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Supreme Court: Microsoft off the hook in AT&T case

Decision could save companies billions in future patent battles

The next step in data security

The Supreme Court has sided with Microsoft today, in a patent infringement case filed by AT&T over international copyright liability.

The 7-1 ruling, which relieves Microsoft of US legal responsibility of infringing software sent overseas will give many other software companies a sigh of relief.

Microsoft had the unusual backing of Yahoo!, the US Department of Justice and open source advocates in the case. Had AT&T won, litigants in future IP offenders would have been held liable on an international scale.

AT&T sued Microsoft in 2001, alleging Windows OS infringes on AT&T technology that encodes and compresses recorded speech. Microsoft had acknowledged the violation and settled, but AT&T claimed the agreement was breached by Microsoft selling its OS with the violating code outside the country.

The courts had ruled in AT&T's favor at the district court level and in the US Court of Appeals.

Patent-infringing exports 101

A US company cannot ship the invention's "parts" or "components" to be assembled or combined abroad. However, sending intangible information, such as a blueprint (which may contain the precise instructions on how to assemble or combine said parts) is perfectly legal eagle. Then it's up to the receiving country to deal with the sticky details of patent infringement.

At the center of the dispute: whether a golden master copy of Windows sent overseas to be mass-produced is considered a "part" or a "blueprint" of the operating system.

The Court ruled that because a master disk is never installed on any foreign-made computers and since Microsoft does not export installation copies of Windows, US patent law does not apply outside the country.

The dissenting opinion written by Justice John Stevens argued that software actually causes infringing conduct to occur, unlike a blueprint, which merely instructs a user how to do something. He said a golden master is more like a roller that makes a player piano produce sound than sheet music, which only tells a musician what to do. ®

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