Microsoft v. AT&T (U.S. Supreme Court 2007)

Computers made in another country and loaded with operating system software copied abroad from a master disk supplied from the United States do not infringe under 35 U.S.C. § 271(f), according to the U.S. Supreme Court.

In general, under U.S. patent law, infringement does not occur when a patented product is made and sold in another country. However, 35 U.S.C. § 271(f) makes it an infringement to supply from the United States components of a patented invention in a manner that actively induces the combination of the components outside the United States in a way that would infringe on the patent if the combination occurred in the United States.

Microsoft admitted that sales in the United States of its Windows operating system infringed an AT&T patent on a speech processing computer. However, it challenged the Federal Circuit’s ruling that its shipment of a master disk abroad, from which copies of the software were made and installed on foreign computers, was infringing under § 271(f). The Federal Circuit held that (1) the software can be a “component” of an invention, and (2) that software from the United States that is replicated and installed abroad is “supplied from the United States.”

Software as a Component

The Supreme Court noted that software can be regarded in the abstract as instructions detached from a medium (e.g., a CD-ROM) or as a tangible copy of the instructions encoded on a medium. AT&T argued that the software could be a component of an invention independent of a medium, while Microsoft argued that only a copy of software (e.g., instructions encoded on a medium) could be a component. The signifi cance of the distinction, as explained by the Court, is that the copy analysis would mean that the software supplied abroad on the master disk is distinguishable from the copies installed on the foreign computers.

The Court focused on the statutory language addressing the supply of components abroad to induce the infringing combination outside the United States. The Court stated that, until expressed as a computerreadable copy, software remains uncombinable. Thus, abstract software code is an idea without a physical embodiment and therefore does not match § 271(f)’s categorization: components amenable to combination.

The Court explained that the Windows operating system abstracted from a tangible copy is information (i.e., a detailed set of instructions), and thus can be compared to a blueprint. A blueprint contains precise instructions for the construction and combination of the components of a patented device, but it is not itself a combinable component of that device.

The Court went on to state that the ease of encoding software onto a computer-readable medium makes no difference. It pointed out that many tools can easily and inexpensively generate the parts of a device, but the tools are not components of the device. The Court stated that Congress could have included information or instructions in § 271(f) concerning which components may be generated in addition to combinable components, but it did not.

Supply of Components from the United States

The Court also held that the foreign-made copies installed on the foreign computers were not supplied by Microsoft from the United States. The Court agreed with Federal Circuit Judge Rader’s dissenting opinion that supplying is an activity separate from any subsequent copying. The Court observed that the only true difference between software components and physical components of other patented inventions is that copies of software are easier to make and transport. The Court stated that nothing in § 271(f) renders ease of copying a relevant factor in triggering liability for infringement.

The Court stated that the presumption against extraterritoriality resolves any doubt about infringement liability for the foreign copying of the software. The Court noted that the presumption is strongly against construing § 271(f) to encompass a physical copy of the software or the software’s intangible code as a component. If interpreted otherwise, the Court stated, the software supplied from the United States included not only the exported copies, but also the duplicates made abroad. While this could be considered a loophole, the loophole should not be closed by the Judiciary but by Congress, the Court concluded.

Concurring and Dissenting Opinions

Justice Alito concurred but offered a different rationale. He pointed out that there can be no infringement under § 271(f) because nothing originating from the United States was combined with the computers. Justice Stevens dissented, siding with AT&T’s abstract view of software, by which software is supplied independent of the media in which it is embodied.