Microsoft Snatches Supreme Court Victory

Still, the ruling is a huge victory for Microsoft and stands as a precedent that could help the company with other patent disputes.

In 2001, AT&T sued Microsoft for patent infringement over speech-decoding technology shipping in Windows. Microsoft lost the case and subsequent appeals. AT&T and Microsoft settled the patent dispute, on undisclosed terms, in early 2004. However, Microsoft reserved the right to appeal, with respect to patent infringement liabilities outside the United States. In February, Microsoft presented its appeal to the U.S. Supreme Court.

Today's ruling means that Microsoft will only have to pay AT&T for infringement inside the United States and not abroad.

In its February presentation before the Supreme Court, Microsoft argued that patent liability essentially ended with the gold master of the software produced in the United States because secondary parties overseas made copies sold there.

The High Court agreed. From the 30-page ruling:

"The question before us: Does Microsoft's liability extend to computers made in another country when loaded with Windows software copied abroad from a master disk or electronic transmission dispatched by Microsoft from the United States? Our answer is "No."

"The master disk or electronic transmission Microsoft sends from the United States is never installed on any of the foreign-made computers in question. Instead, copies made abroad are used for installation. Because Microsoft does not export from the United States the copies actually installed, it does not 'suppl[y] . . .from the United States' 'components' of the relevant computers, and therefore is not liable under [Title 35 of the United States Code] as currently written."

"The Supreme Court rejected the notion that copying abroad is supplying from the United States," explained Paul Ackerman, a patent attorney and partner with Dorsey & Whitney in New York.

Existing law meant to prevent the distribution of patent infringing kits produced in the United States and assembled overseas, Ackerman said. The court essentially decided that the law did not apply to software, or at least in this instance.

"Is Microsoft liable for those copies?" Ackerman asked. "The answer is no."

The ruling, alongside another one today, KSR v. Teleflex, is part of the Supreme Court trend re-examining patent rulings made by the D.C. Circuit Court, here in Washington. The re-examination with respect to Microsoft v. AT&T could affect several hundred pending software patent disputes. These cases include Microsoft's recent MP3 patent loss.

Impact is twofold: Microsoft's win could be used as precedent for other U.S. patent liabilities for software distributed outside the borders; D.C. Circuit Court may have to change how it handles certain patent cases.

"It's definitely going to affect other software patent inventions," Ackerman said. "It's a very good outcome [for these patent cases] and "lowers" the liability bar, he added.

Related Posts:

• Recent Lawsuits Target Vista and VOIP, Microsoft Watch, April 2, 2007
• Microsoft Likely to Dodge Injunction in MP3 Patent Dispute, Microsoft Watch, Feb. 23, 2007
• Why Microsoft Played Low Ball Before the High Court, Microsoft Watch, Feb. 21, 2007
• Microsoft Courts the Supreme Court, Microsoft Watch, Feb. 21, 2007
• Supreme Court to Hear Microsoft Patent Appeal, Microsoft Watch, Oct. 27, 2006