The U.S. Supreme Court says it will intervene in a patent dispute between giants Microsoft Corp. and AT&T Corp. over Windows programs distributed overseas.
An appeals court ruled that Microsoft had infringed on an AT&T patent for a type of speech-coding technology.
The outcome could be worth more than $1 billion US to Microsoft if the justices find that the lower court ruling improperly extended U.S. patent protections to overseas transactions, said Dennis Crouch, a visiting law professor at Boston University.
"Almost every patent infringement lawsuit against Microsoft asks for damages for U.S. sales as well as foreign export sales," Crouch said.
Microsoft has acknowledged its liability for domestic sales.
Microsoft lawyers claimed the ruling by the U.S. Court of Appeals for the Federal Circuit in favour of AT&T "threatens to impose massive liability on U.S. software companies" and could prompt companies to move their research facilities out of the country.
Solicitor General Paul Clement, invited by the court to offer his views, urged justices to take the case. AT&T's remedy "lies in obtaining and enforcing foreign patents, not in attempting to extend United States patent law to overseas activities," Clement said.
AT&T lawyers said that the ruling only protected its patent, which covers a program with a "speech codec" that digitizes speech. "Congress's congressional authority is to protect the rights of U.S. inventors, not U.S. infringers," they said. AT&T Corp. is a subsidiary of AT&T Inc.
Congress extended the reach of 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.
The high court had earlier refused to consider a separate case stemming from a jury's decision that Microsoft should pay $521 million US for infringing patents held by Eolas Technologies Inc. and the University of California. Microsoft challenged a ruling that the award should be based on worldwide sales rather than domestic sales.
Chief Justice John Roberts took no part in the court's decision to hear the case. The court offered no explanation, but Roberts' most recent financial disclosure shows that he owns between $100,000 and $250,000 in Microsoft stock.
The case is Microsoft Corp. v. AT&T Corp., 05-1056.
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