CLIENT ALERT — Supreme Court Decision in Microsoft Corp. v. AT&T Corp. on Enforcement of Patents Containing Software Outside U.S.
May 7, 2007On April 30, the Supreme Court addressed the circumstances under which export of software from the United States could create liability under United States patent law in Microsoft Corp. v. AT&T Corp.
Background
United States patent law does not generally apply outside of the United States. Making or selling a patented product in a foreign country thus does not create liability for infringement under United States law. An exception to this rule is that a person who supplies a component of a patented invention from the United States may be liable for patent infringement if the component is used in a manner that would infringe the patent if such use occurred within the United States.
Congress enacted this exception in 1984 to fill a gap in patent law, passing a statute under which a person may be liable for infringement if he or she
supplies . . . from the United States any component of a patented invention . . . intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States.
35 U.S.C. § 271(f)(2).
The Microsoft Case
Microsoft Corp. v. AT&T Corp. involved the export of software (Microsoft Windows) to be installed on a computer in a foreign country. Microsoft creates the software in the United States and sends this software to foreign countries on a master disk (or by encrypted electronic transmission). In the foreign countries, multiple copies of the disk are made. A copied disk is then used to install Windows on a computer by copying the software to the computer’s hard drive.
AT&T is the owner of a patent for an apparatus that digitally encodes and compresses recorded speech. AT&T alleged, and Microsoft conceded, that in the United States a computer running Windows would infringe the patent. Microsoft argued, however, that it was not liable for the use of Windows in computers outside the United States because the disk or software Microsoft supplied from the United States was not a “component” of the invention as required by the statute.
The Decision
The Court had no trouble finding that a physical embodiment of software (e.g., a disk) can be a component of a patented invention, but reached a different result as to software in the abstract. The Court likened software in the abstract to a blueprint or a tool. That blueprints and tools can be used to manufacture a component does not make the blueprints and tools themselves components. Similarly, software in the abstract can be used to create a disk containing the software, but the software in the abstract is not a component. Only a physical embodiment of software qualifies as a component.
The Court further held that Microsoft did not supply a component of the invention from the United States, because the exported physical embodiment of the software, the master disk, was not itself directly used in the invention – a computer running Windows. Instead, the recipients of the disk made copies, and used only the copies in the computer. The plain meaning of 35 U.S.C. § 271(f), according to the Court, only applied to the inclusion in the computer of components supplied from the United States. The statute could not be read to cover the inclusion of copies of components, when the copies were not themselves supplied from the United States.
A concurring opinion by three justices would have added another ground. The concurring opinion observed that the disks used to further copy the software onto the computer hard drives were then removed and thus did not become a physical part of the completed computer. Since the disks were not physically present in the final apparatus, the concurring justices felt those disks could not be a component of the apparatus. The other justices in the majority, however, did not reach that issue.
What This Decision Means To You
Microsoft Corp. v. AT&T Corp. holds that liability for the export of software used in a patented combination does not extend to the software in the abstract. The case further holds that even where software is exported in a physical embodiment, liability under United States law does not arise where only copies of the exported software are used. Liability only extends to the actual use of the physical embodiment of the exported software in the patented combination, and does not extend to the use of copies of the exported physical embodiment.
This case is of primary relevance to the enforcement of patents containing software as a component, but could also be relevant to patents containing a component that, like software, is easily copied.
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