Supreme Court Scolds Microsoft, AT&T Lawyers In Patent Case

The central legal issue of the case hinges on rather obscure legal code that says infringement concerns are merited if one party supplies "components" of a patented invention abroad in order to be combined in an infringing way. Microsoft ships code overseas in master disks that get copied before being installed in a manner that justices agreed today would be infringing, had it all taken place on U.S. soil. The question then is whether software code is a component of a the larger patented process to digitally compress speech.

It's possible that in their decision, the justices could give broad opinions on the scope of patent law, how it affects innovation and even outsourcing, but that appears less likely since oral arguments skirted over these topics completely.

That, despite the fact that Microsoft and its backers argue a victory for AT&T could put U.S. software developers at a disadvantage relative to foreign competitors, some of whom operate in countries with more lenient patent regulations. An AT&T win would "hinder software development in the U.S. and encourage companies to move their software development overseas," says Roger Kennedy, who represents Oracle in the Coalition For Patent Fairness. The coalition comprises a number of other major U.S. software vendors, including Microsoft, Adobe Systems, and Red Hat.

Judges asked both sides how to define computer code, software, and computer components, and scolded Microsoft for suggesting software isn't valuable unless coupled with a computer. "Microsoft doesn't say please buy our disk because it's the prettiest disk in the business," Justice Anthony Kennedy said at one point. "It says buy our program because the program means something." On the flipside, justices worried that a decision in favor or AT&T could be overbroad, turning any transmission of information about a patented process into a potential patent infringement.

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In 2005, the U.S. Court of Appeals for the Federal Circuit upheld a ruling that sided with AT&T. Microsoft attorney Theodore Olson told the Supreme Court a "very significant amount" of money is involved in the case; the court is expected to rule in July. Maybe then we'll get some real opinions on the patent-ability of software, how patents can affect innovation at home and abroad, and just how badly needed patent reform is in the information era.