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Yahoo! News: ATT, Microsoft take patent battle to US Supreme Court

Bby Veronica Smith
Wed Feb 21, 5:34 PM ET

WASHINGTON (AFP) – Microsoft, backed by the US government and heavyweight corporations, took its patent battle with telecommunications giant AT and T to the Supreme Court Wednesday, in a case that has wide implications for US firms doing business abroad.

The nine Supreme Court justices heard oral arguments in the case that hinges on whether patented US-made software code is subject to US patent law overseas.

AT and T holds a patent on voice-recognition software that Microsoft licensed to use for US sales of its Windows operating system, which runs more than 90 percent of the world’s personal computers.

At issue is whether shipping a master disk abroad for copying is supplying a component from a patented invention from the United States.

The US government, institutions and businesses including Shell Oil, Yahoo and drug maker Eli Lilly have filed friend of the court briefs in support of Microsoft.

Among those supporting the AT and T argument is US Philips Corp. and Philips Electronics North America Corp.

The Washington-based US Court of Appeals for the Federal Circuit, which deals with patent issues, ruled in July 2005 that Microsoft had violated AT and T’s voice-recognition patent by selling copies of Windows abroad, saying software code can be a “component” of a patented invention.

Microsoft contends that software code is not a component as specified by the 1984 patent law. It also argues that copying software for overseas sales is not the same as supplying software.

Microsoft sells the AT and T software as part of its Windows operating system, providing foreign computer makers with Windows on disks — called “golden master disks” — or in electronic transmissions.

The computer makers copy the software and install copies on their PCs.

AT and T insists that each international copy of Windows that includes its patented digital speech coder, a technology widely used in PCs and mobile phones, is directly derived from the Windows software created by Microsoft in the US and therefore violates its patent.

“The golden disk is not a component,” Theodore Olson, a lawyer for Microsoft, told the court. The AT and T patent covers “the components that make the machines run.”

Seth Waxman, a lawyer for AT and T, argued “the component is the object code.”

Under Congressional legislation, shipping a patented product’s components to another country for assembly there constitutes patent infringement.

The Coalition for Patent Fairness accused foreign competitors to US companies of being the “strongest supporters” of the Federal Circuit’s interpretation of the law.

“Under the court’s current rulings, while foreign-based companies do not need to hold a foreign patent to sue American software developers for infringement overseas, American companies must hold patents in foreign countries to protect themselves from foreign infringement,” coalition spokesman Steve Elmendorf said in a statement.

“Today, the only way to level the playing field under current Federal Circuit law is for the American company to move its software development operation overseas. That makes no sense.”

Supreme Court Chief Justice John Roberts has recused himself from the case, a court spokeswoman said, adding that no reason was given, as is customary. Roberts reportedly held investments in Microsoft.

A decision is expected by July.

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