3. Decision of the court (Microsoft VS AT&T)

Decision of the court:
In a 7-1 decision, the Supreme Court held that Section 271(f) of the Patent Act does not extend to cover foreign duplication of software.
There is no such thing as a world-wide patent. Rather, patent law is territorial. A US patent covers infringing acts that occur in the US but generally disregards extraterritorial activity. The lone statutory exception is Section 271(f) of the Patent Act, which calls for infringement liability for the unauthorized supply of "components" of a patented invention for "combination" abroad.

AT&T is the assignee of a patent covering a computer for encoding and compressing recorded speech. In the United States, a computer with Microsoft Windows installed infringes this patent. The question in this case, is whether the foreign installed software can be considered a "component" supplied from the United States under 271(f).

The question before us: Does Microsoft's liability extend to computers made in another country when loaded with Windows software copied abroad from a master disk or electronic transmission dispatched by Microsoft from the United States? Our answer is "No."

AT&T’s argument boiled down to the notion that patented software could essentially be decomposed by a supplier (Microsoft) and recomposed by a foreign manufacturer abroad (for instance, Acer). In such a situation, AT&T argued, Microsoft would be liable for the infringement. Microsoft argued that in exporting an installation disc to foreign manufacturers, it was shipping an "abstract" form of the software, not the patented mechanism itself.

Although Microsoft had obtained a license to AT&T’s speech software and was using it in Windows XP and Vista, AT&T claimed that license did not extend to Microsoft the right to export Windows – and thus export the software with it – to other manufacturers who would then install the software on their own computers, and then sell those computers and pocket the proceeds.

“Abstract software code is an idea without physical embodiment,” reads the syllabus of this morning’s historic decision in AT&T v. Microsoft from the US Supreme Court, “and as such, it does not match [the] categorization “components” amenable to “combination.”

So because it is an abstract form of software, that is being distributed to OEM's, who then recomposes the software and ships it abroad, Microsoft has no control over how the OEM's distribute the software, making Microsoft not liable for AT&T's patent.

http://www.patentlyo.com/patent/2007/05/microsoft_v_att_1.html

http://keznews.com/2778_Microsoft_Wins_in_Supreme_Court__AT_T_Ruling_Overturned

http://www.betanews.com/article/Microsoft-Wins-in-Supreme-Court-ATT-Ruling-Overturned/1177944397