Microsoft was found guilty in Southern District of New York court for infringing an AT&T Reissue Patent 32,580 "under 35 U.S.C. § 271(f) for copies of the Windows® operating system that had been replicated abroad from a master version sent from the United States." The CAFC (04-1285) upheld the District Court.

The case background from the court -

To facilitate international distribution of its flagship product, Microsoft supplies a limited number of master versions of the Windows® software to foreign computer manufacturers and authorized foreign “replicators,” who, pursuant to their licensing agreements with Microsoft, replicate the master versions in generating multiple copies of Windows® for installation on foreign-assembled computers that are then sold to foreign customers. The master versions are created in the United States and are sent abroad on so-called “golden master” disks or via electronic transmissions.

The master versions of Windows® thus exported incorporate certain speech codecs,1 which, when installed on a computer, are alleged to infringe AT&T’s ’580 patent. During the course of AT&T’s suit against Microsoft for patent infringement, Microsoft moved in limine to exclude evidence of purported liability under 35 U.S.C. § 271(f) arising from foreign sales of Windows®. In support of its motion, Microsoft argued that: (1) software is intangible information such that it could not be a “component” of a patented invention within the meaning of § 271(f); and (2) even if the Windows® software were a “component,” no actual “components” had been “supplied” from the United States as required by § 271(f) because the copies of Windows® installed on the foreign-assembled computers had all been made abroad.

Reasoning that the patentability of software was well-established and that the statute did not limit “components” to tangible structures, the district court rejected Microsoft’s argument that software could not be a “component” of a patented invention under § 271(f). As for copies made abroad from a master version sent from the United States, the district court ruled that such copies were not shielded from § 271(f) in light of the statute’s purpose of prohibiting the circumvention of infringement through exportation.

The first question, i.e., whether software may be a “component” of a patented invention under § 271(f), was answered in the affirmative in Eolas Techs. Inc. v. Microsoft Corp., 399 F.3d 1325 (Fed. Cir. 2005), which issued while the instant appeal was pending. In that case, we held that “[w]ithout question, software code alone qualifies as an invention eligible for patenting,” and that the “statutory language did not limit section 271(f) to patented ‘machines’ or patented ‘physical structures,’” such that software could very well be a “component” of a patented invention for the purposes of § 271(f). Id. at 1339.

The remaining question, then, is whether software replicated abroad from a master version exported from the United States—with the intent that it be replicated—may be deemed “supplied” from the United States for the purposes of § 271(f).

In its briefs, Microsoft maintains that no liability attaches under § 271(f) for foreign-replicated copies of Windows® because they are not “supplie[d] or cause[d] to be supplied in or from the United States.” According to Microsoft, a foreign-replicated copy made from a master version supplied from the United States has actually been “manufactured” abroad by encoding a storage medium with the Windows® software.

The CAFC agreed with the District Court that Microsoft had its head up its ass on patent law: doing an international hustle to skirt U.S. patent law won't fly.

The most ironically laughable thing, the very foundation of the decision: "Given the nature of the technology, the “supplying” of software commonly involves generating a copy... Indeed, Microsoft has taken full advantage of the replicable nature of software to efficiently distribute Windows® internationally... Additionally, we cannot accept Microsoft’s suggestion that software sent by electronic transmission must be treated differently for purposes of § 271(f) liability from software shipped on disks, see Tr. of Dec. 12, 2003 Hearing, at 8:8-17 (J.A. 351), as it would amount to an exaltation of form over substance." That the court had to point that out to Microsoft highlights how cravenly depraved Microsoft is.

Jude Rader, in a woolly dissent, exhibited a remarkable ignorance of technology, a exaltation of lofty legal reasoning while ignoring the facts on the ground.