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High Court to Hear Microsoft Patent Case

The Supreme Court is ready to hear from lawyers from Microsoft and AT&T as it considers a long-running patent dispute between the industry giants.

At issue when the lawyers make their oral arguments Wednesday is whether Microsoft can be held liable for violating an AT&T patent overseas. Generally, patents are valid only within a country's borders.

AT&T holds a patent on technology that converts speech into computer code, so the speech can be transmitted electronically. It accused Microsoft of infringing the patent by including similar capabilities in its Windows software. Microsoft acknowledged it violated the patent domestically but disputes that it is liable for infringement when the software is shipped overseas.

The case centers on a provision in patent law that bars companies from shipping parts of a patented invention overseas for assembly. The intent of the provision, when it became law in 1984, was to prevent companies from circumventing patents by sending parts offshore to assemble them in a way that would infringe the patent in the United States.

AT&T charges that Microsoft is liable under that provision for violating its patent when it ships its Windows software abroad to foreign computer manufacturers for copying and installation on computers.

"Master Version"

Microsoft, however, has argued in court filings that it only sends a "master version" of the software abroad, either on optical disk or by electronic transfer, and it is the foreign manufacturer that is responsible for copying the software and placing it on computers. AT&T should pursue those companies for patent infringement under their countries' laws, Microsoft says.

AT&T, for its part, dismisses the distinction that Microsoft draws between the master version of the software and the copies made in foreign countries. The company argued in court filings that Microsoft supplied the software code "to foreign computer manufacturers, with the intent that those companies would pay Microsoft a royalty each time they combined that code with other components to form devices that would infringe AT&T's patent if made or used in the United States."

Solicitor General Paul Clement largely sided with Microsoft in his brief that had urged justices to take the case.

The section of patent law in question "generally prevents companies from manufacturing the components of a patented invention in the United States for assembly overseas," said Clement, the government's top Supreme Court lawyer. "But the statute permits the manufacture and assembly of identical components overseas - conduct that is properly the domain of other nations' patent laws."

Two lower federal courts ruled in favor of AT&T. The Supreme Court is expected to decide the case by July.

The case is Microsoft v. AT&T, 05-1056.

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