US Supreme Court: Microsoft Not Liable for Patent Infringement for Foreign-made Copies of AT&T's US-Patented Software

Ordinarily, US patent law does not apply outside American borders. However, a provision of the US Patent Act (35 USC §271(f)) prohibits the export of components of US-patented inventions from the United States. This was intended to prevent American companies from manufacturing components of US-patented inventions in the United States and then shipping them overseas for final assembly and use in foreign markets. In the case of Microsoft v AT&T, Microsoft exported its Windows software from the US to foreign computer manufacturers. They copied the software onto their computers, which were eventually sold in foreign markets. However, those copies of Windows contained AT&T's US-patented speech-encoding and compression software. The US Court of Appeals for the Federal Circuit has held that Microsoft was not only liable for patent infringement but, under 35 USC §271(f), it was liable for damages resulting from foreign sales of AT&T's US-patented software, since Microsoft exported that software to foreign manufacturers. Microsoft appealed and, in a 7-1 decision, the United States Supreme Court has ruled that Microsoft cannot be held liable for damages resulting from foreign-made copies of AT&T's US-patented software. Justice Ginsburg explained the Court's decision: 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." The master disk or electronic transmission Microsoft sends from the United States is never installed on any of the foreign-made computers in question. Instead, copies made abroad are used for installation. Because Microsoft does not export from the United States the copies actually installed, it does not "suppl[y] . . . from the United States" "components" of the relevant computers, and therefore is not liable under §271(f) as currently written. The Supreme Court viewed the abstract software code which Microsoft exported from the US as a blueprint instead of as a component of a patented invention. Since that software was copied by foreign manufacturers onto foreign computers, and it was those copies which interfaced with the computers and rendered the invention useful, Microsoft could not be considered to be supplying components of a patented invention outside the United States. Justice Ginsburg offered this analogy: A machine for making sprockets might be used by a manufacturer to produce tens of thousands of sprockets an hour. That does not make the machine a "component" of the tens of thousands of devices in which the sprockets are incorporated, at least not under any ordinary understanding of the term "component." The Court also emphasized the presumption against the extraterritorial application of US patent law, as illustrated by the following remarks: In short, foreign law alone, not United States law, currently governs the manufacture and sale of components of patented inventions in foreign countries. If AT&T desires to prevent copying in foreign countries, its remedy today lies in obtaining and enforcing foreign patents. Although AT&T urged that the Court's ruling could create a loophole for software makers to avoid liability for infringing US patents, Justice Ginsburg reiterated that 35 USC §271(f) does not apply to "… blueprints, schematics, templates, and prototypes – all of which may provide the information required to construct and combine overseas the components of inventions patented under United States law." The Court asserted that it is for Congress to examine and address this supposed gap in the legislation. Full text of the judgment More information Summary by: Andrei Edwards