Microsoft and Ma Bell Duke It Out in the Supreme Court

Corp. giants Microsoft and AT&T are getting set to duke it out before the U.S. Supreme Court next Wednesday (Feb. 21) in a case that will decide whether a company can be liable for infringement on a domestic patent abroad. Legal experts say the outcome could have widespread implications on both the software industry and the manner in which patent holders can protect their intellectual property.

The financial fall-out of a decision against Microsoft could cost the software industry billions of dollars, making Microsoft v. AT&T one of the major business cases on the high court's docket this term.

"The case is clearly of huge importance in terms of monetary value," said Richard Samp, chief counsel at Washington Legal Foundation.

The issue at hand is whether Microsoft violated AT&T's domestic patent on sophisticated speech decoding technology by sending the software overseas to be replicated and installed in its Windows operating system.

Microsoft v. AT&T revolves around the interpretation of a section of the Patent Act which involves the export of components of patented inventions from the U.S. Under section 271 (f) of this act, a person that supplies a component of a patented invention overseas is liable for infringement.

Sounds cut and dry. But here's where it gets tricky: Microsoft and a vast number of its supporters, including Intel , Yahoo! and Amazon.com , contend that software is not a physical component, but intangible information.

Going a step further, Microsoft argues that the software wasn't technically supplied from the United States because overseas manufacturers of its computers made copies of the software from a master disk and installed those copies into the operating system.

Since the copies, and not the original software, were in the computers built abroad, Microsoft says it can't be considered a supplier.

But AT&T argues that Microsoft's logic is simply a way to circumvent patent law and infringe upon the company's patent. The company successfully convinced the trial courts and the federal circuit that software is an important component of its speech decoding technology because the invention wouldn't work without it.

Now the issue lies with the U.S. Supreme Court justices, with the exception of Chief Justice John Roberts, who recused himself because he owns shares of Microsoft. Experts are divided about who will prevail in the case since they say both sides have strong arguments.

http://money.cnn.com/2007/02/16/news/companies/scotus_microsoft/index.htm?postversion=2007021613