Microsoft Corp. v. AT&T Corp.

PETITIONER: Microsoft Corporation
RESPONDENT: AT&T Corporation
LOCATION: United States Court of Appeals for the Ninth Circuit

DOCKET NO.: 05-1056
DECIDED BY: Roberts Court (2006-2009)
LOWER COURT: United States Court of Appeals for the Federal Circuit

CITATION: 550 US 437 (2007)
GRANTED: Oct 27, 2006
ARGUED: Feb 21, 2007
DECIDED: Apr 30, 2007

ADVOCATES:
Daryl Joseffer -
Seth P. Waxman -
Theodore B. Olson -

Facts of the case

AT&T owned the patent for certain speech codecs (a type of software code) included in Microsoft's Windows operating system. When Microsoft sent master versions of the software overseas, copied them, and sold the copied software, AT&T sued for patent infringement. A company is guilty of infringement under the Patent Act if it "supplies...from the United States...components of a patented invention...in such manner as to actively induce the combination of such components." Microsoft argued that it was not liable because 1) software code is intangible and cannot not be considered a "component" of an invention and 2) no software had been "supplied" from the U.S. because the copies were made overseas.

The District Court rejected both of Microsoft's arguments, and the U.S. Court of Appeals for the Federal Circuit affirmed. The Federal Circuit ruled that software code could be a component, because the Patent Act was not limited to physical structures. The Circuit Court also held that each overseas copy made of the U.S.-originated software code was "supplied" from the United States.

Question

1) Can software code be a component of a patented invention for purposes of the Patent Act?

2) Are copies of software code "supplied from the United States" for purposes of the Patent Act when the copies are created overseas from a master version that is supplied from the United States?

Media for Microsoft Corp. v. AT&T Corp.

Audio Transcription for Oral Argument - February 21, 2007 in Microsoft Corp. v. AT&T Corp.

Audio Transcription for Opinion Announcement - April 30, 2007 in Microsoft Corp. v. AT&T Corp.

John G. Roberts, Jr.:

We begin this morning with Justice Ginsburg who has the opinion for the court in the case 05-1056; Microsoft v. AT&T.

Ruth Bader Ginsburg:

It is a general rule on the United States patent law that “no infringement occurs when a patented product is made and sold in another country.”

There is an exception, Section 271(f) of the Patent Act, adopted in 1984, provides that infringement does occur when one supplies from the United States for combination abroad, a patented invention’s components.

The question presented, does the exception stated in 271(f) applied to computer software, first sent from the United States to a foreign manufacturer on a master disk via electronic transmission, then copied by the foreign recipient and installed on computers made and sold abroad.

Our answer is no, the concrete case AT&T holds a patent on a computer capable of digitally encoding and compressing recorded speech.

Microsoft’s Windows operating system has the potential to infringe that patent because Windows incorporates software that when installed, enables a computer to process speech in the manner claimed by the patent.

The instant litigation concerns Microsoft’s sales of Windows to foreign computer manufacturers.

Typically, Microsoft sends its foreign customers a master version of Windows either on a disk or via an encrypted electronic transmission, which the foreign manufacturer uses to generate copies.

Those copies, not the master sent by Microsoft, are installed on the foreign manufacturer’s computers the computers are then sold to users abroad.

AT&T filed suit charging Microsoft with infringement based on the foreign installations of Windows.

By sending Windows to foreign manufacturers, AT&T urged Microsoft in Section 271(f)’s words, supplied from the United States for combination abroad components of AT&T’s patent in speech processing computer.

The district court agreed with AT&T and a divided panel of the Federal Circuit affirmed; we now reverse.

Microsoft does not export from the United States the copies of Windows actually installed on the foreign-made computers in question.

Therefore, Microsoft does not supply from the United States components of those computers and has not rendered an infringer by 271(f).

We take up first what 271(f) encompasses as a component combined abroad to form a patented invention.

Until expressed as a computer readable copy, Windows indeed any software detached from an activating medium remains un-combinable.

It cannot be inserted into a CD-ROM drive or downloaded from the Internet.

It cannot be installed or executed on a computer.

Abstract Software Code is an idea without physical embodiment and as such it does not match 271(f)’s categorization, components amenable to combination.

Installable copies of Windows in contrast would fit 271(f)’s usage of the word component.

But Microsoft did not supply from the United States the foreign-made copies of Windows installed on the computers here involved.

Those copies were supplied from outside the United States.

The Federal Circuit majority observed, however, that software components are not like machine parts.

Given the character of the technology, the majority concluded “sending a single copy of software abroad with the intent that it would be replicated should trigger 271(f) liability for the foreign-made copies.

We resist the Federal Circuit majority’s dynamic reading of 271(f).

The statute’s text and the problem to which Congress responded in 1984, lead us to conclude that under 271(f) only components supplied from the United States and not foreign-made copies thereof can trigger liability when combined abroad to form the patented invention at issue.

Two, copying software abroad is both easy and inexpensive, Section 271(f), however, contains no instruction to gauge when duplication is easy and cheap enough to deem a copy in fact made abroad nevertheless supplied from the United States.

Any doubt that Microsoft’s conduct falls outside 271(f)’s compass would be resolved by the presumption against extraterritoriality.

Foreign conduct is generally the domain of foreign law and in the patent area that law may embody policy judgments different from our own about the relative right of inventors, competitors, and the public.

Applied to this case, the presumption tugs strongly against construing 271(f) to accomplish as a component, not only a physical copy of software but also software’s intangible code and to render supply from the United States, not only exported copies of software but also duplicates made abroad.