Wednesday, February 21, 2007

More On Microsoft v. AT&T

Attorneys for Microsoft and AT&T who argued an international patent infringement case before the Supreme Court on Wednesday (see Technology Daily's P.M. edition) may be betting on different outcomes but they agree that the case's impact on innovation and the economy cannot be understated.

Minutes after the case was heard, Microsoft lawyer Theodore Olson and Seth Waxman, both of whom are former U.S. solicitors general, spoke with media on the high court's front steps. Microsoft General Counsel Brad Smith joined them.

Olson said the justices were "exceedingly well-prepared" to hear the case, which involved "highly technical questions." The statute at issue, which was incorporated into U.S. patent law in 1984, is an "important but complicated" one, he said. "They asked good, difficult, probing questions of all of us."

This was the latest in a string of patent cases heard recently by the high court, which historically has avoided them. That is a sign that Chief Justice John Roberts, who recused himself from this case, is "very concerned with the development of patent law" and realizes that patents are critical for the nation's economy, Smith said.

It is crucial that "U.S. courts apply U.S. patent law in the United States," he said. When copies of software are made overseas, companies should be governed by those countries' intellectual property laws, he added.

If the Federal Circuit Court of Appeals' ruling against Microsoft is upheld, there would be greater incentives for American companies to move some of their research and development operations overseas. "It's not the kind of incentive that's going to serve our country well," Smith said.

AT&T's Waxman disagreed. If the high court accepts Microsoft's petition, "there will be no incentive to retain even high-value manufacturing jobs in the U.S.," he said. Software is a component of a computer "in every sense of the word" and the American economy is predicated on that kind of intellectual property, Waxman said.

Oracle's chief patent counsel Roger Kennedy, who sat in on the arguments, said the justices "asked questions that showed they really had a grasp on the issue." "They were trying to make sure they understood the ramifications of what they were going to do," he said, and that is "good for the software and tech industry."

Scott Bain, litigation counsel for the Software and Information Industry Association, predicted the court would "more likely than not" reverse the Federal Circuit's majority decision and come down closer to a dissent issued by Judge Randall Rader. Rader sided with the majority in ruling that software code can be a component of a patented machine but he disagreed with the conclusion that copying software is the same as supplying it.

In an e-mail, Stifel Nicolaus analysts said that based on their reading of the legal briefs, the court is more likely to side with Microsoft. After the oral argument, a closer analysis of the "head count" necessary for the software giant to prevail suggested the case could go either way, they said.