On Wednesday, Microsoft began oral arguments in a patent infringement case with AT&T. No surprise there: As an enormous corporation, Microsoft often finds itself in court. What makes this case interesting, however, are two unique facts. First is the venue: The US Supreme Court. Second, in a rare move, Microsoft is being supported by a vast number of software companies, including numerous rivals that have spoken out against Microsoft's business practices in the US and Europe.
AT&T claims that Microsoft's Windows infringes on several of its patents and Microsoft has, in fact, paid fines for this infringement on products sold within the United States. But Microsoft says that the patents do not cover software products sold outside the US, given that patents are valid only within the country that issued the patent. But AT&T cites a 1972 patent law that prevents US companies from shipping components outside the US and assembling products there in order to avoid patent fines. Microsoft, it says, creates international versions of Windows in the US and then ships the software around the world.
Microsoft, however, says that "components" are physical entities and that it only ships a "golden master" version of its operating systems overseas: The physical manifestations of its products are then created in other countries, when the software is sold on disk in stores or is installed on computer hard drives. Many of Microsoft's competitors support this theory, because they too ship software around the world. A Microsoft loss would leave them open to patent-based fines as well.
The US Supreme Court has agreed to hear the case because manufacturing and distribution operations have changed significantly since the 1970s, and of course software is a newer type of product that doesn't neatly fit into earlier business models. The question is whether software shipped internationally is covered by the 1972 patent law.
Curiously, even the Supreme Court may not be able to resolve this issue: Chief Justice John Roberts has recused himself from the case because he owns Microsoft shares, leading to the possibility that the court could find itself deadlocked. A ruling is expected in July.