The Expanding Reach of U.S. Patent Laws

Under traditional legal norms, US patent laws did not extend beyond the
territorial bounds of the union. With a quick one-two punch, however, the
US court of Appeals for the Federal Circuit (CAFC) has expanded the
extraterritorial reach of patent law.

I tend to agree with the statement above (from the Article The Expanding
Reach of U.S. Patent Laws by Dennis Crouch) because after looking at the
“one-two punch” that Crouch refers to (the cases of Eolas v. Microsoft and
RIM v. NTP) it is fairly obvious that things have changed. While, as
Crouch has stated, U.S. patent laws traditionally have not extended beyond
the territorial boarders of the United States, the Eolas decision has run
contrary to this principle due to the fact that Microsoft was found liable
to Eolas (in an amount in excess of 500 million) for violating its patent
not in the US but in various countries abroad where it distributed and
licensed Internet software which the court found had key components of the
Eolas patent. This decision should thus serve notice not only to Microsoft
but other software companies as well, in that they can no longer expect to
escape the reach of US patent law simply because the patent they are
lifting from is not being used in the US. Also interesting regarding the
implications of this decision and what Crouch briefly touches, is that the
this decision can have consequences not just on the software industry, but
other industries as well. And while Crouch cites only the oil exploration
industry, the decision has the ability to touch many industries across the
spectrum, from genetic engineering to the manufacture of textiles. Using
the manufacture of textiles as an example, the decision in Eolas would
mean that companies in the US who for example constructed a machine based
on the US patent of another and then attempted to sell this machine would
not only be barred from doing so domestically (as per usual), but could
now internationally as well. The decision is thus not only a wake up call
and warning not just to the software industry, but to a great many more
across the board.

Turning now to the second case referred to by Crouch, the decision in RIM
v. NTP has clearly also been a strike against the traditional view that US
patent law is limited only to the borders of the United States. The case
revolved around RIM’s BlackBerry device that was allegedly violating the
patents of NTP. From Crouch’s article the court held that:

The plain language of Section 271 (a) [of the US patents statute] does not
preclude a finding infringement even when components of an allegedly
infringing system are located outside of the United States.

So the defendant in this case, despite their headquarters being situated
in Canada and not the US were still found liable because the court found
that “control and beneficial use” of the system as a whole was within the
US because of the American end-users(who were the people for whom which
the Canadian firm were targeting). The decision clearly is the “second
punch” to the old limitations that Crouch asserts and I could not agree
more with it because with this decision it does not matter whether there
was an infringement of a US patent taking place within the US or not(as
before), all that matters is whether the “control and beneficial use” of
the infringing system is within the US making foreign companies liable
where they were not before.

After examining Crouch’s assertion of change with regards to
the traditional reach of US patent law and the cases of Eolas and RIM, it
is fairly obvious that he is correct in his assertion. It is also
important to note that the implications of the decisions go well beyond
the industries in the cases themselves but can extend to a great many more
(including perhaps service industries as well as per RIM). I therefore
agree with Crouch’s assertion and I also find myself having no qualms with
the departure from the past and the extension of US patent laws into
foreign countries. The reason for my sentiment is that in an era of
globalization, where borders are increasingly eroding, why to should not
those of patent law and US patent law? This is especially so if we hope to
ensure and encourage the fair growth of industry worldwide in this new
era.

This comment is based on the on the Opinion by Dennis Crouch found at:
www.law.duke.edu/student/act/intprop/Symposium2007/supplement/Eolas.pdf

One Comment
  1. Some may argue that recent decisions in the US, which have expanded the extraterritorial reach of patent law may ensure and encourage the fair growth of industry worldwide. Although, I take a much more critical eye to the decisions, and reflect on the overall impact of extending infringement despite the fact that it may offer more protection to US patent holders. I must admit that I do not worry about the rights of Corporate America, rather, in light of intellectual property issues; I concern myself with extending knowledge in the true sense of ‘globalization’. Patents are rationalized as a bargain between the inventor and the state by allowing for the right to exclude with the trade off of full disclosure, which should promote the transfer and dissemination of technology. I do not believe that extraterritorial reach of patent law will enhance innovative activity, and the decision by the US courts seems to simply take into account the rights of American patent holders, rather than the overriding international affects these decisions will have on restricting the technological transfer and dissemination of valuable technologies to the developing world. As discussed by Crouch, the RIM case has the potential to have a major impact on outsourcing of manufacturing and services, so a call centre located in India may now be found to be infringing a U.S. patent, if a court applies the ‘control and beneficial use test’. Western companies outsource in order to abuse lax legal regimes that suit their ‘competitive’ needs; will they bite the hands that feeds them?

Comments are closed.