Top court rules for Microsoft on patent

Packages of Microsoft Corp's new ''Windows Vista'' operating system are displayed at an electronics retail shop on the day of its debut in Tokyo at midnight January 30, 2007. The U.S. Supreme Court overturned on Monday a ruling that Microsoft Corp. should be held liable for patent infringement on copies of the Windows operating system sold overseas.

WASHINGTON (Reuters) - The Supreme Court on Monday overturned a ruling that Microsoft Corp. should be held liable for patent infringement on copies of the Windows operating system sold overseas.

By a 7-1 vote, the justices rejected arguments by AT&T Inc. that Microsoft software code that infringes on its patents could be deemed a "component" of a computer, making overseas sales of the Windows operating system an infringement under U.S. patent law.

The Microsoft-AT&T dispute is one of a series of important patent cases that the court has agreed to hear in the last year. It hinges on a provision of U.S. patent law that holds products sold overseas can be held liable for infringement if they include a U.S.-supplied "infringing "component."

A U.S. appeals court upheld a lower court decision that, under that provision, Microsoft was liable for infringing an AT&T patent for converting speech into computer code in copies of Windows sold overseas.

The U.S. Court of Appeals for the Federal Circuit said the world's largest software maker was liable for the unauthorized distribution of codec technology, used to compress speech signals into data, in copies of Windows overseas.

But the Supreme Court's majority opinion, written by Justice Ruth Bader Ginsburg, reversed the appeals court's ruling.

The U.S. Justice Department has sided with much of Microsoft's argument and said the appeals court ruling "improperly extends United States patent law to foreign markets" and puts U.S. software companies at a competitive disadvantage.

Only Justice John Paul Stevens dissented from the court's ruling.

(Additional reporting by James Vicini)