Microsoft v. AT&T

Citation: Microsoft Corp. v. AT&T Corp., 127 S. Ct. 1746, 82 U.S.P.Q.2D (BNA) 1400 (2007).

Factual Background
Microsoft sends master versions of the Windows operating system to foreign manufacturers which are then copied and installed on computers for foreign sale. The Windows operating system, when installed, allows a computer to digitally encode and compress speech in a manner that infringes a patent held by AT&T. Microsoft has stipulated that installation of Windows during development and licensing copies of Windows to manufacturer of domestically sold computers both directly infringed AT&T’s patent but denies liability based on foreign manufacturers. The U.S. Court of Appeals for the Federal Circuit upheld a finding of infringement and Microsoft brought this appeal to the U.S. Supreme Court.

Supreme Court
The Supreme Court reversed the Court of Appeals’ holding that Microsoft infringed AT&T’s patent and determined that the master versions of Windows are not components under patent law and that Microsoft’s actions do not constitute “supplying”.

Generally, U.S. patent law protection ends at the border of the United States. Under Section 271(f) of the Patent Act infringement does occur when a company supplies the components of a U.S. patented invention to a foreign destination to be combined.

The Supreme Court held that an uninstalled version of Windows could not infringe the AT&T patent and that while some software could constitute a “component” under Section 271(f) the master versions of Windows as uncompiled source code were not.

The Federal Circuit majority determined the “the act of copying is subsumed in the act of supplying” stating that since Microsoft sent the master versions abroad with the intent for them to be easily copied and converted into computer-readable CD-ROMS that Section 271(f) liability was invoked. This court rejected this argument concluding that the components themselves supplied from the U.S. are what triggers Section 271(f) liability and here the copies made from the source code are what are installed on foreign machines. Furthermore, any question on the issue “would be resolved by the presumption against extraterritoriality”; U.S. laws should not be so broadly construed as to give them control in foreign territories.