The justices issued the decision on Friday as
part of a one-page list of orders (click for PDF). They
offered no additional comment, except to note that Chief
Justice John Roberts "took no part in the consideration or
decision of this motion and this petition."
The case dates back to 2001, when AT&T sued Microsoft in
federal court. The telephone company alleged that the speech
codec software included in Windows loaded on computers
infringed on one of its patents, which covered a "digital
The parties ultimately reached a confidential settlement in
2004, and the facts of infringement quickly became less
important than how damages would be awarded. A federal
judge in New York decided that Microsoft was liable for
infringement of the patents in two areas: on systems sold in
the United States, and for copies of the software made by
foreign manufacturers from a "golden master" disk created in
the United States. Last July, a majority on a three-judge
panel for the U.S. Court of Appeals for the Federal Circuit,
which presides over many patent cases, upheld that ruling.
Microsoft balked at those decisions, and in January, it
filed a petition seeking the high court's review.
At issue before the Supreme Court is whether those decisions
are consistent with a complex portion of patent law that
deals with American companies' liability outside their home
turf. It says one can be liable for patent infringement for
supplying "substantial components" of a U.S. patented
invention to someone outside the United States with the
knowledge that, when combined with other components, that
device will infringe on a U.S. patent.
The questions the court has been asked to tackle are: Does
software object code count as one of those components? And
if so, can a U.S. company be considered a supplier of that
component to thousands of computers, if it provides only one
master disk to a foreign manufacturer, which then replicates
Andy Cuthbert, a Microsoft associate general counsel,
applauded the high court's acceptance of the appeal. The
earlier appeal ruling caused concern because it "imposes
liability on any company that does research and development
in the U.S., but doesn't impose the same liability on
companies that have their R&D based overseas," Cuthbert said
in a statement.
"This creates a disincentive for companies to base their R&D
operations in the United States and potential new
liabilities for making, using and selling products
overseas," he added.
AT&T declined to comment on the case, except to say in a
statement: "We anticipate the Supreme Court will handle this
in their normal course of business, and we look forward to
That decision is sure to influence far more than just
Microsoft's operations, said Victor de Gyarfas, a partner
and registered patent attorney with the law firm Foley &
Larder in Los Angeles.
"If Microsoft were to prevail, then this would be a boon for
all software companies that are afraid of infringement
claims due to transferring their software offshore," he said
in a telephone interview. "On the other hand, if AT&T
prevails, then patent holders would benefit, because they
would be able to collect damages for all the software that's
created in the United States and that infringes."
Microsoft's position has garnered some support from the U.S.
Department of Justice's Office of Solicitor General, which
had strongly urged the Supreme Court to take up the issue.
Government lawyers wrote in a supporting brief (click for
PDF) that the appeals court's ruling "improperly extends
United States patent law to foreign markets and puts United
States software companies at a competitive disadvantage
vis-a-vis their foreign competitors in foreign markets."
"That disadvantage will harm the software sector of the
American economy and could ultimately compel some software
companies to relocate their research and development
operations abroad," the brief went on.
The high court's acceptance of Microsoft's appeal arrives
about one year after it declined to hear issues related to a
patent dispute with Eolas Technologies involving alleged
patent infringement in Internet Explorer.