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Are Electronic Files Products Under the Patent Act?

June 15, 2010

The Patent Act (35 USC §271(g)) prohibits importing “products” made by a patented process.  Many financial services patents have claims directed to processes that are performed on a computer.  One strategy for avoiding these patents is to perform some or all of the steps of the method on a computer located outside the United States.  However, generally this involves some interface and communication of data from the computers outside the United States to computers in the United States.  In that instance, the patent owner may assert that the purported infringer is importing a patented product in violation of section 271(g).

While the Court of Appeals for the Federal Circuit has generally read “products” to mean a tangible product, it has not necessarily categorically excluded digital products from being included within the purview of section 271(g).  Therefore, a few district courts have left open the possibility that claims directed to methods for creating digital content might be infringed by importing digital files.  For example in CNET Networks v. Etilize, Inc., 528 F. Supp. 2d 985 (N.D. Cal. 2007), the court found that a digital catalog could be a product within the meaning of the statute.  Similarly in Ormco v. Align Technology, 609 F. Supp. 2d 1057 (C.D. Cal. 2009), three-dimensional digital representations of patients’ teeth were found to be products.

A recent case adds some nuance to the analysis.  In Yangaroo, Inc. v. Destiny Media Technologies, (E.D. Wis. June 7, 2010) the court determined that digital music and video files could not be considered a product made by the patented process.  This determination was based at least in part on the fact that the claims of the patent in question were directed to a method of distributing digital content, not a method of creating digital content.

There are a couple take-aways from these cases.  First, when trying to avoid a third-party patent by moving activity outside the United States, the issue of whether importing digital files runs into section 271(g) should be considered.  Second, when drafting patents directed to computer implemented financial services methods, it may be desirable to include some claims directed to creating digital “products” to increase the possibility of covering would be infringers who move some of their activity outside the United States.

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