Microsoft's rivals root for software giant in supreme court clash with AT&T

U.S. software makers and Web site operators will find themselves in an unusual position this week: rooting for Microsoft Corp.

Companies that normally focus on thwarting the world's largest software company stand to benefit if it defeats AT&T Inc. in a U.S. Supreme Court case that may give software makers new protections from patent lawsuits on exported products.

The case may provide an opportunity for the court to elaborate on its emerging view under Chief Justice John Roberts, 52, that patent holders have too much power to bar use of their inventions and extract damages from infringers. A lower court specializing in patent cases sided with AT&T, the largest U.S. phone company; Microsoft's appeal will be argued tomorrow.

"For the software industry, it's a hugely important case because it effectively doubles or triples the liability of developers who write software in the United States, like Microsoft," says John Duffy, a patent-law professor at George Washington University in Washington. The court will rule by July.

Microsoft is seeking to limit what it must pay to use AT&T's patented technology in the Windows computer operating system. The key issue is whether U.S. patent law, which covers Windows on domestic computers, extends to copies of the software made abroad and installed on computers there.

Oracle Corp., Red Hat Inc. and Sun Microsystems Inc. are among a group of 60 companies including Microsoft lobbying Congress for a patent-law overhaul that would include new limits on potential damages for overseas sales of infringing products. Meanwhile, Yahoo! Inc., Intel Corp. and Amazon.com Inc. have joined Redmond, Washington-based Microsoft in asking the Supreme Court to overturn the decision by the U.S. Court of Appeals for the Federal Circuit.

The companies argue that the appellate ruling encourages companies to insulate themselves from liability by shifting their software-writing teams overseas. Yahoo, owner of the most visited U.S. Web site, warns that the lower-court ruling might prompt foreign countries to retaliate by extending the scope of their own patent laws to cover U.S. activity.

"This court should be careful to avoid any ruling that could launch such a process of escalation," Sunnyvale, California-based Yahoo said in a court filing.

San Antonio-based AT&T, backed by patent-holders including Royal Philips Electronics NV and the University of California system, says Microsoft's position would shield software makers to a far greater extent than Congress intended.