Court Takes on Software Patents

By Robert Barnes and Alan Sipress
Washington Post Staff Writers
Thursday, February 22, 2007

The name alone -- Microsoft v. AT&T-- conjures a galactic showdown. And the legal battle over a patent dispute that unfolded in the Supreme Court yesterday brought together elements of an epic.

Millions of dollars, at a minimum, ride on the outcome. The companies have hired two of Washington's most prominent Supreme Court gladiators, who together have argued nearly 100 cases before the high court, to present their cases. Some justices were on the edges of their seats as they absorbed a mind-bending blend of law and abstract thought, of computer-code poetry and patent-law banality.

The case even involves a "golden disk."

So what if that disk only contains Microsoft's Windows operating system?

"I hope we can continue calling it the golden disk," Justice Antonin Scalia said, when one justice blandly referred to it as the master disk. "It has a certain Scheherazade quality that really adds a lot of interest to this case."

At issue is whether Microsoft can be held liable for violating an AT&T patent on technology that condenses speech into computer code, similar to that found on Microsoft's Windows program.

Microsoft admitted it infringed the AT&T patent on computers sold domestically but contends that it is not liable for its programs installed by computer manufacturers overseas.

In 1984, Congress amended the patent law to forbid companies from shipping components of patented inventions overseas and having the parts assembled elsewhere in an attempt to skirt patent laws.

So in this case, justices are looking at whether digital software code can be considered a "component" of a patented invention and if so, whether it was "supplied" from the United States.

The case has sparked intense interest among U.S. technology firms, especially software developers, who worry they could be left increasingly vulnerable for infringing patents if the ruling goes against Microsoft.

"It would create an enormous base for damages," explained Stephen B. Maebius, a lawyer at Foley & Lardner specializing in intellectual-property rights. This could create an incentive for companies to move their research and development operations abroad, beyond the reach of U.S. courts, he said.

Even some of Microsoft's traditional competitors such as Yahoo and have joined to support the company's argument that overseas production should be governed by those countries' laws.

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