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Microsoft fights AT&T before US Supremes

Judges weigh IP liability

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A US court case that threatens to ramp-up damages against US technology companies which lose patent infringement suits has entered its final stages.

US Supreme Court justices today heard arguments that Microsoft broke the terms of a patent infringement suit brought by AT&T because it sold copies of Windows in markets outside the US containing AT&T's intellectual property.

Microsoft and AT&T settled their action, over a sound recorder in Windows, in 2001 but AT&T claims the agreement has been breached, as PC makers outside the US have sold machines running Windows containing its code.

The carrier has so-far secured victory at the district court level and in the US Court of Appeals.

Patent infringement suits - particularly against Microsoft - occur with tedious regularity in the US, but this particular case stands out because of its implications for all US-based technology vendors.

If AT&T wins, then litigants in future cases stand to gain much bigger awards and damages, as defendants will be held liable on an international, as opposed to a national scale.

Because of this threat, Microsoft has attracted support from an unlikely alliance of open source advocates, the US Department of Justice and Yahoo! among others.

Sensing the problem, justice Stephen Breyer told AT&T's attorney on Wednesday he'd be "quite frightened of deciding for you and discovering that all over the world there are vast numbers of inventions that can be thought of in the same way that you are thinking of this one."

At issue is US patent law section 271 section F that says US companies are liable for damages at home and abroad if they manufactured components that were shipped to overseas suppliers and assembled, and if the final product was found to infringe on US patents.

Microsoft's legal team has argued the law was not meant to apply to conduct that "takes place entirely abroad".®

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