In a victory for the software industry, the Supreme Court ruled today that a "golden master" of software shipped overseas for copying is not a patent infringement. The case is Microsoft v AT&T (PDF).

In prior suits, AT&T had won judgments against Microsoft for including in Windows software that infringes AT&T's speech-recognition patent. In this case, the phone company wanted damages for computers sold overseas. The foreign manufacturers had installed Windows by copying the OS from a golden master that Microsoft shipped from the US.

Generally, US patent law gives no protection when infringement occurs overseas. It's up to companies to patent their inventions in countries around the world and prosecute them in foreign courts. In 1984, though, Congress passed an exception, section 271(f) of the Patent Act, which makes it an infringement to ship "components" of a product with intent to "actively induce" a foreign manufacturer to combine the components into an infringing product.

That's what AT&T was asserting here - that the Windows golden master was a "component" of an infringing finished product (a computer) - and thus Microsoft is liable under US law. Two lower courts agreed with AT&T but the Supreme Court today reversed, deciding that a golden master is "Windows in the abstract," not a physical component. The Court held that copying the master is a separate step in the process and the law doesn't cover copying.

In order for AT&T to succeed, Microsoft would have had to have duped the master in the US and sent those duplicate discs overseas for installation on the PCs. That might not even have sufficed, since the software on the disc is not an infringement until its actually installed on the computer.

The logic is a bit hard to grasp and all of the decisions (a concurrence by Alito and a dissent by Stevens) reached for analogies to make sense of the question. Writing for the majority, Justice Ginsberg thought a master was like a blueprint - instructions for building. But this can't be right - source code might be considered a blueprint, but a master is binary: ready to install.

Justice Alito compared it to sending a pre-Gutenberg manuscript off to a scrivener for copying, meaning, I think, that once copied, the original can be discarded, thus the thing shipped is not it itself a component at all.

Justice Stevens seemed a bit confused about the whole thing. He analogized to shipping an inventory of knives specially made to work in an infringing machine. But of course Microsoft wasn't shipping an inventory; if it had, the shipment would probably have been covered under the law.

Probably the best analogy is shipping one component, say a knife, which could easily be replicated in a general purpose machine, to make many more copies. Would shipping that one knife qualify as shipping "components for combination"? It doesn't seem like it.

The law was passed in response to a Supreme Court case that found no infringement when a US manufacturer shipped components of a shrimp deveining machine overseas. Thus the law speaks of shipping components for combination.

Most important, it seems to me, is the Court's reluctance to extend patent law one step past the letter of the law. Since the law doesn't speak of copying, shipping and copying will not be conflated, the decision says. And since there is a presumption against expanding US patent protection overseas, the court will not expland the protection. If Congress wants to expand it, it can. AT&T surely has the lobbying power to try to get such a change enacted. Or it can make its claims in the countries where the infringment actually took place.

All of which, of course, is a great relief for software in general, since there is always risk of patent infringement in software. The world once again is safe for outsourcing.