Microsoft Corp. v. ATT Corp.: Limiting §271(f) Liability for Software Components: U.S.

Introduction

Microsoft Corp. v. ATT Corp., 550 U.S. 437 (2007), is a pivotal Supreme Court decision that scrutinized the application of §271(f) of the Patent Act in the context of software distribution. The case centered around whether Microsoft could be held liable for patent infringement under §271(f) when its Windows operating system software was supplied from the United States to foreign manufacturers, who then copied and installed it on computers sold abroad.

Parties Involved:

Petitioner: Microsoft Corporation
Respondent: ATT Corporation

Key Issues:

Whether software qualifies as a "component" under §271(f) of the Patent Act.
Whether Microsoft "supplied from the United States" components of ATT's patented device when it exported Windows software abroad.

Summary of the Judgment

The U.S. Supreme Court reversed the decision of the Court of Appeals for the Federal Circuit, determining that Microsoft was not liable under §271(f) for exporting copies of Windows software. The Court held that:

Only copies of Windows software, not the abstract software code, qualify as "components" under §271(f).
Microsoft did not supply these copies from the United States, as the copies were made abroad from master versions sent by Microsoft.
Therefore, Microsoft did not infringe ATT's patent under §271(f) as it was written at the time.

The decision emphasized the limitations of §271(f), especially regarding intangible software components, and underscored the presumption against the extraterritorial application of U.S. patent law.

Analysis

Precedents Cited

The Court referenced several key precedents that shaped the interpretation of §271(f):

DEEPSOUTH PACKING CO. v. LAITRAM CORP., 406 U.S. 518 (1972): This case established that exporting components for assembly abroad does not constitute patent infringement unless explicitly covered by statute.
DEEPSOUTH PACKING CO. v. LAITRAM CORP., 406 U.S. 518 (1972): Influenced the creation of §271(f) to address gaps in patent law regarding foreign assembly.
Fisch Allen, The Application of Domestic Patent Law to Exported Software: 35 U.S.C. §271(f), 25 U. Pa. J. Int'l Econ. L. 557, 565 (2004): Provided scholarly analysis supporting the narrow interpretation of §271(f) for software.
UNIVERSAL CITY STUDIOS, INC. v. CORLEY, 273 F. 3d 429 (CA2 2001): Discussed legislative responses to software piracy, relevant to understanding Congress's approach to digital media.

Legal Reasoning

The Court's legal reasoning can be dissected into several key components:

Definition of "Component": The Court determined that only tangible copies of software, not the abstract code itself, qualify as "components" under §271(f). Abstract software code is likened to blueprints—informational and not directly combinable into a patented invention.
Supply from the United States: The Court emphasized that liability under §271(f) requires that components be "supplied from the United States." Since Microsoft supplied master copies, which were then copied abroad, the actual components installed on foreign computers were not supplied from the U.S.
Presumption Against Extraterritoriality: The decision reinforced the principle that U.S. patent laws are generally not meant to apply beyond U.S. borders unless explicitly stated.
Legislative Intent: The Court held that any expansion of §271(f) to cover software replication abroad constitutes a legislative change, which should be addressed by Congress, not the judiciary.

Impact

The ruling in Microsoft Corp. v. ATT Corp. has significant implications for international software distribution and patent enforcement:

Software Distribution: Software companies can distribute software internationally without the risk of U.S. patent infringement liability under §271(f), provided that copies are made abroad.
Patent Enforcement: Patent holders may face challenges in enforcing U.S. patents against foreign-made products unless components are directly supplied from the U.S.
Legislative Response: The decision signals the need for Congress to revisit and possibly amend §271(f) to address modern software distribution practices and close potential loopholes.
Future Litigation: The narrow interpretation of §271(f) sets a precedent that may be cited in future cases involving digital goods and international distribution.

Complex Concepts Simplified

§271(f) of the Patent Act

What It Is: §271(f) is a provision in U.S. patent law that outlines circumstances under which supplying components of a patented invention from the United States can constitute infringement, even if the final product is assembled abroad.

Main Points:

Only certain components are covered—those that are essential and not commonly used outside the patented invention.
The components must be "supplied from the United States."
This supply must encourage the combination of components abroad into a product that would infringe the patent if made within the U.S.

Extramationality Presumption

Definition: A legal principle that assumes U.S. laws do not apply beyond its borders unless explicitly stated.

Relevance: In this case, it meant that U.S. patent law, including §271(f), was presumed not to apply to actions occurring entirely outside the U.S.

Software Components vs. Abstract Code

Software Components: Physical copies of software (e.g., on a CD-ROM) that can be installed on computers.

Abstract Code: The software's instructions in a non-physical form (e.g., the actual code on Microsoft's servers).

Distinction: Only the physical copies qualify as "components" under §271(f); the abstract code does not.

Conclusion

Microsoft Corp. v. ATT Corp. significantly narrowed the scope of §271(f) by ruling that intangible software code does not qualify as a "component" for purposes of patent infringement liability. The judgment underscores the principle that U.S. patent laws are generally not intended to have extraterritorial effects unless Congress explicitly provides for such application. While this decision benefits software distributors by limiting liability, it also highlights the need for legislative action to address the complexities of modern software distribution and potential infringements beyond U.S. borders.

Moving forward, both patent holders and software companies must navigate the existing legal framework with a clear understanding of its limitations and the potential for future legislative amendments to bridge identified gaps.

Microsoft Corp. v. ATT Corp.: Limiting §271(f) Liability for Software Components