	Background

In 1972, the Supreme Court ruled in Deepsouth Packing Co. v. Laitram Corp . that, under the Patent Act as it was written at that time, it was not an act of patent infringement to manufacture the components of a patented invention in the United States and then ship them abroad for assembly into an end product. In response to this loophole in the patent law that would have allowed potential infringers to avoid liability, Congress added subsection (f) to Â§ 271 of the Patent Act. Microsoft Corp. v. AT&T Corp. The patent at issue in Microsoft v. AT&T concerned AT&T's patent on a speech coder-decoder (a codec). Microsoft exports overseas a limited number of U.S.-made "golden master disks" containing the machine-readable software code of its Windows operating system; foreign computer manufacturers may use these disks to replicate the master disk in generating multiple copies of Windows for installation on foreign-assembled computers that are then sold to foreign customers. In a 7-1 decision issued in late April 2007, the Court reversed the Federal Circuit's judgment, holding that Microsoft was not liable for patent infringement under Â§ 271(f), as the statute is currently written, when foreign-manufactured computers are loaded with Windows software that has been copied abroad from a master disk or an electronic transmission sent by Microsoft from the United States.
Generally speaking, United States patent law does not have extraterritorial effect. The exception, however, is Â§ 271(f) of the Patent Act, which makes it an act of patent infringement to manufacture within the United States the components of a patented invention and then export those disassembled parts for combination abroad into an end product. However, in Microsoft Corp. v. AT&T Corp . (550 U.S. ___ , No. 05-1056, decided April 30, 2007), the U.S. Supreme Court held that software companies are not liable for patent infringement under Â§ 271(f) when they export software that has been embodied in machine-readable, physical form (a CD-ROM, for example), with the intent that such software be copied abroad for installation onto foreign-manufactured computers. In this case, AT&T holds a patent on a speech software program upon which Microsoft's Windows operating system infringes. Microsoft ships abroad a "master version" of Windows, either on a disk or via encrypted electronic transmission, which foreign computer manufacturers use to generate copies. Thus, the actual copies of the Windows software that are installed onto the foreign-made computers are made abroad. Consequently, according to the Supreme Court, liability for such unauthorized replication, if any, would have to arise under the patent laws of those foreign countries, not the U.S. Patent Act.