Microsoft, Corp. v. AT&T Corp.
167 L. Ed. 2d 737, 127 S. Ct. 1746 (2007)
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Rule of Law:
Supplying software from the United States via a master disk or electronic transmission, which is then copied abroad for installation onto foreign-made products, does not constitute supplying "components" from the U.S. for foreign combination under 35 U.S.C. § 271(f). Liability under § 271(f) attaches only to physical components actually supplied from the U.S. that are themselves incorporated into the infringing product.
Facts:
- AT&T holds a U.S. patent on an apparatus for digitally encoding and compressing recorded speech, which can be embodied in a computer.
- Microsoft Corporation develops its Windows operating system in the United States.
- The Windows software code, when installed on a computer, enables that computer to function as AT&T's patented speech-processing apparatus.
- Microsoft sends a master version of the Windows software, either on a disk or via electronic transmission, from its U.S. headquarters to foreign computer manufacturers.
- These foreign manufacturers use the master version to generate numerous copies of the software abroad.
- The foreign-made copies, not the original master version sent from the U.S., are installed onto computers that are manufactured and sold abroad.
Procedural Posture:
- AT&T filed an infringement suit against Microsoft in the U.S. District Court for the Southern District of New York.
- The District Court held Microsoft liable under 35 U.S.C. § 271(f) for foreign installations of its Windows software.
- Microsoft, as appellant, appealed the judgment to the U.S. Court of Appeals for the Federal Circuit.
- A divided panel of the Federal Circuit affirmed the District Court's judgment, holding Microsoft liable.
- The U.S. Supreme Court granted certiorari to review the Federal Circuit's decision.
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Issue:
Does a company that exports a single master copy of software from the United States, which a foreign manufacturer then uses to make multiple copies for installation onto foreign-made computers, "supply from the United States" the "components" of a patented invention for combination abroad under 35 U.S.C. § 271(f)?
Opinions:
Majority - Justice Ginsburg
No. Supplying a master copy of software for replication abroad does not constitute supplying "components" from the United States under § 271(f) because the components actually combined abroad are the foreign-made copies, which were not supplied from the U.S. The Court reasoned that § 271(f) applies only to the tangible, physical "components" that are themselves exported from the U.S. and combined into the final product. Abstract software code, like a blueprint, is an intangible set of instructions and not a combinable "component." The physical copies of the software are components, but the ones installed on the foreign computers were created abroad and thus were not "supplie[d]...from the United States." The Court emphasized the strong presumption against the extraterritorial application of U.S. patent law and concluded that any expansion of the law to cover the realities of digital distribution is a matter for Congress, not the judiciary, to address.
Dissenting - Justice Stevens
Yes. Microsoft's conduct should be covered by § 271(f). The dissent argued that the majority's interpretation allows a technicality to defeat the statute's purpose, which was to close the loophole identified in Deepsouth. Software is not like a blueprint because it actively causes the infringing conduct to occur. The dissent viewed the master disk as the "functional equivalent of a warehouse of components," contending that sending a single master with the intent that it be replicated is the same as indirectly supplying the inventory of copies. In this view, the sole intended use of the exported software was for infringing purposes, fitting squarely within the spirit, if not the majority's strict reading, of § 271(f)(2).
Concurring - Justice Alito
No. Liability under § 271(f) does not attach because no physical object originating in the United States was ever combined with the foreign-made computers. A "component" must be a physical part that remains incorporated in the final device. When software is installed from a CD-ROM, information is copied to the hard drive (creating magnetic fields), but no physical part of the CD-ROM itself becomes part of the computer. Since no physical component was supplied from the U.S. and combined into the machines, the statute does not apply. This reasoning avoids the question of whether the copies made abroad were "supplied" from the U.S., focusing instead on the lack of physical incorporation of any U.S.-sourced item.
Analysis:
This decision significantly limits the extraterritorial reach of U.S. patent law in the context of software and other digital goods. It establishes that sending a "master" version of a digital product abroad for replication does not trigger infringement liability under § 271(f), creating a clear and lawful method for U.S. software companies to avoid liability for foreign installations of their products. The ruling reinforces the presumption against extraterritoriality by demanding a strict, literal interpretation of statutory language, particularly the physical nature of "components" and the meaning of being "supplied from" the U.S. This effectively creates a "digital loophole" in patent law, placing the burden on Congress to update the statute to address modern technology and distribution methods.
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