Supreme Court to Hear Patent Infringement Case Between AT&T and Microsoft

Published: November 1, 2006

by Alex Woodie

Microsoft and AT&T may have their patent infringement dispute decided by the U.S. Supreme Court. Last week the high court announced that it would hear the case, which was brought by AT&T over speech-coding technology distributed overseas.

Problems between Microsoft and AT&T first surfaced in 2001, when the telephone giant sued Microsoft for infringing on an AT&T patent for a codec that digitizes speech. The parties reached a confidential settlement in 2004; however, Microsoft disagreed with how the $1 billion penalty was assessed.

Last July, Microsoft was ordered by the U.S. Court of Appeals for the Federal Circuit to pay AT&T more than $1 billion. Earlier this year, Microsoft appealed the ruling, arguing that U.S. patent protections don't apply to overseas transactions.

At issue is whether Microsoft is liable when it supplies partners in other countries with a component (a master disk) that, when combined with other components, could violate AT&T's patent. Lawyers for Microsoft say upholding the ruling "threatens to impose massive liability on U.S. software companies" and could prompt companies to move their research facilities out of the country, according to an AP story.

AT&T's lawyers, meanwhile, argue that it's Congress' job to protect the rights of inventors, not patent infringers. If AT&T wins the case, it could open the way for patent holders to collect on patent infringements for software created in the U.S. and distributed out of the country.

Ironically, one precedent for this case between two giants lies among the shrimp. Congress extended patent protections after the Supreme Court ruled against the holder of a patent on a shrimp deveining machine who complained that a manufacturer shipped component parts overseas to avoid U.S. patent law, according to the AP story.