Microsoft v. AT&T: The Supreme Court Grapples with How to Treat Software under '271(f) of the Patent Act

The Federal Circuit had held that Microsoft infringed an AT&T U.S. patent under '271(f) when it sent software from the United States to a foreign country (by shipping a master disk or by electronic transmission), where the software was then copied onto disks and installed onto foreign computers. The Supreme Court reversed in a 7-1 decision, holding that Microsoft did not infringe under '271(f). The four justices in the majority held that only the actual physical copies of the software stored on the disks and installed onto the foreign computers ' not the software code in the abstract ' qualified as 'components,' and thus that there was no liability because these copies had not been 'supplied' from the United States. The three justices who concurred went even further, holding that a 'component' must be something physical, and that because no physical thing originating in the United States was 'combined' with the foreign computers, there was no infringement.

The Microsoft decision is interesting for a number of reasons. First, the various opinions reveal that the members of the Supreme Court have different views about how to apply the tangible concepts of 'supplying' a 'component' in '271(f) to the intangible nature of software. Second, the Court made clear that it is up to Congress, not the courts, to consider whether this creates a loophole that needs to be remedied. Finally, although the decision clarifies certain aspects of the scope of '271(f), it does not provide much guidance about how to treat other methods of exporting software for installation on foreign computers, such as downloading software via the Internet. Unless and until Congress steps in, lower courts likely will interpret '271(f) narrowly in view of the Supreme Court's reluctance to interpret the section broadly.