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Supreme Court Sides With Microsoft

Copies of Microsoft's Windows operating system shipped abroad are not subject to U.S. patent-infringement laws, the U.S. Supreme Court ruled Monday.

The decision reverses a lower court decision that extended damages to overseas sales of Windows in the aftermath of a successful AT&T infringement lawsuit against Microsoft. AT&T and Microsoft reached an undisclosed settlement for U.S. copies of Windows containing the speech compression technology.

AT&T, though, insisted U.S. patent law prohibits companies from shipping component parts overseas for assembly to avoid U.S. patent laws. Microsoft compiles the source code for Windows on a master disk, or "golden master," to be shipped to foreign countries. AT&T says the disk amounts to a component part of Windows.

"Foreign law alone, not United States law, currently governs the manufacture and sale of components of patented inventions in foreign countries," Justice Ruth Bader Ginsburg wrote in the majority opinion. "If AT&T desires to prevent copying abroad, its remedy lies in obtaining and enforcing foreign patents."

The Microsoft decision was the second patent ruling of the day for the Supreme Court. Earlier Monday morning, the justices cheered the technology sector in a ruling on the "obviousness" of patents that tech executives claim will make it easier to dismiss patent-infringement claims.

At issue in KSR International v. Teleflex, is the standard currently used to determine whether a patent should be issued if the invention is obvious to those with knowledge of the skills involved, particularly patents that combine two known elements.

"Both of these decisions turned out right," Emery Simon, an attorney for the Business Software Alliance, said in a teleconference. "These are two pretty dramatic decisions that will go a long way to bringing the judicial process closer to the original statutes."

Simon said the court moved in the right direction when it decided to separate foreign sales of software from products that attempt to "game" the U.S. system by making parts of a patented invention in the U.S. and then shipping the component parts for overseas assembly.

"Mere export of information does not create [infringement] liability," Simon said.

AT&T argued before the Supreme Court in February that whether Microsoft sends one master disk for later copying on foreign-made computers or 100,000 copies of Windows on separate disks, the end result is infringement.

Ginsburg wrote Windows could best be compared to a set of blueprints.

"A blueprint may contain precise instructions for the construction and combination of the components of a patented device, but it is not itself a combinable component," she wrote. "The fact that it is easy to encode software's instructions onto a computer-readable medium does not counsel a different answer."

Ginsburg added, "While copying software abroad is indeed easy and inexpensive, the same can be said of other items, such as keys copied from a master."

The KSR case pitted two makers of automobile gas pedals against each other. The Canadian-based KSR combined what it claims is the "obvious" previous technology to produce a hybrid gas pedal for General Motors' vehicles. The Limerick, Pa-based Teleflex claimed the KSR invention infringed on its patents.

"Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may … deprive prior inventions of their value or utility," Justice Anthony Kennedy wrote in the KSR decision.

The court sent the case back to the lower court for additional proceedings.