March 22, 2005 11:44 AM PST

Microsoft seeks rehearing in Eolas case

Microsoft has stepped up its defense in the Eolas Technologies patent infringement case, asking for a new hearing on a software export matter it calls crucial to the whole industry.

The move comes shortly after the software giant claimed a major win in the case--earlier this month, the U.S. Court of Appeals for the Federal Circuit sent a district court's $565 million patent infringement judgment against Redmond back to the lower court for reconsideration.

Previous coverage
Appeals court revisits
Eolas decision

Microsoft claims victory
in high-profile Web
browser patent dispute;
$565 million verdict
may fall.

But in a court filing dated March 16, Microsoft asked for a new hearing on part of the appeals court ruling where it didn't prevail. In that section, the court ruled that software produced overseas from a "golden master" disc was subject to U.S. patent law.

The question is whether a company exports software when it sends a golden master disc abroad, where an OEM (original equipment manufacturer) makes copies from it. In its request for a rehearing, Microsoft argued that companies shipping golden masters are sending design instructions for the creation of software by the overseas OEM, rather than exporting "components of an invention"--and therefore shouldn't be subject to U.S. patent law for those copies.

"The panel's reading greatly expands the extraterritorial application of U.S. patent law, intruding on the sovereign rights of other nations, obviating the need to secure foreign patent protection, and placing U.S. companies at a disadvantage with respect to their foreign counterparts," Microsoft lawyers wrote in the request for an en banc hearing--that is, one by a larger panel of judges.

"We think this issue is of significant importance and deserves consideration by the full panel of the federal circuit," said Microsoft spokeswoman Stacy Drake. "The foreign sales issue is an issue that not only affects Microsoft but the rest of the computer industry."

But the University of California, which with its Eolas spin-off brought the case against Microsoft, said the filing demonstrated that a crucial share of the victory in this month's appeals court decision belonged to the university.

The filing "indicates that they considered these aspects of the circuit court ruling against them to be substantial," said university spokesman Trey Davis. "That goes to the issue of damages in the case."

The district court originally awarded the university and Eolas $521 million and later upped the amount to $565 million. Those awards included foreign sales. Should Microsoft lose on the patent infringement issue but prevail on the golden master issue, the latter ruling could slash its damages considerably.

Foreign sales of the Windows operating system with the Internet Explorer browser--whose system for running external or "plug-in" applications is the subject of the university's patent claim--accounted for more than 64 percent of the damages.

The Eolas golden master case is one of two such patent battles pending against Microsoft. Together, they could have a dramatic effect on how software is patented and distributed around the globe.

The other case is AT&T vs. Microsoft, which reached a settlement except in regard to the golden master issue, according to Microsoft.


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The same argument applies to any software CD
> Microsoft argued that companies shipping golden masters
> are exporting design instructions for the creation of software
> by the overseas OEM, not "components of an invention"-- ...

The same applies to any CD containing software. All it contains are instructions that an OS uses to create software on a hard disk by a cosumer operating a PC.

Actually, the "Golden master" is much more similar to the produced CDs than these CDs are to the actual software produced on the hard disk: The golden master contains exactly the same bits as the CDs sold to consumers. The software installed on the Hard disk is not the same bits: Those bits are just instructions on how to decompress and arrange the different parts of the software on the hard disk, what registry entries and what folders to create for putting them in. Something entirely different.

Even if the entire content of the CD are copied to the hard disk as is they are not bit to bit identical to what's on the CD: It's a different file system on the Hard disk!
Posted by hadaso (468 comments )
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This makes more questions
As I read this I thought about it

Microsoft is claiming that "Golden Disk" is just blueprints and building instructions.

But Source code is the blueprint used by a compiler(manufacturer) to assemble libraries (components) into the software that resides on the disk

The so called golden master might have a few limited bytes changed on each disk it makes to allow each to be uniquely identified but on the whole it is simply an original used to make exact copies

so how about this analogy:

The Golden Master is like a copyrighted photograph. Use a Xerox machine(or Cannon or in my case Epson) to make an exact copy then sell the copy

the sale is copyright infringement

Providing the Master (photo or disk) for such a purpose is conspiracy to commit a crime

all parties are guilty separately and cumulatively (wrong terms but same idea)

calling a skunk a rose doesn't change it's smell
And money bags(Gates) is as responsible as an unavailable nopockets (overseas & out of jurisdiction)_
Posted by qazwiz (208 comments )
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Problematic analogy
The Eolas case is not about copyrights--it's about a patent. These issues on software are complicated because software automatically gets a copyright, but parts of software can also get patents.

Microsoft copied Eolas's patented idea--copyrights can't protect ideas, only specific works. For example, Windows can be copyrighted, but the idea of a GUI operating system cannot be. It could be patented, however, and this is better for that purpose, since no one else could make a GUI OS without your permission. With a copyright, others could make a different GUI OS--as long as the work is theirs and they didn't steal code.

I'm surprised the Eolas patent was upheld; assuming I understand it correctly, it sounds like a very obvious combinations of technologies used in previous programs. Any "obvious" combination of technologies is not supposed to be patentable.

As for this golden master issue, it does sound pretty weak. Essentially, the idea is that MS is paying Eolas the amount, in theory, Eolas would have received from MS had MS been selling IE with that feature licensed on a royalty arrangement. At least, this is what I have to assume, since these articles only quote the damages and not the type.

So, I guess I fail to understand why sending a golden master overseas wouldn't require MS to pay royalty fees if it wasn't under license. . .

I guess if an industry insider happens to see this, they can explain it to me.
Posted by (282 comments )
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