] In such cases, instead of focusing on physical location, the system is deemed located where it is primarily used or controlled.[6]

[¶3] Another reason for expanding the territorial reach of patent law is based on distinctions regarding the type of patent claims obtained. Whether claims are written to cover devices and systems versus whether they protect processes or methods has affected the decision whether to extend the territoriality of the patent laws beyond the boundaries of the United States.[7] For example, courts have found patent claims on processes require, under 35 U.S.C. § 271(a),[8] all steps of the process occur within the United States for patent infringement to arise.[9] If, however, the claims are drawn to a device, where only one part of the system takes place outside the United States, extraterritorial application of the patent law of the United States is appropriate.[10]

[¶4] In an unprecedented move, the Federal Circuit, in AT&T v. Microsoft Corp.,[11] held that copying in a foreign country of software made in the United States infringed United States patents under United States law. Such a holding " provides extraterritorial expansion to U.S. law by punishing under U.S. law 'copying' that occurs abroad." [12] Although courts have previously expanded the geographic boundaries where United States patent law applies, never before have the arguments for extraterritorial reach diverged so far from the traditional arguments to extend territoriality. This extraterritorial application of the patent laws perhaps is related to the unique qualities of software as a technological art. Because software is a mysterious concept that most laymen do not understand intuitively, issues that should remain separate have been conflated and confused, leading to an unfortunate and unprecedented application of extraterritoriality of the patent laws.

[¶5] AT&T is a monumental case because never before have courts related their decision to extend the geographic boundaries of patent law to be dependant on the nature of the field of technology on which the patent was granted. The holding in AT&T expands territoriality while violating the fundamental principle of providing " the same treatment to all forms of invention without discrimination." [13]

[¶6] In AT&T, the court looked to the nature of software inventions as an excuse to treat them differently from inventions involving other technological arts.[14] Despite difficulties in separating computer software from its existence as an arrangement of algorithms,[15] any expansion of extraterritorial application of United States patent law should not be based on the nature of the technological arts, but on principles derived from precedent. The dissimilar treatment in AT&T is in conflict with precedent and United States treaty agreements.[16] Perhaps the AT&T case reveals problems associated with patenting software.[17] In any case, AT&T goes too far in extending extraterritoriality for United States patents, and is likely to encourage software manufacturers to make their software overseas to escape patent infringement liability in the United States.

[¶7] Part I of this Article is a general overview of the strict application of the doctrine of territoriality in patent infringement cases. Part II discusses the limits of the strict application of the doctrine of territoriality. Part III reviews Congress's legislative solution to close a loophole in the doctrine of territoriality. Part IV discusses the subsequent expansion by the courts of extraterritoriality beyond what Congress intended.

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The Recent Expansion of Extraterritoriality in Patent Infringement Cases