• U.S. Supreme Court Limits Extraterritorial Scope of U.S. Patents in Microsoft v. AT&T 
  • April 5, 2011
  • Law Firm: Roylance, Abrams, Berdo & Goodman, L.L.P. - Washington Office
  • The United States Supreme Court, in Microsoft Corp. v. AT& T Corp., No. 05-1056 (April 30, 2007), refused to extend the reach of U.S. patents beyond the United States as it held that Microsoft was not liable under 35 U.S.C. § 271(f) for potentially infringing acts by manufacturers in another country. The Supreme Court resisted using an expansive interpretation of § 271(f) and deferred any extension of § 271(f) to Congress. 

    Under United States patent law, no infringement occurs when a patented product is made and sold in another country. However, § 271(f) of the Patent Act provides an exception when one “supplies - from the United States,” for “combination” abroad, a patented invention’s “components.” This case concerned extension of the applicability of §271(f) to computer software first sent from the United States to a foreign manufacturer on a master disk, then copied by the foreign manufacturer for installation on a computer made and sold abroad. 

    AT&T holds a patent on a computer used to digitally encode and compress recorded speech.  Microsoft incorporated software code in the Window’s operating system that, when installed, enabled a computer to process speech in a manner claimed by AT&T’s patent. AT&T filed an infringement suit charging Microsoft with liability for foreign installations of Windows by foreign manufacturers because Microsoft developed software in the United States and sent a master electronic version of Windows to each foreign manufacturer. The foreign manufacturers then generated copies of the master version of Windows and installed the copies onto the computers they sold. 

    AT&T contended that Microsoft was liable of infringement under 35 U.S.C. 271(f) because Microsoft supplied from the United States, for combination abroad, components of AT&T’s patented speech-processing computer. Microsoft argued that they merely supplied an unincorporated master version of Windows to the foreign manufacturers and that unincorporated software cannot be classified as a “component” of an invention under § 271(f), and that the copies that were installed by the foreign manufacturers were not supplied by Microsoft from the United States, they were generated and installed by the foreign manufactures. 

    The Supreme Court concluded, first, that a copy of Windows, not Windows in the abstract, does qualify as a component under § 271(f) because the provision applies to such components as are combined to form the patented invention, and that the copy of the Windows software when expressed as a computer-readable copy may be classified as “combinable.”  Otherwise, when any software is detached from an activating medium, it remains uncombinable because detached software is only an idea without physical embodiment and does not match § 271(f)’s categorization of components amenable to combination. The Supreme Court specifically noted that they did not intend to address the issue of whether software in the abstract, or any other intangible, can ever be a component under § 271(f). 

    Next, the court concluded that Microsoft’s liability did not 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. The court reasoned that the copies of Windows actually installed on the foreign computers were not themselves supplied from the United States because a copy made entirely abroad does not fit the description “supplied - from the United States” without stretching § 271(f) beyond the plain text created by Congress. The Supreme Court refused to make this stretch and re-iterated that Congress is in the best position to expand the definition of extraterritorial patent infringement as it did by enacting § 271(f) in response to the Supreme Court’s decision in its Deepsouth Packing case 35 years ago. Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972).

    The Supreme Court refused to reach beyond Congressional enactments and intentions by affirming the traditional understanding that our patent law operates only domestically and does not extend to foreign activities. The court suggested that AT&T seek remedies that lie in obtaining and enforcing foreign patents and relieved Microsoft’s liability for 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.