April 30, 2007 9:12 AM PDT

Supreme Court sides with Microsoft in patent spat

In what could be a broader victory for American software companies, the U.S. Supreme Court on Monday ruled that Microsoft cannot be forced to pay up for patent infringement that occurs when copies of Windows are made and installed on computers abroad.

Generally, U.S. patent protection does not transcend American borders. At issue in this case is a complex exception in patent law that bars American companies from shipping "components" to foreign manufacturers, which could then combine them to make a machine that infringes on U.S. patents. The law does not, however, restrict sending blueprints that could theoretically prompt a foreign company to build an identical product.

Scarcely two months after they heard oral arguments in a patent dispute that pitted the Windows maker against AT&T, the justices ruled 7-1 (PDF) that "abstract software code" shipped by Microsoft to foreign manufacturers in the form of "golden master discs" amounts to such a blueprint, not a "component" of the invention.

"The master disc or electronic transmission Microsoft sends from the United States is never installed on any of the foreign-made computers in question," the justices said in a majority opinion penned by Justice Ruth Bader Ginsburg. "Instead, copies made abroad are used for installation."

That means under existing federal law, the company cannot be held liable for infringement that occurs as a result of those foreign installations, the justices concluded, although they seemed to invite Congress to take another look at what AT&T argued are loopholes in the law.

If AT&T wants to prevent its inventions from being copied abroad, the justices added, its "remedy lies in obtaining and enforcing foreign patents."

Andrew Leibnitz, an intellectual property lawyer for Farella Braun and Martel in San Francisco, said in making the ruling the court determined that U.S. patent law governs only the U.S. and not the world. Leibnitz said that is "recognition of a deference that the U.S. has not previously evinced in world affairs."

It's also, he said, a sign that the high court is leery of expanding patent law.

Related story
High court ruling could curb 'obvious' patents
Unanimous Supreme Court opinion calls for a more flexible standard to decide whether combinations of existing elements deserve protection.

"I think it shows, if not hostility, a reluctance to see patent law applied more broadly than absolutely necessary," Leibnitz said, adding that the ruling will impact the whole software sector as well as other industries. "The Supreme Court is talking about not just software, but prototypes that are sent abroad...templates or blueprints or any other idea that gets sent abroad that needs to be combined with something physical in order to potentially infringe."

The decision could save Microsoft and other global software companies billions of dollars. When a jury earlier this year ordered Redmond to pay Alcatel-Lucent Technologies $1.5 billion in a patent dispute over MP3 audio technology used in Windows, the company noted that about half of the damages were calculated based on overseas sales of Windows PCs.

Microsoft general counsel Brad Smith called the decision "important for the entire information technology industry, adding clarity and balance to our patent system." He said he believed the damage awards in the Alcatel-Lucent case and an earlier case against the University of California's Eolas spinoff would be revisited, and the company welcomed that result.

"More generally, because Microsoft is such a large, rich company and competes in so many business areas, it's increasingly been the target of patent litigation," said Matt Rosoff, a lead analyst with the firm Directions on Microsoft. "So any ruling that decreases the amount of potential liability is a good thing for Microsoft."

AT&T Knowledge Ventures CEO Scott Frank said the company was disappointed in the court's ruling. "All U.S.-based sources of innovation--including the software development community--could benefit from patent laws that enable fair, appropriate protection and valuation of new technologies and inventions domestically and overseas," he said in a statement.

The ruling marks the latest in a string of patent-focused cases heard in the past year by the high court that have been hailed by technology companies. Separately on Monday, the Supreme Court issued a unanimous ruling designed to make it easier to weed out patents covering obvious combinations of elements.

The Supreme Court agreed to review the Microsoft-AT&T matter after a federal district court and the U.S. Court of Appeals for the Federal Circuit both found Microsoft liable not only for violating an AT&T patent covering a "digital speech coder" in U.S.-assembled computers but also in those abroad. AT&T first sued Microsoft over the patent in 2001.

CONTINUED: Loopholes in the law?…
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2 comments

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software patents disaster still to come...
So disaster was averted. Developers can safely still practice their trade in the EU and anywhere else except the US.

Aspiring software developers! Flee to the EU where there is still freedom and make your fortunes there! You can safely innovate, create and reap the rewards of a huge market there. It's nto that hard to emmigrate.

Plus, no Patriot Act !

Writing code here has bee outlawed in all but name. But ask Vonage about that; the "patent" they violated is MERELY the ACT of putting information into a database and taking it out later, for a specific purpose. I know that sounds unbelievable so here's the links:

<a class="jive-link-external" href="http://scratchpad.wikia.com/wiki/Vonage" target="_newWindow">http://scratchpad.wikia.com/wiki/Vonage</a>
check out patent #3

and some commentary by industry vets:
<a class="jive-link-external" href="http://blog.biginternetmall.com/?p=88369" target="_newWindow">http://blog.biginternetmall.com/?p=88369</a>


The destruction of the vital software industry and all the precious fruits it bore, from programmable computers to the internet to software to jobs, and its replacement by with overpriced, junkware monopolies that force their garbage down our collective throats is what has to happen when you permit ideas, which is really all software is apart from the source code, to be patented.

No one even argues anymore if ideas ARE what's being patented in method and software patents; they just argue whether it's good or not.

America's patent lawyers and multinationals will eat it alive economically just so their CEOs can send their kids to $20,000 a year preschools
<a class="jive-link-external" href="http://abcnews.go.com/Nightline/story?id=1915973&#38;page=1" target="_newWindow">http://abcnews.go.com/Nightline/story?id=1915973&#38;page=1</a>
and sleep with high priced prostitutes <a class="jive-link-external" href="http://www.cbsnews.com/stories/2007/04/28/national/main2738173.shtml" target="_newWindow">http://www.cbsnews.com/stories/2007/04/28/national/main2738173.shtml</a>

then turn their hungry, clicking mandibles to the rest of the world. Your job, EU et.al. is to stop them. <a class="jive-link-external" href="http://www.openrightsgroup.org/orgwiki/index.php/Software_Patents" target="_newWindow">http://www.openrightsgroup.org/orgwiki/index.php/Software_Patents</a>
Posted by asdf (241 comments )
Reply Link Flag
Yup
Who was the genius that thought that patenting obvious ideas was a good idea? Examples such as pushing data to devices, rather than polling (Blackberry devices), or retrieving data from a database while processing VOIP (Vonage) are indeed chilling to software developers here in the United States. Of course these bogus patents are used to restrict competition, not protect intellectual property in any sense. I am no fan of Micro$soft, but that is irrelevant here. These patent laws need to go the way of the dinosaur. Problem is too many people make too much money off the existing system and will resist any reform, probably with good success (after greasing some palms I'm sure).
Posted by C_G_K (169 comments )
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