On April 30, 2007, the Supreme Court declared Microsoft victorious in a case that AT&T brought, in which AT&T alleged that Microsoft was liable for infringement of its patents by overseas sales of the Windows operating system. Windows had the potential to infringe an AT&T patent on an apparatus for “digitally encoding and compressing recorded speech” because Windows includes software that, when installed, enables a computer to process speech as claimed. Initially, the Federal Circuit had ruled that Microsoft was liable under 35 U.S.C. § 271(f) for supplying a component to be combined into a patented invention outside the United States. Justice Ginsberg, who wrote for the 7 member majority, rejected this holding, writing that U.S. law “does not rule the world” and “if AT&T desires to prevent copying in foreign countries, its remedy today lies in obtaining and enforcing foreign patents.”

This case presented the Court with two questions:

(1) When and how does software qualify as a “component” under § 271(f); and

(2) Were “components” of foreign-made computers supplied by Microsoft from the Unites States?

The court ruled that a copy of Windows, not “Windows in the abstract” (as it is on a master disk), qualifies as a component under § 271(f) and thus “components” were not supplied by Microsoft.

Specifically, the Court found that Microsoft was not liable for infringement due to computers made in a foreign country being loaded with Windows copied from a master disk sent from the United States by Microsoft. The Court found no infringement because, “[t]he master disk or electronic transmission is never installed on any of the foreign-made computers in question. Instead, copies are made abroad for installation. Because Microsoft does not export from the United States the copies actually installed, it does not ‘suppl[y] ... from the United States’ ‘components’... and therefore is not liable under § 271(f) as currently written.” The court resisted giving § 271(f) a more expansive interpretation, it said, because § 271(f) is already an exception to the general rule that United States patent law does not apply extraterritorially. The Court left it to Congress to adjust the language of § 271(f), should Congress find it necessary. Justice Stevens dissented from this conclusion, stating that while “[t]he relevant component in this case is not a physical component,” that does not mean it cannot be a component under § 271(f). Justice Stevens preferred the analogy of the master disk as “a warehouse of components” that is shipped overseas, rather than the majority’s analogy of software as an abstract set of instructions, that “merely instructs a user how to do something,” rather than infringing itself. Chief Justice Roberts did not take part in the consideration of this case.

The Supreme Court’s opinion is available at www.supremecourtus.gov/opinions/06pdf/05-1056.pdf.