The US Supreme Court has decided that the export of Microsoft’s Windows software from the US does not infringe AT&T’s patent rights.

Microsoft sells the Windows operating system to overseas manufacturers who then install it on computers outside the US. Microsoft sends a master version of Windows to the foreign manufacturers on a master disk or via encrypted electronic transmission. The manufacturers then produce copies from the master version and it is those copies that are then installed on the foreign computers.

AT&T hold a patent relating to a computer used to digitally encode and compress recorded speech. The Windows software itself could not infringe the patent, however it was accepted that when the Windows software was loaded onto a computer, it enables that computer to process speech in the manner claimed in the AT&T patent.

The use of the Windows software on computers in countries other than the US cannot infringe the AT&T patent because such use is not occurring in the United States. However, a US patent can be infringed if one supplies “from the United States,” for “combination” abroad, any patented inventions “components” (35 U.S.C. Section 271(f)(1)). So, was the master version of Windows being shipped abroad a “component” of the patented invention?

AT&T sued Microsoft for infringement on the basis that the master version was a “component” of the invention and was being sent abroad from the United States, for “combination” with other components of the invention, namely personal computers. Microsoft argued before the District Court and Federal Circuit that “unincorporated software, because it is intangible information, cannot be typed a “component” of an invention under Section 271(f)”. Microsoft also argued that the foreign-generated copies of Windows, which were actually installed on the foreign computers, were not themselves supplied from the United States. The District Court rejected Microsoft’s arguments and held for infringement and this was affirmed by the Federal Circuit Panel.

The Supreme Court reversed the Federal Circuit decision holding that there was no infringement because the foreign-made copies of Windows are installed on the computers and these copies are not exported from the United States.

The Supreme Court considered that it was the copies of Windows, not the master versions, which qualify as the “component” under Section 271(f). In particular, they held that the master version of Windows was uncombinable until copied onto a computer-readable medium. They noted that it was the copy-producing step that rendered the software useable and that this step is essential. It seems clear therefore that if Microsoft had actually supplied the copies, ready for installation on computers, from the United States, they would have been held to infringe the AT&T patent.

The Supreme Court noted that Microsoft may have benefited from a “loop hole” in Section 271(f) but that it is not the job of the Supreme Court to close such loop holes. The ease with which software can be copied was probably not considered when Section 271(f) was introduced in 1984. The Supreme Court suggested that it was the duty of the US Legislature to close the loop hole, if they deem appropriate.

It should be remembered that the AT&T patent was directed to a computer, and not the software itself. Had it been directed to the software itself, the decision may well have gone in AT&T’s favour, given that Microsoft were manufacturing the master version of the software in the US.

There is no equivalent to Section 271(f) under UK patent law. Although it is possible to sue for infringement in the UK for supply of components of inventions, the supply must be with the intention to put the invention into effect in the United Kingdom. Therefore, supplying only some components of inventions abroad could not infringe any patent to that invention in the UK. Accordingly, software developers who export software from the UK, whether as master disk versions or end-user copies, do not risk infringing UK patents which are directed to “computers” or other “apparatus” since the software is only a component and not the defined invention as a whole . It should be noted that the export of software from the UK could however infringe patents directed to the software itself.

In conclusion, in the US it seems that Section 271(f) can be avoided by supplying foreign manufacturers with a master version of software on a master disk or via electronic communication. Care needs to be taken however if any patent exists which is directed to the software itself and not the computer. The situation for software developers in the UK is generally more favourable as exports of software could not infringe UK “apparatus” patents, and as patents to “computer programs” as such are more difficult to obtain.

Andrew Thompson
June 2007