It is a supposed axiom that patents are territorial in nature. U.S. patents are enforceable in the United States, Mexican patents are enforceable in Mexico and Australian patents in Australia. But under the current law of the U.S. Court of Appeals for the Federal Circuit, U.S. patents on software can in some cases reach beyond the U.S. borders and be utilized to obtain damages on software products that are both manufactured and sold overseas. This controversial rule is currently on appeal to the U.S. Supreme Court in AT&T Corp. v. Microsoft Corp., 414 F.3d 1366 (Fed. Cir. 2005), and the outcome is eagerly awaited by the software industry, legal practitioners and scholars alike.
The dispute revolves around the interpretation of 35 U.S.C. 271(f)(1), which makes anyone who supplies all or a substantial portion of the “components” of a patented invention from the United States an infringer, if the components are supplied in a manner that actively induces their combination outside of the United States into something that is covered by a U.S. patent. This statute was originally written to close a perceived loophole in the patent law brought to light by Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972). The defendant manufactured the parts of a shrimp deveining machine in the United States, and shipped them to foreign countries to be combined and sold. The Deepsouth court held that the shipment of the parts was not patent infringement, because to find otherwise would incorrectly give global reach to U.S. patent law. Id. at 531. Congress then passed �271(f) to overrule this holding and create liability for such activities.
