Microsoft Corp. v. AT&T Corp.

Background:

At the time of this case in 2007, the general rule under patent law in the United States was that no infringement could occur when a product which was under patent in the United States, was made and sold in another country. There is an exception to this rule, and that is, infringement can occur when one “suppl[ies] … from the United States,” for “combination” abroad, a patented invention’s “components.” The case that I will attempt to provide some analysis to, involves the applicability of software first sent from the United States to a foreign manufacturer on a disk or electronic transmission (i.e. email), then copied by this manufacturer for installation on computer hardware in that country.

AT&T held a patent for a computer used to digitally encode and compress recorded speech. The Windows operating system, thus had the potential for infringement because Windows featured software, processed speech, in a manner described by AT&T’s patent. Part of Microsoft business model is the selling of PC software to foreign manufacturers who use this software on the PC’s that they sell to consumers. The way that Microsoft accomplishes this is by sending the manufacture a copy of Windows. This can be a master copy of a disk or through electronic transmission. Once installed on a computer these computers are then sold to customers abroad.

As a result of this, AT&T filed a suit against Microsoft. Claiming that, by sending Windows to foreign manufactures, Microsoft supplied from the United States components of intellectual property held by AT&T. Microsoft defended itself by saying that, because software is intangible information, it should not be classified as a “component” of an invention. Microsoft also added that these “components” were not supplied from the United States.

The Supreme Court sided with Microsoft. It was reasoned that because Microsoft does not export from the United States the actually copies of Windows it cannot be said that Microsoft “supplies” components to these manufactures. Furthermore, because the software was transmitted independently of the computers, it could not be considered a component and thus did not violate the IP of AT&T.

Analysis:

Microsoft’s defense in my opinion is built on two major pillars. The first pillar of the defense is that Microsoft should not be considered an exporter of Windows. The second is the independence of Windows from the actual hardware that it will eventually be installed upon. The second pillar is important because this will determine if the Windows operating system can be categorized as a component or not.

The way Microsoft distributed Windows is extremely important in this case. Microsoft distributed master copies of Windows which original equipment manufacturers (OEMs) were free to install on the machines that they sold. Because of this, Microsoft did not participate in the actual combining of the hardware therefore it did not infringe on AT&T’s IP. The actual software that was put on the machines were the copies made by the OEMs. As I stated before, at the time of this case the general rule was that no infringement could occur when a product which was under patent in the United States, was made and sold in another country. The method that Microsoft uses clearly relieves Microsoft of any liability in regards to windows being considered as a component. What is important is the extra step that the OEMs have to do in order to put the software on their machines. When this extra step is taken Microsoft is no longer a participant in the construction of this machine.

Conclusion:

I found this case to be very interesting especially from a more abstract point of view. It is clear that courts in the United States really don’t understand software. They don’t understand how to classify it, and with more and more software being sold every year software litigation will be a big percentage of the cases heard in court. The fact that software can be distributed so easily makes it even harder for courts to form a unified opinion on this matter. I feel as though the court made the right decision in terms of what was the current state of thinking at the time and the current law. Clearly Microsoft was supplying a component to the PC makers however Microsoft found a loop hole in the law and supplied master copies which were then copied an placed on computers. So thus Microsoft should not be found guilty of infringement.

AT&T’s patent was for a complete apparatus that processed speech, it held a U.S. patent and thus tried to go after Microsoft. It’s understandable why AT&T went after Microsoft. It’s easier to go after the supplier of the software than all the OEMs overseas. Microsoft makes for an easier target. The problem is that Microsoft did not participate in the infringement according to the law.

Further analysis could be done on whether Microsoft provided a means for OEMs to infringe. In this case Microsoft could be seen a secondary infringer but once again what is important is that this is a U.S. patent. Which does not have jurisdiction in other countries in this regard.

Sources:

Litigation Alert: Microsoft Corp. v. AT&T Corp. — The Supreme Court Limits the Extraterritorial Effect of 35 U.S.C. § 271(f). (2007, March 1). Retrieved May 10, 2014, from http://www.fenwick.com/publications/pages/litigation-alert-microsoft-corp-v-at-t-corp-the-supreme-court-limits-the-extraterritorial-effect-of-35-u-s-c-271.aspx

MICROSOFT CORP. v. AT&T CORP. (n.d.). Retrieved May 13, 2014, from http://www.law.cornell.edu/supct/html/05-1056.ZS.html

Microsoft Corp. v. AT&T Corp. No. 05-1056 Argued February 21,2007 Decided April 30, 2007. Retrieved from http://www.supremecourt.gov/opinions/06pdf/05-1056.pdf

Sean

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