Microsoft wins patent case in top U.S. court

The U.S. Supreme Court sided with Microsoft Corp. on Monday in a case that restricts the reach of U.S. patents overseas.

In a 7-1 decision, the court found that Microsoft is not liable in a patent dispute with AT&T.

The decision could impact other lawsuits against Microsoft and save the company billions because of the global scope of its operations.

AT&T had sued Microsoft, alleging computers running the Windows operating system infringe on an AT&T technology that compresses speech into computer code.

AT&T said it is entitled to damages for every Windows-based computer manufactured outside the United States that uses the digital speech coder system.

Microsoft acknowledged violations in the United States regarding the AT&T patent, while insisting the infringement should not be extended internationally.

AT&T said Microsoft ran afoul of a 1984 law making it a patent infringement for a company to ship components of a patented product to a foreign country for assembly there.

Microsoft ships its Windows-operating system to foreign countries on master disks or via electronic transmissions. That data is copied by foreign companies that install it on the computers they manufacture.

"The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law," Justice Ruth Bader Ginsburg wrote in the majority opinion.

Neither Windows software nor a computer standing alone without Windows installed infringes AT&T's patent, Ginsburg added.

U.S. patent law is inapplicable to the export of blueprints and there is no reason to think that Congress intended "to place the information Microsoft dispatched from the United States in a separate category," Ginsburg wrote.

The administration of President George W. Bush supported Microsoft in the case.

Microsoft and the Bush administration say computer code is not a component until it is copied onto a hard drive or installation disk.

Copying parts abroad for assembly and sale abroad is properly the subject of foreign law, the Justice Department solicitor general's office told the court.