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Software Companies Face Threat of Patent Infringement Suits for Overseas Sales: But Is It Serious

A significant case has reached the U.S. Supreme Court that on the surface could expose high-tech companies to greater liability for patent infringement in regard to certain products assembled and sold overseas.  However, based on the tenor of the comments and questions by a majority of the Justices of the Court during oral arguments, it appears that there will be no major shift in policy in regard to patent infringement when a product is assembled and sold off the shores of the United States.

Historically, U.S. companies could escape liability for manufacturing and selling products that produced and sold in the U.S. would constitute actionable patent infringement with no negative consequences.  However, all of this may change when the U.S. Supreme Court hands down a decision in the seminal case of Microsoft Corporation v. AT&T Corp.  The issue in this case is the actual scope of the exception to the rule imposing liability for patent infringement.  That exception had permitted an entity or individual to avoid a patent infringement suit components for a patented invention were supplied to an assembler in another country, provided the final product was sold in another country.

AT&T is arguing in the case before the nation's highest court that Microsoft is doing just that by causing that company's digital speech processor technology to be assembled and sold in another country.  Microsoft is countering that no component as contemplated by the law is involved.  Rather, Microsoft contends that only instructions  directing the computer how to perform the digital speech processing are included in the Microsoft package being assembled and sold overseas.  Microsoft maintains that AT&T needs to obtain foreign patents to protect its interests. 

During oral arguments before the U.S. Supreme Court, Justices Souter and Bryer both expressed concern that a ruling in favor of AT&T would expose many high-tech enterprises to liability under the U.S. patent infringement laws. 

The only apparent support for AT&T's position during the oral arguments before the U.S. Supreme Court came from Justice Kennedy.  He said that he did have sympathy for the AT&T position regarding the component issue that was raised before the Court.  The Chief Justice has recused himself from the case.

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