Microsoft Corp. v. At&t Corp.
The Supreme Court ruled that Microsoft was not liable under U.S. patent law for copies of Windows that foreign manufacturers made abroad from a master disk or transmission Microsoft sent overseas, because those installed copies were never themselves exported from the United States.
The decision keeps a tight boundary around a 1984 patent-law provision aimed at closing an earlier loophole, holding that software must exist as an actual copy to count as a patentable 'component,' and that only the literal thing exported from the U.S. can trigger liability.
“Abstract software code is an idea without physical embodiment, and as such, it does not match §271(f)’s categorization: “components” amenable to “combination.””
Explains why uninstalled software instructions cannot count as a patent 'component.'
How it got here: A federal district court held Microsoft liable, a divided Federal Circuit panel affirmed, and the Supreme Court agreed to review the case.
The Case in Depth
What happened
AT&T held a patent on a computer that digitally encodes and compresses speech. Microsoft's Windows software could perform this patented process once installed. Microsoft sent a master copy of Windows to foreign computer manufacturers, who copied it and installed those copies — not the master itself — onto computers built and sold outside the United States. AT&T sued Microsoft over these foreign installations.
The question before the Court
When Microsoft sent a master copy of Windows abroad to be copied and installed on foreign-made computers, did it "supply" the patented components "from the United States"?
The Court's answer
No — Microsoft did not "supply" the patented components "from the United States." The Court ruled that only an actual, readable copy of software (not abstract code or instructions) counts as a "component" capable of infringing a patent, and that the copies installed on the foreign-made computers were generated overseas by the manufacturers themselves, not exported from the U.S.
Because the foreign-made copies never left the United States in the first place, Microsoft's conduct fell outside the patent provision's reach, especially given the general rule that U.S. patent law does not apply to conduct occurring abroad. The Court left it to Congress to decide whether to close this gap for software distributed abroad via a master copy.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Software companies that ship a master version abroad for local duplication, rather than shipping finished copies themselves, avoid U.S. patent infringement liability for the foreign-made copies. Patent holders like AT&T must instead rely on obtaining and enforcing patents in each foreign country to stop copying that happens overseas.
What changes now
This is a final merits decision reversing the Federal Circuit. Microsoft is not liable under the patent provision for the foreign-made copies of Windows at issue. AT&T's remedy for stopping unauthorized copying abroad lies in obtaining and enforcing patents in the foreign countries where the copying and installation occur. The Court left it to Congress to decide whether to close the loophole this ruling creates for software distributed via master copies sent overseas.
What this does not decide
The Court did not decide whether software in the abstract, or other intangible things, could ever count as a "component" under the statute in some other context, such as if an intangible process itself were the patented invention. It limited its holding to the tangible speech-processing computer at issue here.
Concurrences and dissents
Concurrence — Justice Alito
Justice Alito agreed Microsoft was not liable but reasoned differently: a component of a physical machine must itself be something physical, and since no physical part of the disk Microsoft sent ever became part of the foreign computer, there was no violation. He reached this conclusion through a physical-object analysis rather than the majority's abstract-versus-copy distinction.
Dissent — Justice Stevens
Justice Stevens argued the second paragraph of the patent provision, covering components specially made for the invention, should cover Microsoft's conduct, treating the master disk as equivalent to a warehouse of components. He argued software is not merely instructive like a blueprint because it actually causes the infringing function to occur, and would have affirmed the ruling against Microsoft.
How the Court got there
The legal reasoning, step by step
- The Court first asked what counts as a 'component' under the patent-law provision at issue, which covers only components capable of being physically combined into the patented invention. It concluded that abstract software instructions, detached from any medium, cannot be combined into a computer and so are not a 'component' — only an actual, readable copy (like one on a CD-ROM) qualifies.
- The Court compared uncombined software instructions to a blueprint: a blueprint can contain all the information needed to build a device, but it is not itself a piece of the finished device, and the same logic applies to software code that has not yet been turned into a usable copy.
- Having decided that only actual copies count as components, the Court turned to whether Microsoft 'supplied' the foreign-installed copies 'from the United States.' Because the copies installed on the foreign computers were generated abroad by the manufacturers themselves, and did not exist until that copying occurred overseas, they were not the same copies Microsoft sent from the U.S.
- The Court declined to treat the ease of copying software as legally significant, reasoning that the statute's text says nothing about how easy or cheap duplication is, and other easily copied items (like keys) are not treated as 'supplied' just because a master was sent.
- Because the general rule is that U.S. patent law does not reach conduct abroad, the Court applied a presumption against giving the statute an extraterritorial reach, which further supported reading the provision narrowly to cover only what was literally exported.
- The Court noted that the provision was written specifically to respond to a prior case involving physical, assemblable machine parts shipped abroad, and concluded that any broader gap involving intangible software copies made overseas is a policy choice for Congress, not the courts, to address.
Doctrinal impact
Cases affected by this decision
Distinguishes Deepsouth Packing Co. v. Laitram Corp. (406 U. S. 518)
Distinguished because that case involved exported physical machine parts, not intangible software copies made abroad.