Microsoft and AT&T have been locked in a battle over patent infringement that centers on exporting software code to foreign countries.
The U.S. Supreme Court ruled Monday that Microsoft is not liable in a patent suit with AT&T in a case that had implications for U.S patent enforcement overseas.
In a 7-to-1 ruling, the court found that Microsoft is not liable in a case where AT&T alleged that Microsoft’s infringement on AT&T’s voice compression patents was enforceable overseas.
AT&T claimed it was entitled to damages for every Windows-based computer manufactured outside the United States which uses the digital speech coder system.
The two giants have been locked in a battle over patent infringement that centers on exporting software code to foreign countries. AT&T has already won favorable ruling in both district court and the U.S. Court of Appeals.
Those ruling led the pair to settle on an undisclosed amount in the United States where Microsoft acknowledged it infringed on an AT&T patent covering the speech decoding technology.
AT&T, however, argued that copies of Windows distributed overseas to computer hardware manufacturers also infringes on AT&T’s intellectual property.
The decision could influence other lawsuits against Microsoft, but, more important, it sets precedence in the software industry, according to experts.
“The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law,” Justice Ruth Bader Ginsburg wrote in the majority opinion.
“At its best [AT&T’s position], it amounts to a tax or surcharge on American-made software, which potentially puts U.S. software houses at a disadvantage with respect to their foreign competitors,” Dick Turner, a patent law partner at the firm Sughrue Mion in Washington, D.C., told USA Today in February.
Experts had speculated that the outcome of the case could change the face of the software industry and cost software vendors billions of dollars.
With the Microsoft victory, software companies big and small that do business overseas cannot be held liable for code shipped overseas and will not be exposed to financial hardships based on infringement penalties sought by hardware and electronics companies, software developers or those seeking to cash in on their patents.
Experts say the law could save the software industry from potentially billions of dollars in litigation and having to establish research and development centers outside the U.S. to avoid paying U.S. patent royalties on products they sell overseas.
Microsoft argued that the “gold master” disks of the Windows operating system that it ships overseas to computer hardware manufacturers to copy and install on machines is a blueprint and therefore not a patent infringement under provision 271(f) of a 1984 patent law, which prevents companies from shipping parts overseas to be assembled in a fashion that would infringe on a U.S. patent. Microsoft said the provision does not prevent blueprints from being shipped overseas.
Microsoft said computer hardware companies in foreign countries are the suppliers. Amazon.com, Intel and Yahoo, the Business Software Alliance, the American Intellectual Property Law Association and the Bush Administration are among those in Microsoft’s corner.
